Recognizing the urgency to create workable solutions to meet ambitious net zero targets, ship owners globally have agreed to mandatory contributions towards mitigating their ships’ greenhouse gas (GHG) emissions. Targeted to reach billions of dollars annually, the contributions would accelerate the global commercial shipping fleet’s transition to net zero emissions by 2050 and support developing countries’ maritime GHG reduction efforts.
The International Chamber of Shipping (ICS)—the principal international trade association for merchant ship owners and operators, representing all sectors and trades and over 80% of the world’s merchant fleet—has recently submitted a detailed, fit-for-purpose proposal to shipping’s global regulator, the UN International Maritime Organization (IMO), for a Zero Emission Shipping Fund (ZESF).
The shipping industry’s updated proposal is co-sponsored by the Bahamas and Liberia (two of the world’s largest flag state administrations, measured in gross tonnage). The proposal builds on the “feebate” concept put forward by the government of Japan and support from EU states at IMO for a flat rate “levy-based” global contribution system. Significantly, the updated proposal adds a structure for transparency and accountability for how the billions raised will be used, including those funds for use in developing countries.
“The transition to net zero shipping must be truly global. Otherwise, it will not succeed. ICS fully supports the net zero goal, which IMO has agreed on for shipping. The 2050 goal will only remain plausible if government negotiators roll up their sleeves to develop the regulations needed to establish the ZESF. A global GHG pricing mechanism for shipping urgently needs to be agreed on next year, which will de-risk investment in zero GHG marine fuels and provide billions of dollars of funds to support developing countries,” said Guy Platten, ICS secretary general.
“The governments of Bahamas and Liberia and the global shipping industry have come forward with a carefully thought-out mechanism, which is equitable, transparent, and simple. The first IMO target for 2030 is less than six years away. If we don’t achieve a take-off point in the production and uptake of zero GHG marine fuels by 2030, it’s hard to see how net zero will be achieved by 2050. The groundwork and the regulatory architecture have been carefully laid out. All that is needed is political will from governments to implement this fit-for-purpose solution quickly and effectively,” he added.
IMO member states will consider the Zero Emission Shipping Fund (ZESF) and the “feebate” mechanism at their next round of GHG negotiations in March. Governments have unanimously committed to developing a GHG pricing mechanism for international shipping by 2025. If governments agree, the ZESF will be approved next year to help achieve net zero GHG emissions from shipping by or close to 2050, in line with the ambitious GHG reduction targets adopted by IMO member states.
Under the proposal, contributions from ships per ton of CO2e emitted will reduce the significant cost gap between zero GHG fuels and conventional fuel oil, providing financial rewards (“feebates”) to ships for the GHG emissions prevented by these new marine fuels.
The transparent and accountable proposal will include support for the production of zero/near-zero marine fuels, the roll-out of new bunkering infrastructure in developing countries’ ports worldwide, and support training in the safe use of new fuels.
A detailed impact assessment has already been conducted by Clarksons Research for ICS that highlights a contribution rate adding $20 to $300 per ton of fuel oil consumed would have no disproportionately negative impact on national economies in terms of delivered cargo prices.
The ZESF will allow the hard-to-abate shipping sector, which is entirely dependent on fossil fuels and where the current use of zero GHG fuels is virtually zero, to achieve a “take-off” point in its use of more expensive “green” fuels, such as ammonia, hydrogen, sustainable biofuels, synthetic methanol, and synthetic LNG.
Sole proposal
The ZESF is currently the only proposal in the IMO negotiations for maritime GHG emissions pricing mechanism that sets out in detail the necessary regulatory architecture that can guarantee the funding needed to help the shipping industry decarbonize and support developing countries.
The ZESF will be simple to implement globally, and can realistically be finalized by governments for agreement by the IMO Marine Environment Protection Committee in early 2025 (MEPC 83) as required by the 2023 IMO GHG Strategy, which was agreed by MEPC 80 in July 2023.
ICS calculates that to reach the IMO target of 5 to 10% of the energy used by shipping to come from zero/near-zero GHG sources by 2030, the cost of reducing the cost gap with conventional fuel oil and rewarding the accelerated uptake of alternative fuels would be between $5 to $10 billion per year.
ICS also suggests that generating that amount might require contributions by ships to the ZESF, equivalent to between $20 and $40 per ton of fuel oil consumed. However, the actual contribution rate could be higher, depending on the funds IMO member states decide to collect via the ZESF for the separate IMO GHG Maritime Sustainability Fund (IMSF) to support developing countries.
The proposal to establish the ZESF was endorsed by the ICS board, which comprises representatives of the world’s national ship owners’ associations in Asia, the Americas, Africa, and Europe, collectively representing all sectors and trades and over 80% of world merchant shipping tonnage. (Story and photo courtesy of ICS)