ICS Global Carbon Levy

ICS Endorses ‘Global Carbon Levy’

In a bid to speed up the decarbonization of the shipping industry, the International Chamber of Shipping (ICS) has confirmed its support for a ‘global carbon levy’.  Submitting its proposal to the UN’s International Maritime Organization (IMO), the ICS has urged policymakers to take action on a global scale to accelerate decarbonization and reduce the costs associated with zero carbon fuels and technology.

Despite increasing pressure, the maritime industry remains a major source of environmental pollution. According to statistics from the Fourth IMO GHG Study 2020, shipping emits 1,056 million tons of CO2 each year and accounts for approximately 3% of global greenhouse gas emissions. Worse still – shipping emissions have increased in recent years in direct contravention of the industry’s sustainability goals and are predicted to rise significantly by 2050 unless urgent action is taken..

Graph showing projected CO2 emissions rising at a rate of 50-250% between 2010-2050.
Projected GHG shipping emissions based on varying levels of economic growth and energy development.

As we enter a critical phase of environmental stabilization, there’s no doubt that the maritime industry needs to decarbonize quickly, but is a global carbon levy the answer? Read on to find out what a global carbon levy could mean for shipowners and operators and how shipping firms can overcome the environmental and financial challenges the sector is facing.

What is the Global Carbon Levy?

If approved, the ICS’s global carbon levy will apply to ships trading globally, if they exceed 5,000 gross tonnage. The levy would be paid according to each ton of CO2 emitted, although the ICS has yet to state what level of charge it will support.

Crucially, the levies collected will go into a newly created ‘IMO Climate Fund’, designed to facilitate decarbonization of the industry. As well as closing the price gap between traditional and zero-carbon fuels, the ICS hopes that the IMO Climate Fund can also be used to fund the cost of installing zero-carbon technology on ships and bunkering infrastructure at ports so that zero-carbon fuels can be supplied.

Will a Global Carbon Levy Accelerate Decarbonization?

If operators or owners are forced to pay significant levies when using traditional fuels, there will be more financial incentive to switch to zero-carbon alternatives. Furthermore, if financial assistance is made available via the proposed IMO Climate Fund to facilitate the installation or retrofitting of zero-carbon tech on board, it is likely to incentivize shipping firms to reduce emissions.

Currently, the price gap between zero-carbon and traditional fuels makes reducing emissions an unattractive proposition for ship operators. Similarly, the cost of retrofitting or installing zero-carbon tech onboard ships makes decarbonization financially unappealing to shipowners. With neither party willing to shoulder the costs, the industry remains at something of an impasse when it comes to decarbonization.

If a global carbon levy can break the stalemate and make zero-carbon shipping financially motivating for all parties, there is likely to be a wider uptake in zero-carbon technology and fuels, and, therefore, a reduction in CO2 emissions.

Are There Alternatives to a Global Carbon Levy?

Frustrated with what it sees as ‘slow progress’, the European Commission has already proposed extending its Emissions Trading System (EU ETS) to the shipping sector. This regional approach would also apply to ships exceeding 5,000 gross tonnage but the application of the scheme would be arguably more complex.

Current plans would see financial sanctions applied to:

  • “All emissions from ships calling at an EU port for voyages within the EU;
  • 50% of the emissions from voyages starting or ending outside the EU;
  • Emissions that occur when ships are at berth in EU ports.”

While the EU Monitoring, Reporting and Verification (EU MRV) System already tracks CO2 emissions of ships calling at EU ports, there are widespread concerns that the implementation of the EU’s proposals will lead to unnecessary administrative liabilities and practical difficulties for ship operators. Furthermore, the regional applicability of the scheme will mean it has a limited impact on the industry’s global emissions.

Due to this, many believe that worldwide market-based measures (MBM), such as the global carbon levy, are a more effective and viable way to facilitate the decarbonization of the maritime industry.

What Role is Climeon Playing in Decarbonization?

At Climeon, we’re dedicated to providing ship owners and operators with a cost-effective route to decarbonization. Our HP 150 module is capable of producing 150kw of clean electricity, utilizing waste heat to generate zero-carbon energy. When multiple modules are used as a full heat waste recovery (HWR) system, up to 1MW of clean electricity can be generated, reducing CO2 emissions by 3,500 tons on a single vessel.

By reducing emissions using Climeon heat waste recovery solutions, shipowners and operators can reduce costs associated with levies and zero carbon fuels.

In addition to this, our proprietary technology ensures that Climeon tech offers unrivalled efficiency at low temperatures, simplifying vessel integration and making it a first-choice solution for shipowners and operators who want to lead the industry in sustainable shipping.

While zero-carbon fuels remain a viable option, the increased costs and limited infrastructure currently available at ports makes it difficult for operators to transition away from conventional fuels.

Further, the inconsistent availability of wind or solar power can make these forms of renewable energy of limited use to operators who require a constant source of reliable energy.

In contrast, Climeon’s heat waste recovery solutions are not reliant on external factors or infrastructure and provide shipowners and operators with continuous, reliable clean electricity.

A white cruise ship is shown sailing in calm waters with a mountainous region in the background.
Virgin Voyages', ship, Scarlet Lady, uses Climeon heat power systems to generate clean electricity.

Already in use on a number of ships, Climeon’s HP 150 module is making sustainable shipping a reality and providing owners and operators with the technology and resources they need to decarbonize the industry in a cost-effective and efficient way.

When Will the Global Carbon Levy Be Introduced?

Despite support from the ICS, INTERCARGO and BIMCO, it’s unclear whether a global carbon MBM will be introduced and, if so, when it’s likely to come into force. However, the IMO is expected to approve the $5 billion R&D Fund in November 2021. With both the IMO Council and the Marine Environment Protection Committee (MPEC) due to meet immediately following the UN Climate Change Conference (COP26), it’s highly likely that the issue of a global carbon levy will be on the agenda.

As decarbonization becomes increasingly critical for both the shipping industry and the world as a whole, it’s clear that more effective measures are required to accelerate the transition to zero-carbon shipping. Whether a global carbon levy, a regional MBM or an alternative system is used to incentivize shipping companies, there’s no doubt that we’ll see a push towards financial sanctions for firms that fail to reduce their emissions.

At Climeon, we’re continually working with shipping companies that want to reduce their carbon footprint, increase sustainability and avoid the inevitable financial penalties that will soon be applied to CO2 emissions.

To find out how Climeon heat waste recovery solutions can help you to decarbonize your fleet, get in touch with our maritime team today.