Argus Media Limited

11/18/2021 | News release | Distributed by Public on 11/18/2021 12:31

Small carbon price gap between IMO target and 100pc cut

The carbon price needed to decarbonise shipping fully by 2050 would only be "slightly higher" than that needed to reach the International Maritime Organisation's (IMO's) current target of 50pc emissions cuts, according to a recent report.

The report - produced by maritime consultancy UMAS for the Getting to Zero Coalition, a partnership between the Global Maritime Forum, the Friends of Ocean Action and the World Economic Forum - outlined various carbon prices depending on the speed of decarbonisation.

An average carbon price of $191/t would be needed to reduce maritime emissions fully by 2050, compared with $173/t in a scenario whereby a 50pc emissions reduction is envisaged, the report said. In both cases, the model proposed starting at $11/t upon introduction in 2025, increasing it to around $100/t early next decade and then ramping the price up further thereafter.

But the report acknowledged that these increases "may be challenging from both a political and practical business perspective", so a higher initial price may be more palatable, "easing potential economic shocks of sharp price increases".

The carbon prices could be lower if the money generated is reinvested in maritime decarbonisation, such as subsidising zero-emission fuels and technologies.

Market-based measures (MBMs), such as a carbon price, would support the industry on its path to decarbonisation by narrowing the gap between fossil fuels and zero-emission fuels.

Other measures that the report proposes are emissions trading schemes (ETS) or subsidies to support cleaner fuel alternatives. Levies, taxes and ETS can generate revenues to facilitate cost gap reduction between fuels and incentivise shipowners to operate ships with lower emissions.

The report said that because of ships' typical lifetime of 20-25 years, zero-emission vessels must be a competitive choice by no later than 2030, and this is only an economically viable option if zero-carbon fuels are competitive with traditional fossil fuel ones.

Momentum built during the UN Cop 26 climate summit could push the IMO to press on with discussions to accelerate decarbonisation in the shipping industry at its Marine Environmental Protection Committee (MEPC) meeting next week. Pressure is mounting for the IMO to commit to net-zero emissions by 2050, and do more in terms of legislation.

There is support for a compulsory greenhouse gas levy on international shipping, proposed by a coalition of countries that are highly vulnerable to the effects of global warming.

The European Commission intends to include maritime emissions from intra-EU voyages, half of the emissions from extra-EU voyages, and emissions occurring at berth in an EU port in the scope of the EU ETS as part of a policy reform package put forward in July. Inclusion would start in 2023 with auctions for 20pc of CO2 emissions and gradually increase to 100pc of CO2 emissions in 2026.

By Saleem Rizvi