ICS calls for global CO2 reduction fund to reward green fuel first users

Fund and reward proposal aims to incentivize green fuel first movers. [Image: ICS]

The International Chamber of Shipping (ICS), which represents 80% of the world’s merchant fleet, has submitted a proposal to IMO calling for a “fund and reward” system to accelerate the maritime sector’s transition to net zero by financially rewarding ships and energy producers that invest in low/net zero emission fuels.

The fund and reward system would be financed by mandatory flat rate contribution by ships, per tonne of CO2 emission. It remains to be seen whether this latest proposal will be any more successful than earlier industry proposals to fund shipping’s green transition by some form of levy on carbon remains to be seen.

This time around, ICS is proposing that contributions from the global fleet be gathered in an “International Maritime Sustainability Fund.” Such a fund, the chamber says, could raise billions of dollars annually, which would then be committed both to narrowing the price gap, globally, between existing high carbon marine fuels and alternative fuels, as well as supporting much needed investment in developing nations for the production of new marine fuels and bunkering infrastructure. The support of developing nations will be required to get the needed regulatory framework adopted. The architecture of that framework is based on the industry’s previous proposals for an IMO R&D Fund.

The fund, says ICS, would reward ships according to annual reporting of the CO2 emissions prevented by the use of “eligible alternative fuels.” For example, a ship fueled by ammonia (among many other alternative fuels including methanol, hydrogen, sustainable biofuels and synthetic fuels) could benefit to the tune of $1.5 million a year.

ICS says that a detailed impact assessment undertaken for it by Clarksons Research has identified that a financial contribution of up to approximately $100 per tonne of CO2 emitted would not cause what it calls “disproportionately negative impacts on the economies of states.” Additionally, ICS believes that contributions could initially be set much lower and then be subject to a 5-year review as increasing quantities of new fuels become available.

The ICS fund and reward (F&R) proposal combines elements of various recent GHG reduction proposals, including those from a number of governments, plus a flat rate contribution system previously proposed by ICS and INTERCARGO, and ideas recently put forward for a global IMO measure by the European Union.

“With the ICS fund and reward proposal, IMO member states have a new but very short window of opportunity to put in place a global economic measure which can kick start the development and production of alternative fuels for shipping. To achieve net zero mid-century, these new fuels must start to become available in significant quantities on a commercial basis no later than about 2030,” says ICS Chairman Emanuele Grimaldi. “Compromise is always difficult but, in any negotiation, having a proposal like this can enable everyone to come together. I hope this proposal will act as a bridge between the climate ambitions of both developed and developing countries so that no part of the global shipping industry will be left behind.”