Trafigura proposes IMO-administered carbon levy on fuels

One of the world’s largest ship charterers, responsible for more than 4,000 voyages a year, is proposing that the International Maritime Organization introduce a carbon levy of between $250 and $300 per metric tonne of CO2 equivalent on carbon-intensive shipping fuels, in order to make zero- and low-carbon fuels more economically viable and more competitive.

The proposal comes from commodity trading and logistics house Trafigura. It says that IMO should introduce a “partial feebate” system – a self-financing system – where, when a fuel is used that has a carbon dioxide equivalent (CO2e) intensity above an agreed benchmark level, a levy is charged, and where a fuel is used that has a CO2e profile below the benchmark level, a subsidy is provided.

The system would be overseen by the IMO and the revenue raised by the levy would primarily be used to subsidize and incentivize low and zero carbon fuels and subsequently also be used to fund the research and development of alternative fuels, and in part to help Small Island Developing States and other developing countries with the energy transition and to mitigate the impact of climate change.

The proposal does not get into the nitty gritty of exactly how IMO would administer the program or what measures would be needed to preclude cheating along the revenue collection and subsidy disbursement chain.

Download the Trafigura proposal HERE