The World Shipping Council, which represents the container and vehicle transport sectors, has refined its proposals to the International Maritime Organization for a financial mechanism that it believes will create price equality and drive the adoption of green fuels. The group joins others that are lining up with their competing proposals ahead of the next MEPC session, 82 which is scheduled to run from September 30 to October 4.
Experts expect a contentious session as the IMO looks to review the draft framework for decarbonization efforts and supporting research. The last session in March set the groundwork for the agenda which promises to confront key issues on the path to decarbonization as well as other key issues including new Emission Control Areas.
Industry groups and members are also targeting key elements of the decarbonization effort. For example, calls are increasing for revisions to address the shortcomings in the Carbon Intensity Index (CII).
"IMO member states have a unique opportunity to decarbonize the world’s ocean supply chains. We do not have time for half measures,” said Joe Kramek, the recently appointed President & CEO of the WSC. “The IMO's regulations must make it possible for green fuels to compete with fossil fuels, to drive the transition effectively. Anything less risks raising transportation costs without achieving the climate progress the world needs."
The WSC like many others highlights the concern that green fuels are far more expensive than traditional fossil fuels. They are also concerned about supply and production capacity. The working premise in much of the industry is that if the price of green fuels is addressed ensuring demand from operators will drive investments in production. The WSC points out that 60 percent of the newbuilds on order for the container and vehicle sector are designed to use green fuels further evidence that demand will emerge for these alternatives.
"For shipping’s energy transition to take place, green maritime fuels must be available at scale, requiring billion-dollar investments by energy producers. For these investments to occur, the IMO must adopt regulations that not only increase fossil fuel prices but also make green fuels a viable alternative,” asserts Kramek.
The WSC’s proposal to stimulate the necessary levels of investment in green fuel production calls for the creation of a fund which they call the Green Balance Mechanism. A regulatory measure, it would place a price on fossil fuel use. To bridge the gap between higher-priced green fuels and traditional fossil products, the WSC allocates funds from the older fuels to lower GHG-intensity fuels.
The proposed fee applies to fossil fuels and is calculated on an annual basis. It would be adjusted based on the amount of green fuel use and market prices as well as progress on reaching the initial goal of a 65 percent reduction in industry carbon emissions. Further, they propose to reward those offerings that create the greatest well-to-wake reductions with higher financial allocations.
The World Shipping Council has submitted updated designs for its proposals based on a positive response and input from IMO member states and other stakeholders. They provided a draft of the regulatory text and are working to build support for their proposed approach.
The Green Balance Mechanism proposal also includes a framework to create a parallel IMO Net-Zero Fund. The purpose would be to raise funds for research, development, and demonstration projects and climate mitigation initiatives.
Similar ideas for funds have been presented to the IMO during the past sessions. Observers believe it is likely that MEPC will adopt some form of the fund concept as a critical tool to support the development of green fuels. The industry widely accepts that steps will be required to level the divide between traditional and alternative fuels, although many of the proposals also call for greater government involvement to drive the transition.
