Vincent Clerc, CEO of Danish shipping and logistics giant Maersk, has reiterated the importance of introducing a global maritime fuel standard and a pricing mechanism that would reduce the existing price gap between green and fossil fuels, reports Offshore Energy.
Green Balance Mechanism
To enable a complete and successful transition in the global shipping industry, alternative fuels will need to be widely available, widely used, and cost-competitive.
In early 2024, the World Shipping Council, a trade association representing the international liner shipping industry, proposed a solution to the challenge of crafting a global greenhouse gas (GHG) pricing regulation that encourages investment in green fuels.
Specifically, the Green Balance Mechanism (GBM) introduces a novel approach to greenhouse gas pricing, aiming to minimize the cost disparity between fossil fuels and green alternatives by implementing a fee structure that reallocates fees from fossil fuels to green fuels, ensuring an equal average fuel cost. The mechanism incentivizes greater financial allocations for fuels that demonstrate higher greenhouse gas emission reductions throughout their lifecycle. Collected funds are determined by the volume of green fuels used, initially resulting in a relatively low fee during the transition.
The mechanism also establishes a fund supporting just transition and benefiting developing nations in particular as it facilitates their energy transition.
A detailed proposal, including design updates and regulatory text for the Green Balance Mechanism, has been submitted to support the timely development of effective climate regulations for shipping at the International Maritime Organization’s (IMO) next round of meetings.
Will discussions on a global carbon price at the UN be fruitful?
The penultimate round of negotiations on key shipping climate laws–including a carbon price will kick off at the UN’s International Maritime Organization (IMO) in London this September.
The talks will take place as a two-part summit, technical talks (ISWG-GHG-17) on September 23-27, and a climate summit (MEPC 82), on September 30 to October 4.
The UN maritime body is expected to advance negotiations on what could be “the world’s first universal carbon price” on a global polluter. This policy sees consistent, growing support among the IMO’s 175 member states.
Governments agreed under the IMO’s 2023 Revised Strategy that shipping needs a ‘GHG emission pricing mechanism’, and to adopt it in 2025. The September/October talks hope to clarify the design of the future policy, including crucial questions about the price and revenue distribution.
At the last talks in March 2024, a clear majority of countries favored this mechanism as a levy.
A report by UNCTAD found that a levy is necessary to lower the impacts of shipping decarbonization on global GDP growth, and to promote international economic equality.
The policy is negotiated as part of a ‘basket’ of various measures, as an ‘economic measure’, intended to deliver agreed emission cuts equitably: 30% by 2030, 80% by 2040, to reach zero by 2050. The basket also includes a green fuel standard (GFS), a ‘technical measure’, aimed at further incentivizing the use of zero-emission energy on ships.
MEPC 82 will also open the revision process of the IMO’s existing framework for energy efficiency (Carbon Intensity Indicators, or CII), whose ambition needs to be increased to deliver the agreed emission reduction before 2030.
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Source: Offshore Energy
