- Putting the cost of carbon into the price of bunker fuel could form part of the UK’s effort to get to net-zero, according to a UK government consultation paper.
- As it presently stands, the price difference between oil-derived bunker fuel and alternative marine fuels works against the adoption of green fuels.
A recent news article published in the Ship and Bunker states that ‘Green Pricing’ of Bunker Fuel on Table in UK ETS Proposals.
Investment in emission reduction options
“Maritime fuel prices do not reflect the costs of their greenhouse gas and air pollutant emissions… there is currently a suboptimal incentive for investment in emission reduction options,” the paper said.
To rebalance the market, “some of the externalities of conventional marine fuels” could be priced in to encourage “investment in energy efficiency and alternative fuels”.
Cost of carbon would reflect in bunker price
In essence, the cost of the carbon would be reflected in the overall bunker price.
In essence, carbon cost would be reflected in the overall bunker price.
According to the consulation paper, “emissions would be calculated based on the volume of fuel multiplied by the carbon intensity of these fuels, using the following calculation: amount of greenhouse gas emissions for which [a ship is] liable equals the volume of fuel used on a qualifying journey times the carbon intensity of fuel type.”
Carbon intensity is defined as the amount of carbon dioxide equivalent (by weight) that is emitted per unit of energy used which would be per unit of martime fuel used.
UK Emissions Trading Scheme (ETS)
Inclusion in the UK Emissions Trading Scheme (ETS) would be on voyage basis defined as starting and ending at a UK port where the vessel’s operator would be required to determine the volume of fuel used.
Other options under consideration in the consultation paper shift that responsibility to the bunker supplier.
The UK domestic shipping sector could join the UK ETS by mid-2020s and the consultation period is to run for three months from March.
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Source: Ship and Bunker