Trafigura proposes carbon levy introduction to IMO

IMO headquarters
IMO headquarters; Image courtesy: IMO/Flickr under CC by 2.0

Trafigura, one of the world’s largest ship charterers, has proposed that the International Maritime Organization (IMO) introduces a carbon levy to help boost competitiveness and uptake of alternative fuels.

Image courtesy: IMO/Flickr under CC by 2.0

The company is proposing a levy between $250 and $300 per metric tonne of CO2 equivalent on shipping fuels. The system would be overseen by the IMO, and it would be adjusted as the competitiveness gap narrows.

“We believe that only through the introduction of a significant levy on carbon-intensive fuels can sufficient progress be made towards the decarbonisation of the global shipping industry,” the company said.

Trafigura believes the revenue raised from this levy could be partly used to fund further research and development into alternative fuels.

Some portion of the revenue should be used to help developing countries to manage the energy transition processes and to help them mitigate the consequences of climate change.

“We recognise that a carbon levy will have an immediate effect on shipping costs which companies – including ours – would bear. This increase in operational costs will spur charterers to change behaviour to reduce emissions, charter more efficient ships and switch to lower carbon fuels,” Trafigura pointed out.

The proposal coincides with the growing pressure on the IMO to introduce a market-based measure to help bridge the enormous investment needed to make the switch to alternative fuels to decarbonize shipping.

The push for the international community to act on this measure before the EU is mounting since Europe seems to be losing patience with slow action from the IMO and might go at it on its own.

The industry agrees that a regional measure would be counter-productive causing market distortion or even trade tensions.

Related Article

The International Maritime Organization (IMO) is targeting a 40 percent decrease in GHG emissions by 2030 for international shipping and a 50% cut by 2050 when compared to the 2008 levels.

To do so, the industry needs to introduce zero-emission ships by 2030 and switch to zero-emission fuels.

That being said, the sector also needs to invest trillions of dollars to build a completely new fuel industry and the supporting infrastructure in a couple of decades. Most importantly, the endeavor must make business sense for the switch to be feasible and economically sensible.

In December 2019 shipping associations across the maritime sector submitted a proposal to the IMO for the establishment of a $5 billion worth IMO GHG reduction research and development program.

It proposes $2 are collected per tonne of fuel over a period of ten years.

The discussion on the proposal has been delayed due to COVID-19 related restrictions. However, the fund will be on the agenda once IMO’s Marine Environment Protection Committee (MEPC)meets in November in a digital setting to discuss pressing matters.