Trafigura calls for massive levy on fuels to speed decarbonisation

Malcolm Latarche

Malcolm Latarche · 28 September 2020

ShipInsight


Commodity trader Trafigura has deposited a 16-page white paper with the IMO in which it calls for levies of $250-$300 per tonne of CO2 emitted by ships.

In the paper, Trafigura sets out a proposal for IMO member states to help accelerate progress towards the decarbonisation of the shipping industry via the introduction of a levy on carbon intensive marine fuels.

The company said shipping rules introduced by the IMO at the beginning of 2020 that require the use of shipping fuels with lower sulphur content and there are efforts underway to implement further efficiency standards. However, despite the positive focus of these actions, they do not help to meet greenhouse gas emissions reduction targets alone. The ships in use, the fuels that power them and the related infrastructure need to start changing.

Trafigura proposes that the IMO 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 company said in the foreward to the document “To change the industry and achieve this evolution, the world’s governments , shipowners and charterers urgently need to work with the IMO to agree and implement a levy on carbon intensive fuels, and to subsidise the use of low and zero-carbon alternatives. In addition to subsidising zero- or low-carbon fuels, the revenue raised from this levy could be partly used to fund further research and development into alternative fuels. Revenue in part should be used to help Small Island Developing States and other developing countries to manage energy transition processes and to help them mitigate the consequences of climate change”.

Trafigura went on to say “As one of the world’s largest charterers of vessels, responsible for more than 4,000 voyages each year, 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.

Great efforts have been made in recent years through the Global Maritime Forum, the Getting to Zero Coalition and through other initiatives to create awareness, develop solutions and catalyse a modern maritime sector to take responsibility for its climate impact. It is now time to put a price on carbon emissions in the shipping industry in the form of a global, mandatory industry levy”.

The paper submitted to the IMO suggests that possible emission reductions on a well to propeller basis (favoured by Trafigura) compared to VLSFO are just 2% for LNG, 15% for LPG, 93% for green ammonia and hydrogen and 84% for green methanol. On a tank to propeller basis these change to 15-20% for LNG, 21% for LPG. 100% for hydrogen and ammonia and 11% for methanol.

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