The World Shipping Council (WSC) is looking to submit a proposal for a new global green fuel pricing mechanism which would encourage a shift from fossil fuels to greener alternatives from ocean carriers. This proposal would have to figure out a way to work alongside or replace the current Emissions Trading System (ETS) implemented by the EU Jan. 1 of this year. Learn more about the EU’s Emissions Trading System at the following link: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en
Referred to as the green balance mechanism, the WSC’s proposal would take fees from the fossil fuels used by ocean carriers to provide allotments to those using green fuels. Addressing the large price gap between the two fuel options is the ultimate goal of the proposal.
The ETS system currently enforced by the EU utilizes a “cap-and-trade” system which sets limits on the total annual emissions allowed per company. These companies must purchase allowances based on the gasses they emit.
While both systems have the same general goal, it is important to note that the ETS system is already in place and the WSC’s proposal, if selected, would not be implemented until 2027. Carriers and cargo owners alike are concerned that they may face surcharges from both systems for using fossil fuels if a strategy for co-existence is not secured.
The EU measure contains provisions to re-evaluate implementation methods if another global mechanism is put in place. According to the WSC’s vice president of environment and climate, Bryan Wood-Thomas, the most important challenge to tackle is finding an effective system which will create an environment to push the industry away from fossil fuels and towards greener alternatives.
If the WSC’s proposal is selected to be implemented, it will be important to keep an eye out for potential “double taxes” having a substantial impact on ocean carriers and shippers alike.
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