Credits: DC Velocity
The World Shipping Council (WSC), representing the container and vehicle transport sectors, has presented a refined proposal to the International Maritime Organization (IMO) aimed at fostering the adoption of green fuels through a financial mechanism. This proposal is set to be discussed at the upcoming 82nd MEPC session, scheduled from September 30 to October 4.
As the IMO prepares to review its draft framework for decarbonization, including supporting research and the establishment of new Emission Control Areas, expectations are high for a contentious debate. The last MEPC session in March laid the groundwork for this agenda, highlighting the need to address critical issues related to decarbonization.
Joe Kramek, the newly appointed President & CEO of WSC, emphasized the urgency of adopting comprehensive measures. “IMO member states have an unusual opportunity to decarbonize the world’s ocean supply chains. While we do not have requisite time for half measures,” Kramek stated. He urged that IMO regulations must enable green fuels to compete with fossil fuels to effectively drive the transition and prevent escalating transportation costs without achieving the necessary climate progress.
The WSC, echoing broader industry concerns, highlights the current high costs of green fuels compared to traditional fossil fuels and the challenges related to supply and production capacity. The WSC argues that addressing these cost disparities is crucial for stimulating demand and driving investments in green fuel production. According to their analysis, 60 percent of newbuilds in the container and vehicle sector are designed to use green fuels, indicating a growing demand for these alternatives.
To address the financial gap between green and fossil fuels, the WSC has proposed the Green Balance Mechanism. This regulatory measure would impose a fee on fossil fuel use, with funds allocated to support the development and use of lower greenhouse gas (GHG)-intensity fuels. The fee would be adjusted annually based on green fuel usage, market prices, and progress towards a 65 percent reduction in industry carbon emissions. The proposal also includes financial rewards for the greatest reductions in well-to-wake emissions.
The WSC’s proposal has been updated based on positive feedback from IMO member states and stakeholders. The council has provided a draft of the regulatory text and is actively seeking support for its approach. Additionally, the proposal includes the creation of a parallel IMO Net-Zero Fund, aimed at financing research, development, demonstration projects, and climate mitigation initiatives.
Observers anticipate that the MEPC session will adopt some form of the fund concept as a crucial tool for advancing green fuel development. While similar fund proposals have been presented in past sessions, the industry consensus is that greater government involvement will be essential to drive the transition and bridge the gap between traditional and alternative fuels.