Ocean Carriers Call for ‘Green Balance Mechanism’ to Achieve Net-Zero

The World Shipping Council, on behalf of some of the world’s largest ocean carriers, has called for a Green Balance Mechanism to ‘close the price gap between fossil fuels and green fuels, at the lowest possible overall cost’. 

The call for a Green Balance Mechanism comes at a time when the shipping industry - spurred on by the global regulator, the UN International Maritime Organisation - is required to drastically reduce its greenhouse gas emissions.  Ultimately, the industry is required to hit ‘net-zero’ emissions by 2050.

However, there is yet to be cost parity between traditional bunker fuels and the new generation of alternative zero or low-carbon fuels. 

Therefore, in order to avoid imposing an outsized cost on ocean carriers (and by extension the global economy), the World Shipping Council is proposing a mechanism that will ‘make it economically rational and attractive for both shipowners and energy providers to invest in fuels and technologies that deliver deep greenhouse gas reductions’. 

So, how does the World Shipping Council envision its Green Balance Mechanism working?  It has set out the following proposals: 

• Under the Green Balance Mechanism, fees will be taken from fossil fuels and allocated to green fuels used, so that the average cost of fuel is equal.
   
• A greater financial allocation will be made to fuels that deliver the biggest reductions in greenhouse gas emissions (on a well-to-wake lifecycle basis).
   
• The money collected in any given year will be determined by the amount of green fuels used.  As such, there should be a relatively low fee at the start of the transition.
   
• The minimum fee necessary to offset the price differential in a given year is collected and allocated to vessels using green fuels that meet a specific greenhouse gas emission threshold.  This ensures that green fuels can be produced and used and does so with the least possible cost to transportation.
   
• The emission reductions required for a fuel to receive a price-balancing allocation are linked to IMO decarbonisation requirements, increasing in stringency toward the 2050 net-zero goal.
   
• It is expected that the Green Balance Mechanism will be adaptable and fully integrated with a greenhouse gas fuel-intensity standard.
   
• It should be possible to add other fees to raise funds for climate mitigation initiatives and research, development and demonstration projects. 

It is hoped that the introduction of a Green Balance Mechanism will allow existing and soon-to-be-delivered dual-fuel ships to operate on the cleanest fuels, rather than having to wait years for them to become economically viable. 

Commenting on the proposed Green Balance Mechanism, John Butley, President and CEO of the World Shipping Council, said: 

“Liner carriers are committed to decarbonising shipping and eager to support the development of effective and timely global climate regulations through the IMO.  Switching from fossil fuels to green energy sources for the engine of global trade will take time and require massive private and public investments.  It is our shared responsibility to make sure we meet the needs of our climate in a way that minimises the cost for the global economy”.

Rolf Habben Jansen, CEO of Hapag-Lloyd, echoed this sentiment, saying: 

“The World Shipping Council’s proposal for the Green Balance Mechanism is a pragmatic step towards sustainable shipping.  This greenhouse gas pricing mechanism aims to promote a competitive shift to low-emission fuels, which is consistent with our sustainability measures, our goal to operate a net-zero fleet by 2045, and the shipping industry’s overall commitment to decarbonisation.” 

“Additionally, it promotes the production of alternative fuels and minimises the economic burden on all stakeholders, ensuring a level playing field.  These are crucial factors for a successful energy transition in maritime shipping”.

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