'Mandatory contribution' R&D fund proposed by industry leaders
A global decarbonisation R&D fund could be financed by a mandatory contribution of US$2 per tonne of marine fuel, writes Stevie Knight.
Expected to be worth US$5bn over a ten-year period, it aims to give the research and development of low or zero-carbon fuels and technologies much needed critical mass. At the same time, the amount is pitched at having “negligible” impact on trade or IMO member states’ economic interests.
The proposal, which will be taken to IMO MEPC meetings for discussion next year is designed to be “simple, accountable and deliverable,” said Esben Poulsson, chairman of the International Chamber of Shipping (ICS), one of the proposing partners. But to work “it has to be a mandatory, not voluntary scheme” said Lars Robert Pedersen of coalition member BIMCO: “There can be no free rides.”
There are already signals that it’s being endorsed by big engine manufacturers: “Driving decarbonization is one of MAN Energy Solutions’ main aims”, said Dr Gunnar Stiesch, senior VP and head of Engineering Engines.
However, Stiesch also commented that “we would encourage... providing full transparency” for both utilisation and project results. There may also be some concern from other quarters that the playing field could be distorted by less scrupulous owners taking advantage of loopholes.
“It’s been crafted in a way that we can be reasonably sure everyone participates”, underscored Pedersen. Further, he added, “though IP property rights will have to be fleshed out, the principle is clearly not to throw money at a programme that then simply becomes proprietary to a vendor”.
Other worries about its efficacy may – possibly – be eased by the way the proposal builds on well-established mechanisms: for example, the amount due will be verified by the Fuel Oil Data Collection System and there will be oversight by IMO via a supervisory body (composed of member state reps) reporting to the MEPC.
As a result “our plans are transparent, and our regulator has teeth”, said ICS secretary general Guy Platten, two very good reasons to take this initiative seriously.
The idea is to set up an account for each ship based on IMO number, with the entity that actually pays the fuel bill being responsible for passing on contributions - not, underlines the proposal, bunker suppliers or other third parties.
Despite this, there remain some challenges said Pedersen, as it hinges on IMO and member states passing a MARPOL amendment which demands ships carry a certificate of proof that they’ve contributed to the fund, for ready inspection in port.
There are some further tweaks to be hammered out: for example, a lower R&D contribution per tonne would accrue to low-carbon fuels and energy sources, or those with lower GHG emissions than conventional fuels. Further, special attention will be paid to operational innovations addressing the high transportation costs of many Small Island Developing States (SIDS) and other remote locations.
However, it should be noted that despite its global nature, “this should not be considered a market-based measure” underlined Stuart Neil of the ICS.
Still, while not an MBM itself, it may pave the way for its introduction. The proposal states it “could provide some of the architecture” for development of a levy-based measure, “in a manner that would reduce the possibility of market distortion”.
Certainly, MAN ES is looking toward “current and anticipated IMO regulations” to go further by “creating a pricing scheme directly related to the actual greenhouse-gas footprint of the particular fuels used”, said Stiesch.
Moreover, as Neil added: “If MBM’s are seen as a way forward at IMO, this could be a vehicle for that to work quickly, making sure we have the underpinning technology to achieve the transition.”
It’s a clear winner for alternative tech companies: the proposal "shows clear recognition of the commercial benefits of a coordinated, rapid emission reduction”, said Diane Gilpin of Smart Green Shipping, especially as these ambitions “require massive infrastructure change”.
While the fund won’t see innovation through to commercial realisation, it aims to be a broad brush: all kinds of carbon reduction measures could apply to the fund explained Pedersen. Gilpin added, “scaling-up nearer-to-market fuel-reduction technologies like 21st-century wind-assist” is a necessary part of the mix.
The proposal is ambitious but it could create a wave of innovation. Neil concluded: “This isn’t merely a commitment, it’s a mechanism to deliver change.”
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