What I’d like to see come out of next month’s MEPC meeting

Khalid Hashim, managing director of Thai-listed dry bulk owner Precious Shipping, lays out his green vision for shipping.

Next month the Marine Environment Protection Committee (MEPC) will meet at the headquarters of the International Maritime Organization (IMO). It is a crucial meeting, and one where concrete action is needed to ensure the industry is given the regulatory guidance it needs on its path towards net zero.

My recommendation would be for IMO member states to agree a net zero target by 2050, and to impose a tax of $100 per ton of CO2 emitted starting on January 1 next year, increasing to $200 by January 1 2030.

In my view, every ton of fuel oil burnt in an engine would cost an additional $320 from January 1 next year as a carbon tax increasing to $640 per ton by January 1, 2030, to be collected and used by the IMO. A universal tax by the IMO would stop similar taxes by others. The world would benefit.

With the right ambition to get to net zero by 2050, IMO will make itself more relevant. Imposing a CO2 tax from 2024, and doubling it by 2030, would allow the IMO to do the following seven things.

1. Have massive resources at their command exclusively for decarbonising shipping.
2. Stop all the ‘pretenders’ who wish to apply similar taxes when ships call at their ports.
3. Have clear rules and regulations from the IMO, rather than different rules and regulations from separate individual countries.
4. Conduct R&D in alternate fuels, their engines, and the infrastructure needed at bunkering ports.
5. Subsidise alternate fuels on ‘first mover’ green ships.
6. Assist island nations from the worst impact of climate change.
7. Give clarity to shipyards with targets of just how many ships they need to build each year to get shipping to zero GHG emissions by 2050.

The IMO must put a hard stop to any fuel-burning ships delivered by shipyards on or after January 1, 2030. Look at the auto industry. Once they were given a deadline after which they could not produce or deliver diesel engine cars, significant numbers of electric cars are rolling off the assembly lines in every serious automotive manufacturing country. Such an IMO imposed deadline will do the following five things:

1. Get clarity for shipyards, for owners, for charterers, and for end consumers, with hard deadlines.
2. Increase capacity needed at shipyards by a specific date to be able to deliver the required zero-emission vessels (ZEVs).
3. Get owners to have a road map cast in stone for getting to zero GHG emissions by 2050.
4. Get charterers to tie up long-term contracts with owners who have contracted ZEVs.
5. Get cargo users to factor in the cost of ‘green’ shipping services.

I’d also like to see the IMO set a deadline for 20 years or older ships to be scrapped by January 1, 2035, a rule that would do the following 10 things:

1. It will immediately reduce GHG emissions from the gas-guzzling ships built in the past when fuel oil was not thought of as the culprit, which we can now see, all too clearly.
2. It will shrink the supply side of ships and force our clients to start paying more for our services and remove any cost differential between fuel burning and ZEVs.
3. It will allow shipowners to generate enough money to be able to order the much more expensive ZEVs that will bring us to net zero.
4. Dr Martin Stopford, the most eminent shipping economist, stated replacing fuel-burning ships with ZEVs will cost between $1trn to $1.5trn in a good case, or $2trn to $3trn in a poor case.
5. Allow regulations to be in place for the safe operation of alternate fuels.
6. Allow crews to be regulated and trained for handling such alternate fuels.
7. Bunkering hubs to be created, with their entire infrastructure, for alternate zero GHG fuels.
8. Encourage clients to charter such ZEVs on long-term contracts allowing everyone in the logistics chain to map out their costs and returns.
9. Make cargo owners pay a fair freight rate to move their products on ‘green’ ships.
10. Allow cargo owners to charge their end consumers for such a ‘green’ service.

Splash will be bringing readers updates from July’s MEPC gathering.