Is the shipping industry’s R&D climate fund a Trojan Horse?

In brief, the IMRF proposes to levy €0.6 ($0.7) on each tonne of CO2 that ships emit ($2 per tonne of fuel). Ostensibly, the goal is to generate about $5 billion in funds over the next 10 years. These resources would fund research and development (R&D) into carbon-free marine technologies that would help decarbonise the sector. For pure R&D and pilot tests, this amount might arguably be adequate so long as the money is spent efficiently. Together with other funding streams, including the EU Innovation Fund, a possible future EU Maritime Climate Fund under the emissions trading system (ETS), private investments by the individual shipping companies and shipyards, the IMRF could be sufficient to develop and test new marine technologies. In that respect, I welcome this proposal and the efforts of the parts of the industry that have genuineve intentions in developing it.

And here is where the Trojan Horse enters the “battlefield”.

Firstly, certain voices within the industry seem to have taken the opportunity to spin this proposal as (a precursor of) a global market-based measure (MBM), a carbon pricing system, for shipping. MBMs intend to guide the industry towards environmentally sustainable technologies by making CO2 emissions increasingly expensive. For example, in the EU sectors covered by its ETS, including power plants and airlines, pay around €25 ($28) per tonne of CO2 emitted. While in itself insufficient to nudge the maritime sector to carbon-free fuels, the EU carbon price is a whopping 40 times bigger than the IMRF carbon/fuel levy. In that context, it would be ridiculous to suggest that the IRMF is an MBM and that we should all lie back and expect miracles in the next 10 years. Given such a mediocre starting point, expecting IMRF in the future to evolve into a proper carbon pricing mechanism would be akin to expecting a hen chick to evolve into a fully grown ostrich.

And that’s precisely where the second problem lies. Industry’s IMRF proposal comes in a particular political moment. A week before it was announced, the new European Commission published the European Green Deal, a strategy paper laying out its plans for regulatory and policy actions to ensure that Europe becomes the first climate-neutral continent by 2050. As part of the Green Deal, the Commission committed to extend the EU ETS to cover international maritime transport and implement further measures to accelerate the uptake of zero-carbon fuels, such as hydrogen, by the sector. EU shipping in the ETS would initially generate about €4 billion/year in revenues, while having a negligible impact on consumer prices, measured in less than a cent on a kilo of bananas shipped to Europe. Given that shipping industry has long been resisting European measures on shipping, it is quite hard to shake off the feeling that the release of the IMRF was not, in part, calculated by some to dissuade Europe from acting on maritime emissions.

Hear it from the horse’s mouth. Following the release of IMRF proposal, Simon Bennett, deputy secretary-general of the ICS, was quoted in Politico Europe as saying: “If you believe in a market-based mechanisms, the place to do that is at the IMO. […] This is a global problem and it’s only going to be solved at the global level.” [18 December 2019]. It is strikingly obvious that, at least parts of the industry are keen to nip the EU ETS in the bud by giving the misguided promises that everything is under control at the IMO.

This wouldn’t be the first time the industry is resorting to such a tactic. Every time Europeans lose their cool about the lack of IMO progress, industry has been quick in encouraging IMO to make some cosmetic progress and then shout from the rooftops that shipping’s global regulator is making ‘great’ progress on climate – if only to buy themselves more time. It is good to be hopeful about global climate negotiations, but that does not mean being naive. IMO and other UN agencies, like ICAO, are notorious in their appallingly poor track record in curbing the sector’s climate pollution. Relying solely on the IMO to solve shipping’s climate impacts is akin to relying on (mostly) coal development ministries and coal miners to eliminate coal-power plants.

Therefore, even though the industry’s IMRF proposal is a welcome news, it is not an emissions reduction measure and should not be treated as such. Most importantly, this should not stymie the EU in extending the ETS to cover the maritime sector as a matter of urgency. The IMRF and EU ETS can actually function in parallel; the latter could even fund the former. There cannot be exclusivity in action against climate change. The urgency of the crisis is daunting enough to justify efforts at all levels, by ports, national governments, regional and global actors. To suggest otherwise would only mean signing a death penalty to the planet.