Support for a Carbon Levy for Box Shipping

We recently invited our readers to respond to a survey we ran for the free-to-register website Ship.Energy which reports on shipping's path to decarbonisation. You can also listen to my podcasts there which feature interviews with ship owners, engineers, tech leaders and senior industry figures.

Thanks for your responses to our survey. They show that respondents expect future disruption to global trade due to decarbonisation policies, themselves to be debated at COP 26 in Glasgow, Scotland, later in 2021.

67 per cent of respondents believe that ‘global or regional decarbonisation policies will disrupt global container trade over time’ while 26 per cent disagree, with the remainder feeling either neutral about it or undecided.

One key policy that might affect box trades was debated and approved by the rubber stamp European Parliament at the end of April. This confirmed that shipping will be included in the European carbon trading scheme (CTS) from 2022. Limited numbers of carbon emission permits are available, and these will be cut over time. The price of carbon has accordingly risen from around Euros 43 to Euros 49 so far in 2021. As the munber of permits is reduced over time, and the number of buyers increases, prices are bound to rise - we think they could hit Euros 100 within two years as shipping joins the scheme.

This has not phased our survey respondents: 45 per cent ‘strongly support’ the EU’s move and another 25 per cent ‘somewhat support’ it. Only 10 per cent oppose the move, while 20 per cent are neutral or undecided.

When asked if they support an IMO emissions levy to pay for research into low-carbon fuels, 45 per cent ‘strongly support’ such a move while another 30 per cent ‘somewhat support’ the concept. With only five per cent of respondents undecided, another five per cent ‘somewhat oppose’ and 15 per cent ‘strongly oppose’ the idea.

In other words, there seems to be more support for the EU’s existing scheme than for a theoretical global scheme promoted by the IMO.

Still, as 75 per cent support the IMO concept, we asked what level of emissions levy they would consider appropriate to impose on liner companies on a tonne of CO2 emitted basis. 20 per cent of respondents replied ‘nothing’ – presumably the same 20 per cent who somewhat or strongly oppose the idea. 30 per cent voted for a levy of less than USD 50 per tonne of CO2 - about the level today of the EU scheme. Another 15 per cent voted for a levy of between USD 50 and USD 99. Ten per cent voted for a levy of between USD 100 and USD 149. Nobody voted for a levy of USD 150 to USD 199. It is a surprise then that 20 per cent of respondents voted for a levy of USD 200 or more.

It seems that among our respondents (readers of Ship.Energy and websites and social media) there is no consensus on what level of environmental levy would be appropriate, but opinion is broadly divided between ‘not much’ (less than USD 50 got half of all votes) and ‘lots’ (USD 200 a tonne or more achieving 25 per cent of votes). Such is shipping’s culture and fate, to be regulated by outsiders due to a persistent lack of consensus from within the industry.

Following the introduction of Marpol 13G Annex VI which introduced 0.5 per cent sulphur fuel oil and engendered a rash of scrubber retrofits, liner companies successfully passed on the costs of higher fuels to their customers, even when the pandemic-induced collapse in fuel demand meant that the price of the new compliant fuel failed to reach expected levels. Our respondents believe that the liner companies will do the same with any environmental levy. 50 per cent believe that the liners will pass on the cost ‘entirely’ while 45 per cent believe they will do so ‘at least in part.’ Only five per cent believe that they will not pass on the cost at all.

The cost of a carbon levy per TEU may not be very much for a ship arriving in port with 23,000 TEU aboard. But as the SeaCargo charter forum demonstrates, there is increasing awareness that charterers will have to contribute the environmental costs of global trade if ship owners are to continue to provide reliable and safe services.

If charterers are forced to pay up, what will happen to the money that is levied? Will ship owners be able to make use of any R&D as open-source technology, blueprints or designs? Will they be able to use the results of that R&D to lower the dissuasive costs of retrofitting the current fleet to low-carbon alternatives?

We asked our survey respondents if liner companies and tonnage providers would retrofit existing ships to use LNG as a marine fuel. 70 per cent agreed that some but not all ships would be retrofitted, while only five per cent thought most ships would be retrofitted. 15 per cent thought that no ships would be retrofitted while 10 per cent remained undecided or were not allowed to say.

The ship repair and newbuilding yards will be delighted to know that fully three quarters of our respondents can see more retrofit / upgrade business coming their way. And the good news doesn’t stop there, as 55 per cent of respondents think a minority of container ship newbuildings will be built with LNG fuel capability, along with 35 per cent who think most new ships will be built with LNG capability. Nobody thinks that container shipping will turn away from LNG fuel now, but 10 per cent did not know or were not allowed to say what they thought…

Beyond LNG, 60 per cent of respondents think some container ships will be designed with methanol fuel specification and another 15 per cent think most liners will be built with methanol optionality. Still, 20 per cent do not think liners will plump for methanol and five per cent remain undecided.

Peering into the future and the advent of zero carbon fuels, we asked whether any container ship owners will replace any of their current fleet with newbuildings burning hydrogen or ammonia. 55 per cent of respondents think that this will happen before 2030 and another 22 per cent think that this will happen after 2030. Ten per cent think this won’t happen and another ten per cent don’t know or were not allowed to say.

Hydrogen and ammonia would appear to be more popular as liquid fuels than as fuel cell components. 35 per cent of respondents think that fuel cells and batteries will be fitted to container ships before 2030, with another 10 per cent of the opinion that this will happen after 2030. Another 25 per cent think that smaller newbuildings will be fitted with fuel cells and / or batteries before 2030 with 15 per cent more opting for this option after 2030, giving the technology more time to mature. Only 15 per cent of respondents do not think that container ships of the future will come with electrical power.

It has become a cliché that shipping is hard to decarbonise. On land, the mantra is to electrify everything and produce the electricity with renewables as solar and wind power are now cheaper than coal in most countries. But electricity, with current technology, only really works on large ships as auxiliary power. This is because the biggest fuel cells and batteries can only supply a few per cent of the 20 to 50 megawatts of power generated by large cargo ships’ main engines.

Nonetheless, our survey responses indicate that a majority agree that carbon levies and alternative fuels will be introduced for shipping in the years before 2030, despite most extant ships being able to reach the IMO’s 2030 emission reduction target by combining slow steaming with some non-fuel technological retrofits.

Around a fifth of our respondents could be cynical, jaded or contrarian. They could theoretically be right that liner shipping won’t decarbonise either through regulatory or technological means, and certainly not before 2030.

But now that the world’s cargo interests and financiers are turning their attention to their Scope 3 emissions – the emissions from their supply chains rather than their direct emissions from their own activities - shipping’s chances of dodging carbon taxation appear to be vanishingly small.

Meanwhile the G7 and Cop 26 meetings this year may well add more political will – and taxpayers’ money – to the decarbonisation agenda. If the world is to build back better from the Coronavirus pandemic, it will need to put international shipping at the centre of its public health, trade and environmental policies.

We might all feel cynical about that but, if shipping does not itself present a consensus to the regulators about how it can responsibly and safely put itself at the centre of their deliberations, its fate will continue to be regulation by the uninitiated.

A version of this report was recently published at