Last month, Denmark put its name on a proposal labeled the ‘shot of the moon’ to set up a $ 5 billion fund to catalyze the research and development (R&D) it needs to help shipments meet the UN’s decarbonization goals. Thinking blue sky or cake in the sky? Bunker place spoke with the Danish Head of Maritime Security, Environment and Maritime Research, Maria Skipper Schwenn, to find out more.
Why did Danish Shipping decide to support a $ 5 billion R&D fund proposal?
Maria Skipper Schwenn: We have been heavily involved in the preparation of proposals through our membership in the International Chamber of Shipping. What’s changed [last month] It is a fact that Denmark, as a country and as a member state of the International Maritime Organization, supports the proposal.
It’s quite unique that you have an industry at the international level that proposes this. This is the first time you have really seen proposals from the joint industry on financing the transition facing the industry. At IMO, it is the Member States that ultimately adopt the regulations. Therefore, we need the support of Member States so that the IMRB proposal can be turned into a regulation.
How can Denmark support the proposal?
MSS: In the fall of 2019, the Danish government established 13 climate partnerships between government and industry. Its job is to bring initiatives to the table that industry itself can undertake under the current framework to contribute to Denmark’s national emission reduction target of 70% by 2030.As an industry, we must make initiatives and recommendations for the government to take over and do more work. continue. One of the initiatives we brought to the table was a proposal by the International Maritime Research and Development Agency (IMRB) – that the industry itself takes responsibility and raises revenue for research and development. But we also clearly state in our report that we need to have government support for this because otherwise it wouldn’t be the rule at IMO. So, we are very happy that Denmark has decided to take a recommendation from the industry and act on it.
How did you get to the $ 5 billion mark?
MSS: That’s a very good question. We need someone to talk about it. $ 5 billion is just a proposal to be negotiated. Nothing says that’s where we’ll end up, but in order to be able to describe the size of the animal we’re talking about, we have to add an image. Is that going to be $ 2 per tonne [of fuel], I don’t know, it’s for negotiation. If you ask, it’s definitely not fixed, it’s something to negotiate with.
What are some considerations in deciding to set a $ 2 per tonne amount of fuel?
MSS: It’s important to understand that this is not an MBM [market-based measure]. This is not a mechanism that will push [emissions] subtraction. Now we’re saying $ 2. That won’t drive any deductions. There is absolutely no incentive to reduce your emissions at the cost of just $ 2 per tonne of fuel – and that’s not the point of this. The goal is to generate revenue which can then be channeled into research and development, fuel type testing, energy infrastructure – everything we need to be involved in the transition.
What would you say to those countries, such as the Marshall Islands and the Solomon Islands, that think the proposals are not enough?
MSS: The Marshall Islands and Solomon Islands have submitted proposals for a $ 100 fee, but it is an entirely different matter. It was a massive MBM. For us at Danish Shipping, we believe it is too early to start talking about numbers and numbers before we really agree on what the goal is because otherwise you will end up in a discussion about $ 100, $ 150, $ 250 and you won’t. go anywhere. You will then have all developing countries ask for support and then raise a joint but different responsibility card [the principle that recognises all states are responsible for addressing climate change but do not share equal responsibility]. From our point of view, the IMRB proposal is not an MBM, it is something completely different, and we support the beginning to discuss MBM in its entirety. Again, not $ 100 or $ 150, but the principles of the MBM, and how we designed that MBM, so it really drives reduction, and it rewards and incentivizes first movers. That is what we want to focus more on at the moment and which we are ready to discuss because, yes, one day there will be MBM.
The strength of the IMRB proposal is that it can be carried out as an amendment to MARPOL, so that it is an amendment to existing regulations, which means that it can actually take place and be ready in 2023. Meanwhile, the MBM as a whole will require a new regulatory framework and knowing IMO which can take up to eight year, [then] IMRB is the first step towards making this happen.
Shipping companies have come under increasing financial pressure in recent years to comply with stricter emission regulations. Do you think that the potential 2% tax on their fuel bill makes sense, especially when the market is already responding to the challenge of decarbonization?
MSS: I can of course only speak for my members and there I clearly feel the urgency as they are being met by requests from customers starting with transparency regarding their emissions. But then there are the requirements for low-carbon shipping, and with those terms and demands, companies can start talking about who will pay the bills. So, that’s the customer side. And then you have the whole investor side where you also have increasing requirements for transparency and low-carbon green vessels if you want to get invested. So, I think we are seeing the circle starting to develop and thus also sharing responsibility for the bill.
Our members are eager to run this because they don’t want to be the last industry someone else will decide for them, just because shipping will stand there by itself when the rest of the world is gone. It’s no secret, there are also parts of the industry that are dragging their feet, but in that sense, I have an easy job because I have a very homogeneous membership where they agree we have to be proactive, and we should set the agenda as an industry instead of asking other people do it for us.
Do you expect resistance to this proposal?
MSS: Since this is a joint industry proposal, you even have the most conservative national associations backing the IMRB proposal. We’ve been working on this proposal for some time and there is definitely some movement in the industry and for sure, as we said in Denmark, some hairy camels to swallow! It’s important to highlight that there will be no doubt or lack of support from the industry. The industry is 100% behind the IMRB proposal and will furthermore be ready to start discussions on massive MBM.
When is the time for submitting a proposal?
MSS: Now will be discussed at the MEPC [Marine Environment Protection Committee] in June and will hopefully be greeted with a view to further discussion in the fall. That’s how it works at IMO – they open a discussion and then point out things to refer to at the next committee meeting. Then hopefully it will be discussed further at the next MEPC in November and then approved at the MEPC in 2022.
Does the proposal require unanimous approval from all member states?
MSS: In principle, that’s how IMO works, but you never see voting taking place on IMO. If that happens, it will be one-country-one-vote, assuming they are parties to the MARPOL Convention. Usually what happens is that you have all the statements and then the Chairman concludes and he can quickly figure out how many [Member States] support and do not support the proposal. I have experienced several countries threatening to demand a vote. When [0.50%] the sulfur regulations go into effect, we suddenly see some really attractive countries suddenly ratify the MARPOL Convention so they have a say, and I’m pretty sure there has been some lobbying going on! But in principle, it will be a consensus, but not unanimous.
Do you expect the proposal to be approved and then adopted at the end of the year?
I really think that now with co-sponsorship – because this is a pretty influential state – that is supporting it to keep this going. But I am sure there will be developing countries who will question this. [For instance], a small island nation that depends on the transport of its goods by sea wants to know if goods are becoming more expensive.
There are still some things to discuss, but I don’t understand why it won’t be adopted next year. Who can refuse to raise money for this? It’s counter-intuitive to say you’re against this. For those who say that this is too unambitious? This is not an MBM, let’s work on an MBM that will drive emission reductions and have an economic impact – let’s work on it in parallel with the IMRB. That’s why I’m sure it will be adopted and it will become law.