CARGILL and Trafigura, two leading ship charterers, have proffered mixed responses to the shipping industry’s proposal for a self-imposed fuel levy to help decarbonise the maritime sector.

On Wednesday eight shipping associations unveiled their proposal for a mandatory $2 payment from shipping companies for each tonne of fuel oil their ships buy to consume. This would help to finance decarbonisation research and development. It would generate about $5bn over a 10-year period for that purpose.

With charterers and shipping customers anticipated to drive much of the demand for an improvement in shipping’s environmental credentials, Cargill and Trafigura have been among the more vocal presences in this regard and are expected to play a leading role in this area.

Charterers, who often pay for the fuel ships consume, would therefore be key figures in this proposed fuel levy; the shipping associations suggest that the $2 fuel levy should be thought of as an integral part of the fuel purchase costs, to ensure they become part of commercial contracts.

A spokesperson for Cargill Ocean Transportation told Lloyd’s List the company is encouraged by the maritime industry pushing for progress in decarbonisation. It takes the view that this is a “high and urgent priority”.

Meeting the IMO 2050 targets — reducing greenhouse gas emissions by at least 50% by 2050 — will require both funds for R&D and pilot projects as well as a distinct change in industry behaviour, they added.

“We believe that a mandatory fuel levy could drive this, but the price of carbon will need to be sufficient to incentivise the change. Cargill does not currently have a view on one proposed scheme over another, but we favor global initiatives over regional initiatives, and a price of carbon that is realistic,” the spokesperson said.

Cargill did not comment directly on what it thought of the $2 value of the proposed levy.

Elsewhere, Trafigura, whose global head of wet freight has openly supported a carbon levy on fuel, welcomed the proposal’s approach but questioned its potential effectiveness. 

“Trafigura supports a surcharge on CO2 emissions, but is not convinced that the proposed amount of $2 per tonne is sufficient to drive behavioural change and incentivise efficiencies in the way vessels are operated,” a spokesperson for the company told Lloyd’s List.

Comments on the value of the proposed fuel levy have come despite efforts from the backers of this fund to distinguish it as an attempt to boost R&D, instead of a call for market-based measure on shipping emissions.

The eight association stated in their proposal that the R&D fund is not meant to be a market-based measure nor to impede one from coming into effect in the future.

They do believe, however, that “it could potentially provide some of the architecture for the possible future development of a levy-based market-based measure for shipping, in a manner that would reduce the possibility of market distortion”.

International Chamber of Shipping deputy secretary Simon Bennett said during a conference call on Tuesday that the $2 price level is meant to avoid penalising developing countries that cannot absorb increases in cost.

The proposal was also met with mixed reactions from environmental organisations due to the $2 payment.

Transport & Environment, the Brussel-based non-governmental organisation, said that the proposed $2 per tonne fee means that the levy on carbon consumption for ships would be about 40 times smaller than the price for carbon allowances in the EU, which today cost about €25 ($27.8) per tonne of CO2.

The German-based environmental non-governmental organisation Nature and Biodiversity Conservation Union, known as Nabu, said it sees the fund as a “nice additional measure” for decarbonisation, especially in combination with the short-term emissions measures the IMO will consider next year.

It warned, however, the “$2 alone would be a ridiculously low levy”.

“No question, this can push long-term decarburisation in shipping, but only in addition to instantly effective measures such as speed limits, fuel tax, CO2 price, efficiency or the EU Emissions Trading System,” Nabu shipping expert Sönke Diesener told Lloyd’s List.