SIMIC

"Propulsion methods such as LNG and ammonia currently offer high but expensive CO2 mitigation potentials. On the other hand, a bunker levy could offer an implementable and R&D cost-free approach towards the IMO targets," said Athens-based Intermodal Shipbrokers analyst Dionysis Kourouniotis.

Writing in Hellenic Shipping News Worldwide, Mr Kourouniotis said: "Carbon neutral fuels would set a zero-levy baseline; the levy could be increased with increasing carbon footprint of fuels. This method would require a tax per ton of CO2 emission equivalent."

The three current levy implementation strategies proposed in 2019 by the Technical University of Denmark led by Harilaos Psaraftis include low, medium and high levy intensity strategies".

Intermodal's analyst added that "a horizontal IMO-imposed levy could be enacted on a gradual basis starting from 2023-24 to account for the current newbuilding orders placed.

Current IFO [intermediate fuel oil] price is at around $280/ton, therefore a carbon levy of $75/ton (even at a [15-25] per centinitial implementation) would increase fuel costs by five to seven per cent.

Alternatively, a greater than 70 per cent levy imposition by 2030 could be overly aggressive as it would require the timely development of greenhouse gas reduction technologies to avoid the shifting of costs from shipowners to end consumers.

This is because total annual costs to the shipping industry would exceed $65 billion (computed based on BP's Statistical Energy Review & Outlook, 2019).

The revenue stream distribution of the carbon levy would have to be carefully allocated by the IMO. Arguably, a significant proportion of the funds would have to be used to finance greener shipbuilding methods (inclusive of R&D required) and end-products (vessels).