LONG AWAITED: US EMISSIONS LEVY PROPOSED

LONG AWAITED: US EMISSIONS LEVY PROPOSED

A fee of 150 USD per ton CO2 equivalent emitted from ships discharging international cargo at U.S. ports is suggested to be implemented from January 2024.

Early this month, U.S. lawmakers proposed new legislation, the International Maritime Pollution Accountability Act (IMPA), to be introduced at the same time as the EU carbon price comes into force from January 2024.

IMPA highlights

If introduced, the act would increased the cost of cargo shipped to the US (in contrast to Europe’s ETS, IMPA proposes to cover 100% of the voyages to the US, but 0% on voyages leaving the US. The current proposal’s main aspects:

• The pollution fee
  150 USD per tonne CO2 equivalent (only for inbound voyages)
  Additional fee on air pollutants:

• 30 USD per lb nitrogen oxides
• 18.00 USD per lb sulphur dioxide
• 90 USD per lb particulate matter‍
• ‍Eligible vessels
  Vessels of 10 000 GT or more
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• Introduction
  January 2024‍
• Responsible party
  ‍The operator (not further defined) is to submit the required information and also the one to hand in the fee‍
• Process‍
  Reporting within 30 days after end of each quarter
  First reporting 30 April 2024 for voyages completed during Q1 2024
  Fee issued 30 days thereafter. Payment due 30 days thereafter‍
• Penalties
  ‍Operators failing to hand in the fee will be prohibited from operating within U.S. waters and from docking at ports of call in the U.S.

The fact that Europe’s ETS puts the responsibility on the manager while IMPA does so on the operator is an indication of how not thought through this proposal is as of today, but further regulatory alignments are likely, if IMPA is to be implemented.

The act does recognise foreign pollution fees. If a vessel is subject to a pollution-based fee by the country of the port of origin of the vessel, the U.S. CO2 fee shall be

1. reduced by 50 percent if the fee from the other country is equal to or more than 50 percent of the U.S. fee and
2. reduced by an amount equal to the amount of the fee from the other country if that fee is less than 50 percent of the US fee.

In addition, a particular provision states that if the IMO enforces a global fee on emissions that is equal to or greater than the U.S. fee, the U.S. fee would cease to apply. The CO2 factors used in the US would be higher than the factors applied by IMO and in the EU ETS which only includes tank to wake (TTW) CO2 emissions.

The bill was introduced and cosponsored by democrat senators and has to be voted on by both houses of Congress and signed by the president to become law. Antonio Santos, Federal Climate Policy Director at Pacific Environment who has got over 20 years of federal and state regulatory experience, was asked about the likelihood of this bill being passed before 2024, and said: “I’m hopeful, but it will be a challenge to move the bill this year. However, the bill will continue to raise awareness in Congress of the importance of maritime decarbonization and the need for a funding mechanism to help transition the shipping industry away from the use of fossil fuels.”

What is OceanScore’s take on this?

The American initiative should be a wakeup call to IMO to quickly start to move on a global regulatory framework. The structural imbalances and lack of alignment between IMPA vs. for example the EU ETS will make it hard to efficiently comply with both regulations and all but impossible if more players join the game with non-aligned rules and concepts.

We believe it is highly unlikely that the IMPA proposal passes both houses in its current shape and with the proposed timeframe. So we would not worry about it too much at this point in time.

What we would worry about is to get ready for Europe’s ETS in time. Getting the fundamentals right there will without doubt be critical to succeed in whatever other emissions oriented regulatory regime is to come upon shipping:

• Granular, quality assured emissions data, daily / between all relevant events – with no surprises at year end when annual data are verified
• A solid, automated process (solution) that secures that you stay in control without overburdening your organization:
  • identify the emissions to compensate / provide payments for,
  • allocate these to the different parties involved (charterers, owners)
  • generate the respective requests
• 360° monitoring of open positions, cost, balances,… with owner, manager and charterer perspectives

Getting ready for successful ETS implementation will prepare any shipping company for whatever is to come from the US, the UK, IMO, …

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