Shipping CO2 controls to raise transport costs

By Stefano Ambrogi - Analysis

LONDON (Reuters) - The world's shipping industry plans to limit its growing carbon dioxide emissions by taxing marine fuels and signing up to a new climate change deal in moves likely to raise transport costs for raw materials.

Experts say the measures, aired at an International Maritime Organisation (IMO) meeting on fuel pollutants in London last week and about a year away from being formally agreed, will be painful but are necessary in the fight against climate change.

"If costs go up then consumers will have to pay ... and that looks like the scenario," said Don Gregory a fellow of the Institute of Marine Engineers.

Shipping, because it operates out of sight on the oceans, has avoided the high-profile criticism for its production of CO2 as aviation, but its emissions are high and growing.

A scientific study prepared for the IMO in December found annual CO2 emissions from ships are more than twice previous estimates at 3.5 percent of the global total. That compares with 2 percent of global emissions from aviation.

The report said shipping emissions could increase by at least another third by 2020 as ocean trade, carrying 90 percent of the world's traded goods by volume, continues to rise.

"The carbon tax would clearly be an additional cost for operators who will pass it on, but you have to see it in the context of the overall transport cost which is still small," said Simon Bennett secretary at the International Chamber of Shipping (ICS).

COSTS "MINIMAL"

Gregory, who also works on the environmental side at an oil major, agreed:

"The (former World Bank chief Nicholas) Stern report suggested those costs would be minimal compared with the costs of climate change."

Some executives believe that even the IMO's latest figures may be underestimating the true scale of shipping emissions.

"We believe the IMO is grossly underestimating future growth in shipping," said Christian Eyde Moller, chief executive of Dutch-based DK Group, a marine technology firm that specializes in reducing ship emissions.

Moller says CO2 emissions could exceed 2 billion metric tonnes in 2020, rather than the IMO's 1.475 billion estimate.

The IMO's plans will be reassessed in June before a decision in 2009 ahead of a UN's climate change conference in Copenhagen.

"What is pivotal is that they have decided to do something and that they now have a timescale to do that: a legislative solution by Spring 2009," said Peter Hinchliffe, ICS marine director.