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Shipping being considered for UK emissions trading scheme, minister confirms

Industry could form part of planned post-Brexit cap and trade set-up, but no definite decision yet

Move comes as European Commission proposals to include shipping in EU mechanism expected within months

SHIPPING may be included in the UK government’s planned post-Brexit emissions trading system, a senior minister has indicated.

“This is one of a number of things we are looking at, but no final decisions have been made,” a spokesperson for the Department for Transport told Lloyd’s List on behalf of Robert Courts.

The confirmation comes after speculation was sparked by earlier ambiguous media comments from Mr Courts, which left some of the organisations that would routinely expect to be consulted unsure of exactly what was being said.

Shipping is thought to account for around 3% of UK emissions, but is currently not included in domestic climate change targets.

But with Glasgow set to host the United Nations Climate Change Conference (COP26) this year, the UK is keen to polish its green credentials, and its advisory body — the Committee on Climate Change — has called for maritime emissions to form part of emission reduction efforts.

Emissions trading schemes are designed as a market mechanism to instantiate the ‘polluter pays’ principle. Carbon emitters are allocated or made to purchase tradeable permits for the right to pollute.

Those that can reduce emissions below their quota can then sell their permits to those that exceed alloted targets, potentially at a profit.

Many environmentalists regard them as ineffectual. There is empirical evidence they have not had the degree of impact a simple economic textbook model would suggest, not least because they sometimes create perverse incentives.

The European Union introduced such an ETS 16 years ago, with shipping so far excluded in practice.

But both the European Commission and the European Parliament now have shipping in their crosshairs, and an official proposal for shipping's inclusion is expected from the Commission in June.

The Marshall Islands and Solomon Islands have proposed that the International Maritime Organization impose a $100 levy per tonne of carbon dioxide equivalent on all ships by 2025. Their stance has been backed by Maersk.

Having now left the European Union, Britain is mulling a similar domestic scheme, in line with the government’s stated target of eliminating UK carbon emissions altogether by 2050.

Were shipping to be included, owners would likely to resent any additional outlay entailed, especially if the burden proves to be greater than that imposed on EU counterparts.

A spokesperson for the Chamber of Shipping seemed to indicate a preference for an international rather than a unilateral approach.

“Tackling climate change is a top priority for the Chamber and our members and we are committed to reaching the targets set on reducing emissions. Shipping is international by nature and we firmly support international regulations and the proposed $5bn research and development fund proposed by the IMO.

“We would welcome the UK co-sponsoring this and help lead the way on decarbonisation.”

Maritime London chief executive Jos Standerwick said: “We would have to know more details, but it is important that the UK considers mechanisms that will support UK owners and operators through the transition to zero carbon.

“With the the proposed inclusion of shipping in the EU ETS, it seems a regional approach to carbon pricing may be inevitable. However, the UK must ensure our shipping cluster is not adversely affected by introduction of the ETS.”

But bringing shipping within a British ETS would be in line with demands from the opposition Labour Party, whose green transport spokesperson Kerry McCarthy came out in favour of such a move in November last year.

An advisor to Labour shipping spokesperson Mike Kane said: “On the face of it, if they confirm this trading platform, it’ll go some way to what we’ve asked for.”

Labour is keen to push for shipping’s inclusion in Britain’s statutory but advisory annual ‘carbon budget’ and Mr Courts had given no word on that, he noted.

The Department for Transport, at which Mr Courts is a minister, has also established a £20m ($28m) fund to help shipyards design new greener vessel types. It is now open for bids, he told Bloomberg.

Meanwhile, the Maritime and Coastguard Agency has announced that consultation over transposing the International Maritime Organization’s rules for shipping in the Arctic and Antarctic into domestic law has begun.

The so-called Polar Code covers issues including ship design, construction and equipment as well as the protection of the unique eco-systems of the polar regions.

While shipping operators should already be working to the standard anyway, Britain wants enact it into law as part of its ongoing commitment to cleaner seas and protection of the environment, the MCA added.

The eight-week consultation process commenced last week.

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