Identifier
Created
Classification
Origin
09BRUSSELS811
2009-06-11 14:42:00
UNCLASSIFIED
USEU Brussels
Cable title:  

SHIPPERS PROPOSE CLIMATE FUND TO AVOID CAP AND

Tags:  EAID ENIV EWWT KGHG KTDB 
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ZNR UUUUU ZZH
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FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
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RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 02 BRUSSELS 000811 

SIPDIS

STATE EEB/TRA FOR S. MILLER

E.O. 12958: N/A
TAGS: EAID ENIV EWWT KGHG KTDB
SUBJECT: SHIPPERS PROPOSE CLIMATE FUND TO AVOID CAP AND
TRADE

UNCLAS SECTION 01 OF 02 BRUSSELS 000811

SIPDIS

STATE EEB/TRA FOR S. MILLER

E.O. 12958: N/A
TAGS: EAID ENIV EWWT KGHG KTDB
SUBJECT: SHIPPERS PROPOSE CLIMATE FUND TO AVOID CAP AND
TRADE


1. In May 2009, the Danish Shipowners' Association (DSA)
proposed a bunker levy on fuel as an alternative to inclusion
of the maritime sector in emissions trading schemes (ETS).
Under the proposal, suppliers of bunker fuel would be
registered with the administrator of an international fund
for greenhouse gas emissions from ships to be established by
the IMO. (Note: The fund would be structured along the
lines of the International Oil Pollution Compensation funds.
End note.) The suppliers would collect a levy or a fee,
based on the amount of fuel distributed, and transfer the
proceeds to the fund. Proceeds from the fund would be used
to finance mitigation and adaptation efforts in the
developing world, in conjunction with UNFCCC efforts, as well
as research and development of clean energy technologies.

2. Econoff met with DSA representatives on May 21 during EU
Maritime Day events in Copenhagen. Although they did not
expressly say so, Danish shippers fear that the inclusion of
maritime emissions in the EU's ETS would put them at a
competitive disadvantage, since "about 2/3 of the merchant
vessels fly Annex II flags." Danish ship owners did announce
a 15 percent GHG reduction target by 2020, by implementing
efficient practices and installing modern technology.
However, it will be difficult to exceed this target without
overhauling the fleet, which would be prohibitively expensive.

3. DSA stated that a bunker levy is consistent with the IMO's
nine fundamental principles for future regulations on GHG
emissions from ships (see below) as well as the IMO principle
of no favorable treatment, by encouraging shippers to
minimize fuel usage while maintaining a level playing field.
Further, DSA stated the proposal respects the "common but
differentiated responsibilities" standard in that proceeds
from the fund would be distributed among developing countries
for adaptation and mitigation efforts. DSA also stressed
that the levy is not a "tax", since it would not be imposed
and collected by governments.

4. Since the IMO operates by consensus, DSA's greatest
challenge is to secure the support of China, India, South
Africa, and Brazil. DSA hopes the prospects of revenues from
the fund will generate support from these countries. One DSA
representative stated that Chinese officials have in
confidence expressed interest in the proposal but publicly,
the Chinese will not take a position in the IMO that
contradicts their stance in the UNFCCC discussions. The
IMO's Maritime Environment Protection Committee continues to
discuss the proposal, but DSA does not expect any results
before COP 15 in Copenhagen, which it hopes will send a clear
signal to the IMO.

5. In the meantime, an EU Commission official commented on
June 9 during the Nor-Shipping conference in Oslo that
"immediate action" is required by the industry and that the
Commission has a "clear preference" for including the
industry in the ETS. However, he later told a reporter that
"we would not question the efficacy of a bunker levy over
emissions trading if it was global, proven to be efficient
and avoided any distortion of competition."

6. Comment: Inclusion of the maritime industry in the
emissions trading schemes will be difficult to enforce and
could distort shipping practices, as ship owners will attempt
to circumvent ETS regimes. A bunker fuel levy could be a
win-win as it will maintain a level-playing field ) an
important consideration for developed states ) and provide
financing for developing states. End comment.

7. The IMO's nine fundamental principles for future
regulations on GHG emissions from ships are:
1) Effective in contributing to the reduction of total
global GHG emissions;
2) Binding and equally applicable to all flag States in
order to avoid evasion;
3) Cost effective;
4) Able to limit, or at least, effectively minimize
competitive distortion;
5) Based on sustainable environmental development without
penalize global trade and growth;

BRUSSELS 00000811 002 OF 002


6) Based on a goal-based approach and not prescribe
specific methods;
7) Supportive of promoting and facilitating technical
innovation and R&D in the entire shipping sector;
8) Accommodating to leading technologies in the field of
energy efficiency; and
9) Practical, transparent, fraud free and easy to
administer.

Murray
.