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Live From Nor-Shipping 2013
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BW proposes bunker tax for environmental technology

In his keynote speech at the Nor-Shipping 2013 opening conference, BW Group chairman Andreas Sohmen-Pao has suggested a global tax on bunkers to encourage advances in environmental technology.

Jumping straight to the defence of the idea, he explained, "it may sound counter-intuitive to argue for taxes on bunker fuel during a shipping downturn, but I think this is manageable if the following conditions are met."

"It should be applied equally across the industry, it should be at a flat rate per tonne of fuel rather than a volatile market based instrument and it should start at low level with clear and meaningful increases over a 10-year period."

"The proceeds should be reinvested into environmental initiatives within our own industry to incentivise green recycling and develop new technologies and solutions," Sohmen Pao added.

Speaking to Seatrade Global, Sohmen Pao elaborated, "one needs to have a central collecting organisation and one needs determine what to do with the funds, but the mechanism would be very simple in terms of a fee, a levy as a tax per tonne on fuel."

"As an example one might start with something very small like $10 per tonne, which is really very insignificant given the bunkers just now are at $700 per tonne, but then if you signal it's going to go to $100 or $200 over 10 years at a steady rate people have a lot of time to prepare and invest in the right technologies before the date when it arrives and its quite an onerous tax."

"The key is if it's too complex a system it will not fly at all so the starting point is a system that is simple."

When asked how the market would likely react to the measure, Sohmen Pao stressed, "it's all right if it's fair and equal and it starts small, so if it's $10 per tonne and it starts next year and everyone pays the same I don’t think it would be a great burden to the industry. The key is to start small."

Claus Hemmingson, partner and member of the board of AP Moller Maersk told Seatrade Global he was not sure a bunker tax was the solution. "In general we are positive if it’s a level playing field and simple. I am not sure a bunker tax would solve the problem in itself. The bunker cost is huge cost as it is already, I think there would be more merit if the oil price suddenly collapsed," he said.

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