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SSA turns up the heat in CO2 debate

SSA turns up the heat in CO2 debate

Singapore: As the crunch COP 15 (15th Conference of Parties) meeting of the UN Framework Convention on Climate Change unfolds in Copenhagen, the Singapore Shipping Association (SSA) has reaffirmed its support for a Bunker Levy Scheme (BLS) as the preferred Market-Based Instrument (MBI) to help further reduce Greenhouse Gas emission from ships.

The SSA argues that a BLS is "the best and preferred option to mitigate GHG emission from international shipping because such a scheme is transparent, predictable and simple and equitable in application."

Regarding transparency, the SSA says it strongly believes that the IMO, as the lead legislative and technical body for the maritime sector, is the forum that will provide sufficient oversight to guarantee transparency when the BLS is applied for the shipping industry. Whilst there may be concerns with regard to the collection, administration and disbursement of funds raised by the BLS, this is an issue which the SSA considers will be common to all market-based instruments.
On predictability, SSA believes that BLS will not be subject to the same fluctuations and vagaries as a cap-and-trade system, another proposed MBI for the shipping industry. Historically, carbon trading on the climate exchanges such as the Chicago Climate Exchange (CCX)  or the European Climate Exchange (ECX) has shown variations of up to 600%, it says.

"Shipping is a very capital intensive industry where the value of a ship is determined over the entirety of its 25-year lifespan," says SSA president S.S. Teo. "Fluctuations in the carbon price, as in an Emission Trading Scheme (ETS), can create serious economic and financial disruptions and thus make it extremely difficult for the shipowners to monitor and justify returns on heavy capital investments such as new, energy-efficient ships."

He added, "There are already enough variables in the shipping industry. The introduction of a system where carbon is just another volatile market commodity used by speculators is unacceptable to the SSA."

Mr Teo also said, "The SSA is confident that an incentivised BLS will provide the shipowner some certainty of cost projections, creating a stable platform that will reward capital investment in newer, more efficient ships, thus encourages shipowners to renew their fleets."

As regards application, SSA says a BLS would be administered by the IMO and therefore applied to all ships irrespective of flag. As the amount paid will depend on the size of the fleet, smaller shipowning companies will not be placed at an unfair disadvantage, unlike with other MBIs which may be subject to manipulation by larger shipowning companies that have easy and faster access to greater financial resources.

The SSA stresses, however, that its support for the bunker levy is based on the assumption that the BLS, if adopted at the IMO, will have universal application to all States simultaneously so as to ensure a level playing field. This will be consistent with the IMO's principle of "no more favourable treatment".  [10/12/09]