Shippers say lines will simply pass on costs of ‘green’ taxes rather than reduce emissions

Shipper groups say the introduction of green fuel taxes will not reduce emissions

Shipper groups say the introduction of green fuel taxes will not reduce emissions. They claim that shipping lines will not switch to more environmentally-friendly fuels or more efficient ships, they will simply add yet another surcharge to the rates they charge their customers.

Nicolette van der Jagt, Secretary General of the ESC told The Shippers’ Voice: “A uniform levy or tax on all ships and all fuel purchases would be a risk to shippers whichever way you look at it: the added costs will be merely passed on to the customers through surcharges without offering a clear incentive to the carrier to increase the efficiency of the ships or their operation.”

Most of the talk from the shipping sector and governmental organisations is about establishing a levy or tax on fuel that is proportionate to the level of emissions from each and every ship. The way to reduce such charges would be to score well on the recently approved Energy Efficiency Design Index for ships, as agreed by the International Maritime Organization.

Shippers, including the Global Shippers Forum, the British Shippers’ Council and the European Shippers’ Council (ESC) say this strategy will not work.

Based on their track record, says the groups, the shipping industry, and particularly the liner shipping industry, is likely to pass on these charges to their customers.

And you cannot blame shippers for thinking this, says a Shippers’ Voice spokesperson. “Every time the liner shipping industry finds another individual cost, it tries to pass it on in a surcharge or ancillary cost, whether it is for fuel price increases, currency fluctuations, being too busy (e.g. peak season surcharges), port strikes, congestion or even fog. Whatever the cost, the shipper is targeted to pay.”

That may seem reasonable to some: you pay for the service you get, and what it costs to give that service. The trouble is, some shippers would argue that they do not always get the service they pay for anyway. Whether it is a delayed vessel, rolled over cargo (i.e. not loaded), or delivered to a different port at a different time than planned because of service changes, the shipper does not always get a good service.

Any business with poor service performance would be looking to rectify the problem so that the service being provided actually improved. But why bother when you can pass the costs on in the form of surcharges or, in an over-supplied market, the rate you get is not worth the effort, and the competition isn’t necessarily much better either?

So, shippers around the world believe a levy or tax will merely be passed on to them, and the ships will have very little incentive to change practice or improve design in order to reduce emission-related charges.

“What is needed is a mechanism which rewards shipping companies which invest in new designs, technology and practices which reduce emissions without reducing service performance; a scheme which does not add to current costs, but clearly provides an incentive to ship operators and owners,” says Shippers’ Voice.

This is a view echoed by Ms van der Jagt: “The preferred approach should be one which provides tangible incentives and rewards to owners and operators of individual vessels who invest in ships and ship technologies that optimise vessel utilisation, operation and fleet sizes, and reduce emissions of GHGs. I believe that shippers will increasingly be drawn to those ships which attract lower costs for the supply chain from lower emissions, provided the service does not diminish.”