Delivering net zero by 2050 with the Green Balance Mechanism
We see the catastrophic effects of climate change every day, and as a significant emitter of greenhouse gases, the shipping industry must do its part and decarbonise by 2050.
Container and vehicle carriers are building and already operating vessels that can run on the greenest fuels, but those fuels cost 3 to 4 times more, and the supply is only a fraction of what is needed.
Global climate regulations are necessary to make it possible for carriers to operate on green fuels, and to incentivize fuel and energy providers to invest in new production capacity.
Standing united for decarbonisation.
An effective and efficient approach to greenhouse gas pricing
The WSC Green Balance Mechanism outlines a new approach to greenhouse gas pricing which makes it possible to close the price gap between fossil fuels and green fuels, at the lowest possible overall cost.
Fees are applied to ships burning fossil fuels and allocated to ships using green fuels so that the average cost of fuel used is equal.
The greater the greenhouse gas emission reductions a fuel delivers – on a well-to-wake lifecycle basis – the greater the financial allocation received.
The fees and allocation of funds are calculated each year, based on fuel availability, use and market prices, balancing out the cost across ships using very different fuels.
The minimum fee necessary to offset the price differential is collected and allocated to ships using green fuels that meet a specific greenhouse gas threshold. This ensures that green fuels can be produced and used and does so with the least possible cost to transportation.
The emission reductions required for a fuel to receive a price-balancing allocation increase in stringency between 2027 and 2050 to meet IMO’s net-zero goal.
Accelerating the transition, at the lowest possible cost
The Green Balance Mechanism makes it attractive for ship owners and energy providers to invest in fuels and technologies delivering deep greenhouse gas reductions from the start
Production of the cleanest fuels will grow more quickly, accelerating economies of scale to push down the cost of green fuels and reduce the cost of the transition as a whole
Ties the amount of money collected in any given year to the amount of green fuels used, allowing for a relatively low fee at the start of the transition
The monies collected in any given year is determined by the amount of green fuels used, allowing for a relatively low fee at the start of the transition.
The Green Balance Mechanism is adaptable and fully integrated with a greenhouse gas fuel-intensity standard. It can be used as a targeted greenhouse gas pricing mechanism, or a possible addition to an integrated measure.
Other fees can be added to raise funds for climate mitigation initiatives and Research, Development & Demonstration projects, to provide a just and equitable transition.
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The Green Balance Mechanism will achieve the most important task of a greenhouse gas pricing mechanism, completely closing the price gap between fossil fuels and green fuels, making it possible for carriers to operate on fuels that deliver the deepest greenhouse gas reductions from the very start.
This creates a powerful incentive for fuel providers to invest in green energy and fuel supply, accelerating the economies of scale that will push down cost of production and price.
As the Green Balance Mechanism only charges the minimum fee necessary to offset the price differential in a given year, it adds the lowest possible cost to transportation.
Switching from fossil fuels to green energy sources for the engine of global trade will take time and require massive private and public investments. It is our shared responsibility to make sure we meet the needs of our climate, in a way that minimises the cost for the global economy.
To make it in time for future generations, we cannot afford to delay – liner shipping is fully on-board and will support the IMO member states in ensuring the necessary regulations are developed by 2025, and operational by 2027.
Learn more about effective and efficient climate regulations
