Norway uses an incentive programme to coax shipping companies into lowering nitrogen oxide (NOx) pollution. A similar incentive measure could be used in the UK to reduce carbon dioxide (CO2) emissions.
The direct effects of climate change — increased storms, loss of ports and port infrastructure to sea-level rise and changing agricultural patterns — all combine to make the climate crisis the biggest challenge facing the shipping industry, by far.
Recognising this threat, the International Maritime Organization last year adopted an interim goal of reducing shipping’s greenhouse gas (GHG) emissions by at least 50% by 2050. But can a country’s shipping sector remain globally competitive while reducing its climate impact? It can. But it will require a systemic change in the shipping industry.
The UK recognised this when it launched the Maritime 2050: Navigating the Future strategy in January. Maritime 2050 spelled out opportunities that will allow the UK to retain its market advantage as a provider of marine services while achieving long-term sustainable shipping.
As the UK develops the policy options to reach its Maritime 2050 goals, one solution — in what will undoubtedly be a package of measures — would be the creation of an incentive programme, as Norway has already done successfully to reduce nitrous oxide pollution.
A similar programme, focused on CO2 reduction, and created for the UK shipping industry, could be an effective way to drive investment into low carbon shipping solutions. If the scheme is successful in the UK, it could be seen as a testbed for such a scheme to be adopted at the global level under the IMO’s GHG strategy.
NOx Fund
Norway imposed a tax on NOx emissions in 2008, but Norwegian companies quickly realised that they needed to invest in technology to drive down NOx emissions. Their solution? The Norwegian NOx Fund. The fund allows business participants to pay into the fund (at a rate lower than the tax level) to create a pot that finances measures to reduce NOx, such as engine replacement or battery installation.
Reduction goals are agreed with the government — in line with Norway’s international commitments — but the choice of investments to meet them rests solely with industry. If targets are not met, the tax can be re-imposed. So far, the targets have always been met.
The NOx Fund has been a great success story in Norway. Since 2008, Norwegian NOx emissions have decreased by 44,000 tonnes (21.5%), with more than half of those reductions coming from the shipping industry. The fund has received more than 1,000 applications for investment in NOx-reducing measures and technology and subsequently the fund has paid out over NOK 4bn ($47m USD).
Climate goals
The heart of the NOx Fund is recycling money to fund green emission reduction technologies within the industry. The UK could easily create a fund that vessels travelling in UK waters would pay into for journeys to the UK or as a fee on inward-bound cargo. The low overhead and ease of introduction should make it an attractive option for a government seeking to stimulate investment in emerging sectors and technologies. Giving UK industry the option, as has been done in Norway, to direct the spending of those funds is also worthy of serious consideration.
One side-effect of the NOx Fund in Norway — because it solely deals with air pollution — has been to drive investment into liquefied natural gas shipping, which can exacerbate short-term climate impacts due to associated emissions of methane — a powerful climate pollutant.
To ensure long-term viability, the fund should restrict investments into liquefied natural gas shipping and focus on technologies with the capability of eliminating GHG emissions fully. In this way, the UK can become the front-runner in zero-emission shipping and remain a frontrunner in the maritime services industry of the future.
The UK has already shown leadership and delivered a massive transition to clean energy in the power sector. This brings with it knowledge, skills and infrastructure that can be repurposed to help shipping accomplish a similar transition. Already, hydrogen ferries powered from windfarms in Scotland are cutting new ground.
With the right approach, the UK has the potential to lead the way for the rest of the world and deliver investment and growth at home. Borrowing a smart policy with a great track record from our Norwegian neighbours could be just the thing to get us there.
The text was originally published in Lloyd's List