Hong Kong rolls out red carpet for shipping leaders

From left to right: Edward Liu Principle Representative ICS (China) Liaison Office, Guy Platten Secretary General ICS, Simon Bennett, Deputy Secretary General ICS
 

Due to the ongoing Covid restrictions in Hong Kong, foreign visitors were thin on the ground at Hong Kong Maritime Week 2022 (20 November-November 26). But the arrival of the Secretary General of the International Chamber of Shipping, Guy Platten and his Deputy, Simon Bennett gave an extra shot in the arm to the week’s proceedings.
 

During the week the pair had meetings with Hong Kong’s Finance Secretary Paul Chan and Secretary for Transport and Logistics Lam Sai-hung and members of the Hong Kong Shipowners Association.
 

“We are delighted that Hong Kong is now open again to foreign visitors. It is very important to us that we re-establish our connections with Hong Kong, one of the world’s premier maritime centres,” said Mr Bennett.
 

Primarily, we are here to reconnect with the Hong Kong Shipowners Association, a shipowner member of the ICS. They play an important part on the development of ICS policy. HKSOA’s technical director, Martin Cresswell is chairman of our Marine Committee, one of our most important policy committees.”
 

There are other reasons for the timely visit of the two VIPs. This year marks the third anniversary of the establishment of the ICS (China) Liaison Office with Edward Liu as principle representative. And more importantly, news that the China Shipowners Association (CSA) is preparing its application to join ICS. 
 

The purpose [for setting up the China Liaison Office] was to forge greater connections with the mainland. It’s no secret our ambition is for the China Shipowners Association to become a member of ICS. Until now the CSA has been conspicuous by its absence from ICS. It is very difficult for us to claim to speak on behalf of the global industry if Mainland China is not part of that process. The latest news is very encouraging, and we are confident that the CSA will be able to make a formal membership application soon,” commented Mr Bennett.
 

Mr Bennett also took the opportunity to evangelize the ICS’ global CO2 reduction fund proposal. He attended five of the events held during Hong Kong Maritime Week to get the message across ahead of the proposal’s consideration at IMO in December.
 

By way of introduction, he said: The whole question of what the future fuels will be is complicated, but the expectation is: if we are to get to net-zero, then very low or indeed zero carbon fuels are going to be part of the mix, which will probably be a combination of methanol, hydrogen, ammonia. A further complication about the fuels is that they must be green fuels produced from renewable sources rather than the fossil feedstocks being produced today.
 

“Individual companies are identifying the pathway, but we need a regulatory framework which will shipowners to make the right choice. Equally important is an economic measure that on a global basis will provide an incentive, not just among shipowners but also amongst the energy producers to encourage them to develop the new fuels,” he said.
 

One idea originally came from the Chinese Government and has been labelled a fund and reward system. 
 

“China made a proposal for the fund and reward approach earlier this year. However, China wanted to use the CII (carbon intensity) framework. We have serious concerns about the CII framework. We recognize the role of CII in helping owners to improve the energy efficiency of existing ships, but we are very cautious about using carbon intensity ratings and combining them with an economic measure. If you have an economic measure where you are charging for CO2 emissions it is important that they are directly linked to CO2 emissions: carbon intensity and CO2 emissions are not the same thing,” Mr Bennett explained.
 

“Following the discussions, we had with the Chinese Government they now seem to have a greater appreciation of our argument and have indicated that they might be willing to accept an economic measure that uses a flat rate contribution based on C02 emissions. Also significant, which gives us cause for optimism, the European Union has now formally signaled that they can accept a flat rate levy approach. This represents quite a shift because they are still committed to the development of the Regional Emissions Trading system for Europe.
 

“What the Chinese have identified is that everybody recognizes the need for economic measures, but as a voice for the interests of developing countries, China is concerned that if the quantum of the contribution is too high it will have a negative impact on trade and the economies of developing countries,” he added.
 

The International Energy Agency the new fuels could cost more than three times the cost of conventional fuels which would equate to a levy of about US$3,000 per ton. This would no doubt be universally unacceptable. 
 

“But by having a reward system and anticipating only a relatively small number of ships will be using the new fuels up until 2030 you can then quantify how much money you need to generate, and you can have a quantum of levy that will be relatively small and therefore acceptable. Now everybody has that understanding it is potentially a breakthrough to developing an economic measure,” says Mr Bennett.
 

Although the ICS expressed dismay when IMO rejected its US$5bn research and development fund on the last day of MEPC 78 in June this year, Mr Bennett claims that the organization is philosophical about the setback.
 

“Ultimately, we always wanted some form of pricing mechanism because we do need to close that price gap. Also, because we need a global measure if we are going to stop piecemeal unilateral action whether it’s in Europe or elsewhere. When IMO agreed its GHG strategy in 2018, consideration of a market-based approach was put on the back burner. That’s why we changed our tack to the US$5bn fund at that time.
 

“In our latest proposal we still envisage that some of the money generated will be earmarked for research and development. The original proposal achieved an understanding of how the levy collections system would work. Hence IMO would be capable of employing the system without burdening administrations or IMO as an organization. 
 

“Although it has not been agreed, there is a growing consensus that the system we developed for the R&D fund is a system that will also work for the more significant contribution. The only difference really is the larger sums of money generated and the broader purpose they will be used for. First, half the money would be awarded to first movers that use the new fuels. The rest of the money would be given to developing countries but kept in sector. To benefit the entire shipping industry the fuels will have to be available worldwide.”

Source: Hong Kong Maritime Hub

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