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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global SupplyChain Logistics

From SCDigest's On-Target e-Magazine

- Oct. 4, 2012 -

 

Global Supply Chain News: European Union Says it Is Considering Carbon Tax on Container and Bulk Ships Into and Out of Ports


Move Would Mirror Controversial Approach for Airlines; Tax Would Likely be On Full Voyage Distance

 

SCDigest Editorial Staff

 

There has been a lot of controversy over the announcement last year by European Union authorities that would begin taxing foreign airlines based on CO2 emissions flying into and out of the EU.

SCDigest Says:

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Would the carbon tax again be based on the full length of the voyage? It would seem likely so, as the distance travelled in Euro controlled waters would be a tiny fraction of the full trip from say the US or Asia into Euro ports.

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China, for example, has threatened to cancel orders from Europe's Airbus, and a bill just passed in the US Senate on a unanimous vote would prohibit US airlines from paying the tax, among other actions. The controversy is in part that the airlines are required to pay the tax based on the entire length of the flight, not just the time over European airspace.

Now, the EU is looking to take the same type of actions against ocean container and bulk ships moving into and out of European ports.

On Monday, the European Commission issued a statement saying they were moving forward with an effort to reduce greenhouse gas emissions from international shipping because the industry was not moving fast enough on changes.

"Shipping is a global industry and needs global solutions to address its environmental footprint. As a result, we are all working towards an internationally agreed global solution to decrease greenhouse gas emissions from ships," said European Commissioner Siim Kallas and EU Commissioner for Climate Action Connie Hedegaard in a joint statement.

The statement continued that "Discussions about further global measures are on-going at IMO [International Maritime Association] level, but we need intermediary steps to quickly deliver emissions reductions, such as energy efficiency measures also for existing ships."

The EU Commission also said it is considering possible action in 2012 in regards to including shipping emissions into the EU's greenhouse gas emission reduction commitment.

The statement further said that "At EU level, we consider several options, including market-based mechanisms. A simple, robust and globally-feasible approach towards setting a system for monitoring, reporting and verification of emissions based on fuel consumption is the necessary starting point."

The statement further said that "It's therefore our joint intention to pursue such a monitoring, reporting and verification system in early 2013. At the same time, we will continue the debate with stakeholders on which measure can successfully address the EU's greenhouse gas reduction objectives."

The new plan is, as noted above, is supposed to be ready by early next year.

The EU has previously suggested it might tax carriers for the emissions produced by their vessels, similar to what is being tried with airlines. It has also said in the past that it will establish its own regulations on shipping emission if the IMO fails to act.

Would the carbon tax again be based on the full length of the voyage? It would seem likely so, as the distance travelled in Euro controlled waters would be a tiny fraction of the full trip from say the US or Asia into Euro ports.

There US has already seen some opposition to the concept.


(Global Supply Chain Article Continued Below)


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"The European Union is threatening a new set of taxes on Americans. After introducing an illegal tax on all flights to and from Europe, the EU announced that it wants to force a similar scheme on shipping," said Republican Rep. Jim Sensenbrenner of Wisconsin.

Countries like China and India are also coming out in opposition to the EU unilaterally imposing an emissions tax on shipping.

"India has argued that imposition of carbon tax on aviation or maritime activity must adhere to the principles agreed to under the UN Framework Convention on Climate Change," reports the Times of India.

"China, like many other countries, is firmly opposed to the EU’s unilateral legislation on carbon tax," Chinese Foreign Ministry spokesman Hong Lei said at a press briefing.

Will such a move fly, or we might say sail? That will be perhaps a billion question.


What do you think of this latest news from the EU? Good or bad if it happens? Let us know your thoughts at the Feedback button below.

Recent Feedback

An imposition of a Carbon tax on air planes/vessels is tantamount to treatment of the symptoms, not the root cause. It is secondary and meaningless to argue whether the tax is on the European stretch or the total journey, simply because in principle, the rate can be readjusted to suit the argument ( that is to say, if the argument is in favour of tax only on a portion of the stretch which is 10% you can increase the tax rate to 10 times, and satisfy the lobby that wants restrictions on this aspect!) Secondly, there is no proven theory that adverse effects on carbon emissions is selectively felt in the restricted territories where the emission occurs: rather the impact is global though may not be uniformly distributed.

The real issue is having gotten used to air transport  to the extent that it exists today, what measures can be taken to reduce the number of flights and consequently emissions? To do so on material, it is easier and more effective to impose a carbon tax based on the carbon footprints by heavily taxing an item which has a larger carbon imprint. This way, the cost at the consumer level will act as a detriment to flying a product over long distances.


T A KRISHNAN
Vice President
Larsen & Toubro, India
Oct, 06 2012

As a professional industry member, having immersed oneself so very comprehensively, working together with industry stakeholders, government and non-government on this subject matter, it is here that I would engage you in understanding that the upstream maritime industry has been and is very proactive in undertaking measures attending to initiatives.  I would go so far as to say the maritime industry is amongst the worlds industry leaders on attending to initiatives.  Examples on efforts include behavioural change (Eco or slow steaming), conventions on standards (Marpol Annex VI), technological deployment (new builds - energy efficiency design index - EEDI) complimented with management processes to retrofit existing fleet (Shipping energy efficiency management plan - SEEMP and Energy efficiency input and output EEIO) - these efforts here have made a significant contribution arresting GHG's.  To those who would appreciate the global warming potential (GWP), recognise the overarching impact.  To those viewing the incremental would recognise the aggregated efficiency savings resulting from these efforts applied as triple bottom line initiatives. 

What does require attendance, think about LCA and the downstream stakeholders (that is to say those who are the users) - the buyers of the service.

This is a two way street - users need to address this scope factor within their own inventory. Attention is needed by focusing on gaining efficiencies here and recognising those attending.  Here buyers addressing this scope within their own product systems sales and operational (S&OP) practises provides a market differentiator.  This allows for amplifying attendance to the wider community supporting a market differentiator.  Engaging in attendance strengthens connections B2B viewed in the context of avoiding double counting and B2C - product on the shelf.  Here too those viewing the incremental would recognise efficiency savings result from these efforts applies as triple bottom line initiatives.

My experience is the lack of understanding by downstream stakeholders on attendance. 

Allow me say a tax would attend, however it would also dillute - that I am not anti-tax, on the contrary, through the development on downstream adoption of scope initiatives derives efficiencies. Small change can make a big difference here in the context of applying too.  This creates research and development, education, training, project deployment jobs creation resulting in economic stimulus - think globally acting locally.  A local approach would develop a healthier workforce, greater awareness and localised ownership on efforts to seek out opportunities to reduce ones footprint.

A financial instrument deployed as a tax dilutes attention and divests economies of such a stimulus. 

GWP C02 = 1000kgs the standards identified - the product system rules consumptive on a voyage HSU, C.H. (2005) in place normalised output CO2 e 

Piracy requires sophisticated measures.  And as the downstream, you might care to think on how it is depreciation is calculated or that you would regard the expertise of the professional to attend on accurately quantifying and communicating within the existing policy framework. An agreed tax would contravene UNFCCC - signatories too.  


Caroline Clarke
Director
SCM Services
Oct, 14 2012
 
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