Shipowner demands stopping construction of fuel oil powered vessels

Precious Shipping boss Khalid Hashim has called on the IMO to put a hard stop on building fuel oil burning ships from 2030 and a scrapping of all vessels over 20-years old by 2035.

Along with a carbon tax starting from January 01, 2024, the radical proposals were put forward by Hashim, Managing Director of Precious Shipping and presented to the IMO last month via the Thai delegation through a video link, as well as to the Philippines IMO delegation, and at a recent HSBC conference.

The proposals from the Bangkok headquartered shipowner break down into three areas – a carbon tax, a hard stop on building fuel oil powered ships, and a mandatory scrapping of vessels over 20 years.

A carbon tax is already an item on the agenda for the key IMO MEPC80 meeting next month aimed at revising the industry’s ambitions for greenhouse gas emission reductions.

Hashim said the IMO should impose a tax of US$100 per metric ton (pmt) of CO2 emitted from January 01, 2024, increasing to US$200 pmt from 2030. Such a tax would increase the cost for ships engines burning fuel oil by US$320 pmt from January 01, 2024, and US$640 pmt from 2030.

He said it would provide massive resources exclusively for decarbonizing shipping and a universal tax would stop similar taxes by others.

The funds could be used for R&D into alternative fuels, subsidizing the costs of first movers, and building bunkering infrastructure. It would also push shipyards to build more zero emissions vessels (ZEVs) with a requirement of 5,000 such new builds a year to meet a 2050 zero emission target.

The second proposal involves a hard stop on building vessels that burn fuel oil and effectively forcing shipyards to produce ZEVs. “The IMO must put a hard stop to any fuel burning ships delivered by shipyards on or after January 01, 2030,” he stated.

Hashim cited the example of the automotive industry where a growing number of countries have set a deadline on production and sale of internal combustion engine vehicles. “Once they were given a deadline after which they could not produce or deliver diesel engine cars, significant numbers of electric cars are rolling off the assembly lines in every serious automotive manufacturing country,” he said.

This would give clarity to owners, shipyards, charterers and consumers with hard deadlines. He said it would also increase the capacity at yards needed to produce ZEVs, encourage charterers to enter into long term contracts for zero emission vessels, and for end consumptions to accept the increased cost in shipping.

The third proposal relates to a deadline by IMO for the scrapping of all ships over 20 years old by 2035.

“It will immediately reduce GHG emissions from the gas guzzling ships built in the past when fuel oil was not thought of as the culprit, that we can now see, all too clearly,” Hashim said.

The proposal would shrink the supply ships forcing clients to pay more shipping services the profits of which could be used to pay for the multi-trillion dollar cost of replacing the fuel oil burning fleet.

Renowned shipping economist Martin Stopford has estimated that replacing fuel burning ships with ZEVs will cost between US$1 trillion to US$1.5 trillion in a good case, or US$2 trillion to US$3 trillion in a poor case.

It would also accelerate the regulations for using alternative fuels, the training of crew, and creation of bunker hubs.