Seeking an Agreement on Carbon Pricing for Shipping

Channoil Consulting in collaboration with Gibson Shipbrokers have produced a paper offering views and analysis of the route to 2050, crunching the numbers of fuel prices.

Channoil Consulting and Gibson Shipbrokers have focused a recent assessment on the near term measures, looking at fuels readily available for the maritime sector today; Very Low Sulphur Fuel Oil (VLSFO), or Heavy Fuel Oil (HFO) using abatement scrubbing systems, Marine Gasoil, bio-derived fuels using Fatty Acid Methyl Esters (FAME) or Hydrotreated Vegetable Oil (HVO), and Liquid Natural Gas (LNG).

With prices for most fossil fuels depressed due to lack of demand: VLSFO and Marine Gasoil are at historically low multiples against Brent crude oil, LNG oversupplied and priced accordingly, and biofuel grades price higher due to costs of production, demand is driven by various mandates on their use.

As of today, there is no carbon tax on shipping activities. Channoil and Gibson are claiming LNG gives savings of around $7,700 per day versus VLSFO, based on a VLCC’s typical daily consumption, so this could amount to a total saving on fuel of $2,800,000 per year ($5,000/day). These savings may justify the additional $14m investment and generate an IRR of 10% over a 15-year period, but HVO and FAME are currently not competitive in the absence of a carbon trading scheme.

As per the study, an indicative current value of the EU Emissions Trading Scheme CO2 price of €30 does not shift the market.


For additional details regarding the need for a much higher carbon levy, please visit the link below: