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Carbon Tax Rules Spark Fears on Supply Chain

A meeting this week will make cargo prices hit record levels. This has alarmed risk managers who count on the international supply chain.

The risks for supply chain and business interruptions were the topics for discussion at the Association of Insurance and Risk Managers in Industry and Commerce, AIRMIC’s annual conference in Liverpool, the Global Shippers Forum (GSF). The plans to impose new carbon rules on the maritime industry will result in higher prices for commodities transportation worldwide.

The global business organization has requested the maritime sector to examine ways to protect cargo owners and shippers from the upcoming carbon tax. The organization accounts for freight owners’ import and export activities across global supply chains.

After a decade of efforts by the International Maritime Organization (IMO) and several measures of energy efficiency on existing ships, the Marine Environment Protection Committee (MEPC) plans to talk over the new proposal by the shipping sector to impose carbon tax on bunker fuel.

The measure will help to minimize carbon emission but will double the tradition bunker fuels’ current costs.

In one measure, GSF is asking regulators to ensure that the capacity of shipping lines to get rid of older cargo tonnage in the market “is not used as a disguised means for capacity management,” which could lead to a rise in cargo costs.

 

James Hookham, Director of GSF, said: “Shippers will be forgiven for thinking that the proposal, and its consideration at the IMO, will inevitably result in still higher freight rates. That’s because the shipping industry has a very efficient mechanism for passing through higher fuel costs in the form of BAF; a surcharge to cover variations in fuel price. There are few reassurances in the existing proposals that a Carbon Tax won’t just be passed through as an added cost for shippers.”

GSF has also urged the Marine Environment Protection Committee to ensure that the interests of those involved in global trade, importers and exporters, are protected and to make sure that any carbon tax policies will be entirely clarified and scrutinized.

Hookham also added the MEPC should analyze “the realities of the shipping market” and stop comparing the situation with what is seen in other sectors of the economies.

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By Saha on June 7, 2022

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