VZCZCXRO6532
RR RUEHAG RUEHAST RUEHDF RUEHDH RUEHHM RUEHIK RUEHLN RUEHLZ RUEHMA
RUEHPB RUEHPOD RUEHROV RUEHSR RUEHTM RUEHTRO
DE RUEHBS #0811/01 1621442
ZNR UUUUU ZZH
R 111442Z JUN 09
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING
RUEHBR/AMEMBASSY BRASILIA
RUEHNE/AMEMBASSY NEW DELHI
RUEHNY/AMEMBASSY OSLO
RUEHOT/AMEMBASSY OTTAWA
RUEHZP/AMEMBASSY PANAMA
RUEHSA/AMEMBASSY PRETORIA
RUEHUL/AMEMBASSY SEOUL
RUEHGP/AMEMBASSY SINGAPORE
RUEHKO/AMEMBASSY TOKYO
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 BRUSSELS 000811 
 
SIPDIS 
 
STATE EEB/TRA FOR S. MILLER 
 
E.O. 12958: N/A 
TAGS: EAID ENIV EWWT KGHG KTDB
SUBJECT: SHIPPERS PROPOSE CLIMATE FUND TO AVOID CAP AND 
TRADE 
 
¶1. In May 2009, the Danish Shipowners' Association (DSA) 
proposed a bunker levy on fuel as an alternative to inclusion 
of the maritime sector in emissions trading schemes (ETS). 
Under the proposal, suppliers of bunker fuel would be 
registered with the administrator of an international fund 
for greenhouse gas emissions from ships to be established by 
the IMO.  (Note:  The fund would be structured along the 
lines of the International Oil Pollution Compensation funds. 
End note.)  The suppliers would collect a levy or a fee, 
based on the amount of fuel distributed, and transfer the 
proceeds to the fund.  Proceeds from the fund would be used 
to finance mitigation and adaptation efforts in the 
developing world, in conjunction with UNFCCC efforts, as well 
as research and development of clean energy technologies. 
¶2. Econoff met with DSA representatives on May 21 during EU 
Maritime Day events in Copenhagen.  Although they did not 
expressly say so, Danish shippers fear that the inclusion of 
maritime emissions in the EU's ETS would put them at a 
competitive disadvantage, since "about 2/3 of the merchant 
vessels fly Annex II flags."  Danish ship owners did announce 
a 15 percent GHG reduction target by 2020, by implementing 
efficient practices and installing modern technology. 
However, it will be difficult to exceed this target without 
overhauling the fleet, which would be prohibitively expensive. 
¶3. DSA stated that a bunker levy is consistent with the IMO's 
nine fundamental principles for future regulations on GHG 
emissions from ships (see below) as well as the IMO principle 
of no favorable treatment, by encouraging shippers to 
minimize fuel usage while maintaining a level playing field. 
Further, DSA stated the proposal respects the "common but 
differentiated responsibilities" standard in that proceeds 
from the fund would be distributed among developing countries 
for adaptation and mitigation efforts.  DSA also stressed 
that the levy is not a "tax", since it would not be imposed 
and collected by governments. 
¶4. Since the IMO operates by consensus, DSA's greatest 
challenge is to secure the support of China, India, South 
Africa, and Brazil.  DSA hopes the prospects of revenues from 
the fund will generate support from these countries.  One DSA 
representative stated that Chinese officials have in 
confidence expressed interest in the proposal but publicly, 
the Chinese will not take a position in the IMO that 
contradicts their stance in the UNFCCC discussions.  The 
IMO's Maritime Environment Protection Committee continues to 
discuss the proposal, but DSA does not expect any results 
before COP 15 in Copenhagen, which it hopes will send a clear 
signal to the IMO. 
¶5. In the meantime, an EU Commission official commented on 
June 9 during the Nor-Shipping conference in Oslo that 
"immediate action" is required by the industry and that the 
Commission has a "clear preference" for including the 
industry in the ETS.  However, he later told a reporter that 
"we would not question the efficacy of a bunker levy over 
emissions trading if it was global, proven to be efficient 
and avoided any distortion of competition." 
¶6. Comment:  Inclusion of the maritime industry in the 
emissions trading schemes will be difficult to enforce and 
could distort shipping practices, as ship owners will attempt 
to circumvent ETS regimes.  A bunker fuel levy could be a 
win-win as it will maintain a level-playing field ) an 
important consideration for developed states ) and provide 
financing for developing states.  End comment. 
¶7. The IMO's nine fundamental principles for future 
regulations on GHG emissions from ships are: 
1)    Effective in contributing to the reduction of total 
global GHG emissions; 
2)    Binding and equally applicable to all flag States in 
order to avoid evasion; 
3)    Cost effective; 
4)    Able to limit, or at least, effectively minimize 
competitive distortion; 
5)    Based on sustainable environmental development without 
penalize global trade and growth; 
 
BRUSSELS 00000811  002 OF 002 
 
 
6)    Based on a goal-based approach and not prescribe 
specific methods; 
7)    Supportive of promoting and facilitating technical 
innovation and R&D in the entire shipping sector; 
8)    Accommodating to leading technologies in the field of 
energy efficiency; and 
9)    Practical, transparent, fraud free and easy to 
administer. 
 
Murray 
.