BHP plans for broad carbon levy on ships
BHP believes an imminent emissions crackdown on the world’s shipping fleet may be extended to a broader carbon levy.
BHP believes an imminent emissions crackdown across the world’s shipping fleet may eventually be extended to a broader carbon levy, as the maritime industry weighs additional environmental measures to cut high pollution levels.
New regulations from the International Maritime Organisation requiring the use of lower-sulphur fuel across the world’s shipping fleet come into force in January, imposing a 0.5 per cent cap on the sulphur content of all marine fuels and marking an 85 per cent fall from the 3.5 per cent limit today.
The mining giant — which in July announced the world’s first tender for LNG-fuelled transport of its iron ore as part of plans to meet the sulphur standard — said it ultimately expected a broader clampdown on heavy “bunker” fuel used in large shipping carriers.
“There may well be a carbon levy associated with bunkers from the IMO,” BHP’s maritime vice-president Rashpal Bhatti told The Australian.
“If that is the case it will be a significant driver to bring down emissions from any fuel that’s used. And our competitors will obviously have to think about that too.”
While the introduction in 2020 of new sulphur standards will add roughly another $US2 ($3) a tonne to BHP’s shipments of iron ore from the Pilbara to China, it expects Australia’s main competitor, Brazil, may face up to double that cost given its extra distance to Asian markets.
BHP said it lobbied the IMO to introduce the rules, but expected they would simply be a starting point for a much bigger shift within the industry and the way it deals with the chain of emissions from the mine gate to its end customers.
BHP chief executive Andrew Mackenzie has outlined a plan to set targets on so-called scope 3 emissions, taking in all activities that can extend to customers, which in BHP’s case include steelmaking and energy.
International shipping accounts for 2.2 per cent of global emissions, according to the IMO, which aims to cut those levels by at least 50 per cent by 2050 compared with 2008 levels.
“We think this is the first of a number of new regulations that will come from the IMO,” Mr Bhatti said. “Sulphur won’t be the last and that’s absolutely necessary if we’re going to get to the goal of decarbonisation.”
The looming policy effectively ends the burning of high-sulphur fuel in its current form, forcing shipping companies to source more expensive, cleaner fuels or fit scrubbers to capture the sulphur emissions from their vessels.
As part of its response, BHP launched a tender in July calling for LNG-fuelled transport covering about 10 per cent of its Australian iron ore exports, with delivery of the vessel due by late 2020 or early 2021.
The world’s biggest miner approached 19 parties as part of the tender and received 17 bids, which are currently being studied.
“We didn’t just go to the traditional vessel owners. We went to financial institutions because a number of them across Asia and Europe have significant relationships with ship yards which gives them an advantage. We are optimistic the outcomes of the tender will be very favourable against a conventional approach.”
Woodside Petroleum has previously cited research from consultancy Energetics that estimated using LNG instead of heavy fuel oil would reduce the greenhouse gas emissions generated by the iron-ore carriers that ship hundreds of millions of tonnes of iron ore from the Pilbara to Asia each year by up to a third.
The switch would save up to 5.8 million tonnes of carbon dioxide — the equivalent, Woodside said, of taking 1.8 million cars off the road — while sulphur oxide and nitrogen oxide emissions would fall by 95 per cent and 85 per cent respectively.