March, 2015:

Simon Ng wonders at the need for incentives for shippers to comply with stricter emission standard, when the industry itself is ready for change

In last week’s budget speech, Financial Secretary John Tsang Chun-wah proposed to extend a government incentive scheme to March 2018 that halves the port facilities and light dues charged on ocean-going vessels that switch to low-sulphur fuel while at berth in Hong Kong. The extension is, the government explained, a means to help the shipping industry’s transition to more stringent fuel regulation that is expected to come into effect later this year.

Vessels will be required by law to burn marine fuel with a sulphur content of 0.5 per cent or less, slashing at-berth sulphur dioxide and particulate emissions by up to 80 per cent.

Given the maritime industry’s contribution to Hong Kong’s economy, the proposal is a calculated attempt to prevent cost-conscious ship operators from going to Shenzhen and other neighbouring ports where regulation on marine fuel quality is lacking. Despite assurances from major shipping lines that they have no plans to bypass Hong Kong, the government is taking no chances.

It is debatable whether tighter environmental regulations will drive ships away. The government’s concerns could be fuelled by Hong Kong’s diminishing competitive advantage over neighbouring ports. That said, to think that introducing higher environmental standards will inevitably make Hong Kong’s port less competitive is missing the bigger picture.

There is growing evidence that the maritime sector has become more responsive in recent years to the call for better environmental performance. For example, Koji Sekimizu, secretary general of the International Maritime Organisation, put forward in 2012 the concept of a sustainable maritime transport system. This was a wake-up call at the highest level that, despite its significant contribution to trade and economic growth, the sector has a major responsibility to reduce its environmental footprint.

Around the world, national, regional and local governments are working tirelessly together with the industry for innovative solutions – technical, financial and regulatory – to improve the energy efficiency of ships, and to reduce air pollution and greenhouse gas emissions. Here in Hong Kong, the shipping industry voluntarily initiated the Fair Winds Charter in 2011. We are expecting ship emission control regulation this year, and are pushing for the same across the region. The tide has turned.

The government’s generosity in light of impending regulation has therefore raised a few eyebrows. Questions have been asked as to why it is planning to give away public money to polluters, who are only months away from complying with regulation with or without government incentives.

If the government insists on doling out the money, the scheme would only make sense with different incentives. Vessels meeting the regulation requirements should get a standard rebate, whereas carriers willing and ready to take the next step, such as burning fuel with 0.1 per cent sulphur content, should be rewarded with a higher rebate. This way, all industry players would receive some financial support from the government for switching fuel, the front runners would be motivated to reach for a higher standard, and Hong Kong as a whole would benefit from a green maritime sector in the long run.

Simon Ng is chief research officer at Civic Exchange
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Source URL (modified on Mar 5th 2015, 12:02pm): http://www.scmp.com/comment/insight-opinion/article/1729936/government-should-rethink-blanket-incentives-shippers-new