Cyprus’ Deputy Shipping Minister Vassilios Demetriades has defended the island nation’s new tonnage tax regime claiming it rewards early movers and helps to change the industry’s mindset as the drive to decarbonise gathers pace.
[s2If is_user_logged_in()]In addition, in what will be a significant blow to the LNG sector, the European Union (EU) member has rejected LNG as an alternative fuel for the purposes of the tonnage tax regime, claiming that the fuel will not reduce carbon emissions sufficiently and through the release of the potent greenhouse gas (GHG), methane, will have a greater global warming effect than current fuels.
In an online event today (19 January), Demetriades outlined the major elements of the new tax incentives that include tax concessions of up to 25% for vessel performance that exceeds the required Energy Efficiency Design Index reductions.
Further environmental incentives are offered if carriers can prove, through the International Maritime Organization (IMO)’s Data Collection System (DCS) that fuel consumption has decreased in relation to the distance sailed, compared to the previous DCS reporting period. Savings are up to 20% of the annual tonnage tax bill.
Finally, in an effort to encourage greater carbon savings of between 15-30% can be made, calculated on a case-by-case basis for the use of alternative fuels which achieve carbon reductions of at least 20%.
In the final category, the Cypriot ministry has excluded LNG as a recognised alternative fuel, on the basis that this fuel cannot reduce the level of GHG emissions, including carbon dioxide and methane pollution.
However, if LNG powered ships can sufficiently reduce their fuel consumption through efficiencies the vessels could achieve reductions through the DCS reporting section.
“We are not rewarding industry by just following the law,” explained Demetriades, “it goes far beyond that, there is an incentive for operators to go beyond compliance.”
The new tax regime will be applied in the fiscal year starting in 2021 and it is hoped that the incentives will encourage owners to be more efficient in the future, with the promise of more measures to come as the decarbonisation process gather pace.
Even so, it is unlikely that Cyprus alone can effect significant change in the industry, but Nicosia’s approach is successful it may become the blueprint for action with the EU’s Green Deal.
Nick Savvides
Managing Editor[/s2If]
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