By: Ioannis Ttavas, Advocate – Legal Consultant @ A. Karitzis & Associates LLC
The Republic of Cyprus, being a leading maritime state, understands the importance of promoting sustainable practices within its shipping sector.
More specifically, the Shipping Deputy Ministry of Cyprus is well known for its practices for environmental developments at a worldwide level. One of the top priorities of the Shipping Deputy Ministry of Cyprus is the support of sustainable shipping by way of adopting various measures at a worldwide level for the reduction of emissions and to achieve a sustainable future of the shipping industry, such as the use of more environmentally friendly fuels, the development of relevant infrastructure, the electrification of ships and the use of energy efficiency technologies. By combining all of the aforementioned options, an opportunity is given for the improvement of the commercial and environmental sustainability of the industry, while at the same time shipowners are rewarded for investing in sustainable practices by way of financial incentives.
In this regard, in an effort to decarbonise Shipping, the Shipping Deputy Ministry of Cyprus is taking proactive steps to incentivize and accelerate decarbonisation by announcing a revised series of green incentives to reward ships that demonstrate effective reductions in Greenhouse gas emissions.
Started from January 2024, any vessel that takes measures for the reduction of its climate impact, its Annual Tonnage Tax will be reduced by up to 30%. Thus, this practise will ensure that any shipowner will be rewarded for his/her sustainable shipping efforts.
The benefit of such reduction of the Annual Tonnage Tax, can only be applied to Cypriot and Community ship owners by meeting the criteria of the environmental incentives as mentioned below:
- EEXI – ships that have achieved a reduction of the Achieved Energy Efficiency Index of the Existing Ship in relation to the Required Energy Efficiency Index of the Existing Ship by a percentage of more than 10%, (regulations 19, 23 and 25 / Annex VI of the revised MARPOL) will receive the corresponding annual tonnage tax discount between 5 – 25%.
- IMO DCS – the environmental incentive related to the Data Collection System (IMO DCS) of the International Maritime Organization, applies to ships of 5,000 gross tonnage and above with declared hours at sea of at least 4,380 per year and complying with regulation 27 of Annex VI of the revised MARPOL. Ships that achieve a reduction in the ratio of total fuel consumption to total distance travelled between two consecutive reference periods of more than 4% will receive an annual tonnage tax rebate of between 10 – 20%
- CII – the environmental incentive is related to the Carbon Intensity Index (CII) of the IMO and applies to ships of 5,000 GT and above, which are subject to the provisions of Regulation 28 of Annex VI of the amended MARPOL Convention. Ships that achieve Class A or B operational carbon intensity in one year, with declared hours at sea of at least 4,380 per year will receive an annual tonnage tax rebate of 10% – Class B and 20% – Class A.
It is worth mentioned, that any detention of a vessel due to environmental reason upon an inspection by the ECL, and/or violation by a vessel of any European Commission regulation regarding the environmental protection and/or decommission of a vessel during the calendar year, leads to non-eligibility for the environmental incentive.
In conclusion, the environmental incentives introduced by the Shipping Deputy Ministry of Cyprus, represent a significant step towards to achieving decarbonisation in the shipping industry. By providing these incentives, the Republic of Cyprus is positioning itself as a leader state in sustainable shipping practices and strengthening the shift of the Cyprus flag to the use of environmentally friendly vessels and methods. As the world transitions towards a low-carbon future, Cyprus is paving the way for a cleaner and more environmentally friendly shipping sector by demonstrating the commitment of Cyprus Shipping Industry to the Green transformation.
