Cabinet approves incentives to support decarbonisation in shipping industry

The Cyprus Shipping Deputy Ministry (SDM) has announced a new range of green incentives to reward vessels that demonstrate effective greenhouse emissions reductions.

“Within the framework of the continuous monitoring of environmental developments, both at international and European level, and contributing to the efforts towards the decarbonisation of the shipping industry, the Shipping Deputy Ministry announces, the approval by the Council of Ministers, today, February 7, 2024, a new range of green incentives to reward vessels that demonstrate effective emissions reductions,” the deputy ministry said in an announcement. “From January 2024, annual tonnage tax will be reduced by up to 30% for each vessel that demonstrates proactive measures, to reduce its environmental impact, ensuring shipowners are rewarded for sustainable shipping efforts.”
Cyprus is a leading advocate for sustainable shipping, it added. “The SDM believes that broad and diverse measures are required at both global and regional level to achieve emissions reduction targets and a sustainable future for the industry. This includes the use of cleaner fuels, the deployment of the relevant fuel infrastructure, the electrification of ships, and the use of energy efficiency technologies. A combination of all of these options has the potential to improve the commercial and environmental sustainability of the sector, while at the same time ensuring that shipowners are rewarded for investment in sustainable practices.”
The ‘discount’ on the Tonnage Tax is available to owners of Cyprus and Community ships which comply with the requirements of the environmental incentives:
EEXI - vessels that have achieved reduction of their Attained Energy Efficiency Existing Ship Index (EEΧI) compared to the Required EEXI (Regulations 19, 23 and 25 / amended MARPOL ANNEX VI) by more than 10%, will obtain the respective annual tonnage tax reduction of between 5 - 25%.
IMO DCS - the environmental incentive relating to the IMO Data Collection System (DCS) applies to ships of 5.000 GT and above with reported hours underway of 4.380 and above for each year, that comply with Regulation 27 of amended MARPOL ANNEX VI. Ships which demonstrate reduction of the total fuel oil consumption to the total distance travelled, between two consecutive reference periods (year x vs year x-1) of more than 4%, will obtain an annual tonnage tax reduction of between 10 – 20%.
CII – the environmental Incentive relates to the Carbon Intensity Index (CII) of the IMO and applies to ships of 5,000 GT and above (Regulation 28 / amended MARPOL ANNEX VI). Ships which achieve an operational carbon intensity of Rating A or Rating B in a year, with declared hours underway of at least 4.380 per year, will obtain an annual tonnage tax reduction of 20 % for Rating A or 10% for Rating B.
Any vessel detained due to any environmental deficiency(ies) during PSC inspection, or which violates any regulation / Directive of European Commission related to the environmental protection, or is in laid-up condition (warm or cold) during the calendar year, will not be eligible for the incentive.
“Cyprus believes that the environmental incentives will strengthen the shift of the Cyprus flag and of the maritime cluster to the use of environmentally friendly ships and mechanisms, which is a main priority of the national maritime policy aiming to establish Cyprus as a maritime state with environmental responsibility,” the deputy ministry said. “It also demonstrates the commitment of Cyprus Shipping to the green transformation which is a key priority of the EU and is reflected in the European ‘Green Deal’.”