Cyprus has announced it will offer an annual tonnage tax reduction of up to 30% for vessels using approved alternative fuels, marking one of the first “green” incentive schemes to be introduced by a major ship registry. This sends a clear message to other registries that sustainable shipping practices should be both supported and rewarded.
Approved alternative fuels include biofuels, methanol, hydrogen and electric power, but liquefied natural gas (LNG) has been expressly excluded (though vessels using LNG may qualify for reward under a separate incentive if they can show a specified reduction in fuel consumption). The full 30% tax reduction will be available to vessels which demonstrate a decrease in carbon dioxide emissions of at least 30% through use of the approved alternative fuels, with a 15% rebate available to vessels which demonstrate emission reductions of at least 20% through approved alternative fuels. There are also a variety of tax rebates on offer for vessels with lower than required Energy Efficiency Design Indexes (EEDIs).
This new incentive scheme can be applied to the 2021 fiscal year, meaning successful applicants will receive their rebates by next year.
Official projections estimate that between one fifth and one quarter of Cyprus vessels will currently qualify, but the hope is that more will be able to meet this new, greener goal in the near future.
While Cyprus has been hovering just outside of the top ten flags by tonnage for several years, this could incentivise more ships to switch to the Cyprus register, bringing it inside the top ten rankings.
It also underscores the increasing importance of environmental considerations for shipowners who can reap the financial rewards of such schemes, as well as for ship registries who wish to maintain a competitive advantage in the years to come.