19.9.2024 | Tax

A major port operator has unveiled plans for the first green shipping corridor in the UK. The first routes have been identified, including Belfast to Heysham in Lancashire and Dublin to Birkenhead in Cheshire. These routes support plans for Heysham to become the UK’s first net zero port.

The project involves decarbonising maritime emissions by rolling out the UK’s first commercial electric ship and supporting infrastructure, including a charging network and clean power access.

It’s an exciting development. After all, while the shipping industry is the engine of the global economy, facilitating more than 80% of trade (95% transited via ports), it reportedly accounts for more than 3% of global CO2 emissions.

Beaton’s Andrew Diver examines what could help this industry to become greener faster.

The current picture

The UK is legally committed to achieving net zero by 2050, and shipping firms have been replacing older, heavier vessels with newer, more efficient ones as that deadline approaches.

But there are also moves in government – past and present – to support industry in making these changes.

In April this year, the government revealed it would launch the bidding process for the £1.5 million ($1.9 million) funding to establish zero-emission shipping routes to and from the UK.

This followed the wider £206 million UK Shipping Office for Reducing Emissions (UK SHORE) program, announced in March 2022.

It also tied in nicely with the Mission Zero review, which set out how the UK could better meet its goals by specifically examining how policy incentivises investment in decarbonisation, including via the tax system and capital allowances.

Now that we have a new government in place, we are eagerly waiting to find out if such changes will be implemented and what they might look like.

Here are some tax changes that could help businesses in the shipping industry – and more generally:

Tax credits

Reliefs or rebates could be a good way for the Government to encourage green change. Countries such as the US and Canada already provide specific tax reliefs to encourage businesses to use lower carbon energy sources like hydrogen, for example.

Business rates

Businesses can be disincentivised from carrying out property improvements because an increase in the value of the property might lead to higher business rates in the future. Some of these issues were addressed with the introduction in April 2022 of specific exemptions for certain green plant and machinery but the Government should check that there are no further disincentives for businesses investing in green property improvements.

R&D tax credits

The Government could consider how to incentivise more R&D to help achieve net zero such as enhancing the tax credits available to those projects which support net zero goals.

VAT

Currently, electric vehicle owners pay 5% VAT on electricity costs when charging at home, but 20% when charging elsewhere. If this imbalance was equalised this could encourage more adoption, and this will help business fleets too.

We wait and see

Our new government appears to have understood the need to invest in a sustainable and productive future as demonstrated by the announcements it has made in the last month regarding making Britain a clean energy superpower.

But any policy changes this year will be important in terms of moves made to support this.

Green shipping corridors could be game-changing for industry and net zero ambition – and every penny will count to help investors, customers, shipping lines and hauliers as they transition to a greener future.