The Panama Canal Authority has announced a new Green Ship Classification to promote the reduction of greenhouse gas emissions on the waterway

‘Green Ship Classification’ to Cut Panama Canal Emissions

The Panama Canal Authority has announced a new “Green Ship Classification” which will see lesser polluting vessels charged reduced tariffs for passing through the waterway, in a scheme that is intended to radically reduce greenhouse gas emissions.

A stock image of a ship traveling the Panama Canal, where a new Green Ship Classification aims to reduce greenhouse gas emissions significantly
A ship traveling through the Panama Canal

According to Ricaurte Vásquez, the administrator of the Panama Canal, the move will see a new “Greenhouse Gasses Tariff” introduced and contribute to a more sustainable future for the interoceanic channel.

The introduction of the Green Ship Classification comes “in recognition of the urgency of climate change and the need to accelerate industry and global climate action,” Vásquez was reported as saying in a press release provided by the Authority.

The Panama Canal is highly important to the Panamanian economy, generating almost 6% of gross domestic product (GDP), as well as being a crucial piece of infrastructure to the international shipping industry.

Each year, an estimated 14,000 cargo vessels pass through the Canal, which reduces transit between the Atlantic and Pacific Oceans by up to 8,000 nautical miles — more than 10 days of travel for many container ships.

SEE ALSO: Form an Offshore Company in Panama: What You Need to Know

The new Green Ship Classification will see eligible vessels will only apply to ships over 125 feet long (38.1 meters), and will be based on three factors, including energy efficiency built into the ship’s design, employment of efficiency promoting measures such as bow thrusters, and the use of more sustainable fuel sources, including zero carbon biofuels and other carbon neutral fuels.

According to Vásquez, the introduction of the Green Ship Classification is intended to reduce greenhouse gas emissions during transit through the Canal by between 20% and 100%.

Green Ship Classification promotes sustainability in attractive investment market

The introduction of the Green Ship Classification comes just months after the Panama Canal Authority launched a scheme to make the waterway carbon neutral by 2030, and appears to be a key component in those efforts.

Panama is one of the most popular destinations in Latin America and the Caribbean for foreign investors, partly due to the Central American country’s famously secure and secretive banking sector, including one of the most well-known off-shore banking regimes.

The country is well-known for being politically stable and having some of the lowest violent crime statistics in the region. It has also witnessed significant and consistent economic growth since the turn of the century, with GDP only declining in the face of the COVID-19 pandemic.

With the World Bank predicting that Panama would register 9.9% GDP growth by the end of 2021, it stands to be one of the fastest growing economies in the region. The Green Ship Classification promises to help that growth be more sustainable.

A Biz Latin Hub infogrpahic providing a snapshot of the market in Panama, where a new Green Ship Classification aims to reduce greenhouse gas emissions produced by the Panama Canal
A snapshot of the market in Panama

Panama is well-known for its extremely pro-business regime, with the country given a very high score of 92.0 in the World Bank’s Doing Business 2020 report — positioning it as one of the best countries in the world to do business.

Meanwhile, with FDI hitting $6.07 billion in 2019, it was recognized in the UN’s 2020 World Investment Report for receiving more foreign direct investment (FDI) than any other country in Central America, as well as several significantly larger economies in South America.

While the country’s main export commodities include refined petroleum, chemicals, bananas, gold, and ships, the country is becoming increasingly well-known as a hub for innovation, with a ready supply of developers and other tech workers.

With the world increasingly waking up to the pressing need to take action on the climate, and the global shipping industry responsible for emitting an estimated 940 million tonnes of carbon dioxide per year, the Panama Canal’s Green Ship Classification promises to be an important tool in the fight to promote a more sustainable future for the world.

Biz Latin Hub can assist you doing business in Panama

At Biz Latin Hub, our team of bilingual corporate support specialists is available to provide the assistance you need in Panama, as well as in 15 other markets around Latin America and the Caribbean where we have teams in place.

We offer tailored packages of integrated back-office services based on a portfolio that includes accounting & taxation, company formation, due diligence, hiring & PEO, visa processing, and legal services.

Contact us today to find out more about how we can support you doing business in Panama.

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Key services offered by BLH including legal services, accounting & taxation, hiring & PEO, due diligence, tax advisory, and visa processing
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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Team Central America

Team Central America is the Biz Latin Hub leading experts on doing business in Central America. The Team writes on the news, doing business, law, accounting, and changing regulations. Read more about them here. You can contact Team Central America via our "contact us page".

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