In its relentless pursuit of decarbonising the shipping industry, the International Maritime Organization’s (IMO) recent Marine Environment Protection Committee 82 (MEPC 82) meeting marked another step forward, albeit a tentative one.
MEPC 80 in 2023 saw the adoption of a revised strategy, setting the ambitious goal of fully decarbonising shipping by 2050. This includes intermediate targets of 20% and 70% reductions by 2030 and 2040, respectively.
A crucial aspect of this strategy is the adoption of a well-to-wake approach, considering emissions throughout the fuel lifecycle. Another important adjustment to the strategy at that time was the decision to have the reduction targets address not only what happens when the fuel is used on board the ship, but to also take into account emissions associated with the production of the fuel.
In an analysis of the progress made at last month’s MEPC 82, Erik Nyhus, director – environment for maritime at DNV, explained that the focus of that meeting was on developing the specific regulations necessary to achieve those ambitious goals. The agreed timeline is for these regulations to enter into force in 2027, with initial steps taken at MEPC 81 and further progress made at MEPC 82.
MEPC 80 proposed regulations which included two key elements. Firstly, the Greenhouse Gas Intensity (GFI) regulation is a technical measure that aims to regulate the greenhouse gas intensity of fuels used on board ships. Secondly, a proposed economic measure to impose a form of carbon pricing, such as a fee or levy, to incentivise the adoption of low-carbon fuels.
“The agreed plan is for these measures to become clear MARPOL regulations ready to be approved at MEPC 83 in April 2025, and then adopted at an extraordinary session of the MEPC in October 2025. That will allow them to enter into force in 2027, most likely becoming effective from January 2028,” said Nyhus.
MEPC 82 built on the outcome from previous meetings and reached an agreement on the net zero framework for greenhouse gas reductions from shipping. “This was, in essence, a common structure for the future regulations, but without very detailed content. The goal and one of the outcomes for MEPC 82, was to attempt to shoehorn all the various proposals into this common framework and to start narrowing down some options.
But there were no expectations for a grand political compromise this time around.”
Navigating the political landscape
While some progress was made at MEPC 82, significant political challenges persist, notably around the well-to-wake versus tank-to-wake debate, where these two approaches to calculating greenhouse gas emissions continue to divide Member States. As Nyhus noted: “One is fronted by the EU and directly applies the well-to-wake approach to calculate greenhouse gas intensity. The other is spearheaded by China and applies a tank-to-wake approach to the calculation, taking well-to-tank performance into account in the form of weighting factors being applied to the tank-to-wake figures.”
While both proposals meet the well-to-wake greenhouse gas intensity targets of the IMO greenhouse gas strategy, differing political wills pit one concept against the other.
The extent to which flexibility measures, such as banking, borrowing, and pooling, should be allowed is another important issue. “Under the FuelEU Maritime, which conceptually is where the EU, for instance, is coming from here, there are features such as banking, borrowing and pooling intended to ease the path to compliance,” said Nyhus. Similar options are being proposed for the GFI by both the EU and by China et al.
“While the proposals are not identical, this is yet another area where MEPC 82 showed a distinct possibility of finding common ground.”
However, a grouping of Pacific and Caribbean islands is said to be “digging in their heels” and refusing to accept any compliance provisions, according to Nyhus. They believe that any flexibility will leave these regions behind when it comes to the availability of alternative fuels.
Carbon pricing sticking point
One of the “most difficult” parts of MEPC 82 was on carbon pricing as an economic measure. The implementation of a carbon price, particularly a universal levy, faces strong opposition from certain Member States. “IMO Member States remain deeply divided on the issue of universal levy being applied to shipping, and positions have not shifted much over the last meetings,” Nyhus said.
While member states are largely divided on the matter, three primary positions have emerged. First are levy supporters. The Pacific and Caribbean Islands grouping advocates for a $150 per tonne CO2 levy, equating to a $450 per tonne increase in conventional fuel costs. Then there are the EU and its allies supporting a levy as a mechanism to accelerate the adoption of alternative fuels and generate revenue for decarbonisation efforts. They also propose using the funds to level the playing field between alternative and conventional fuels and to address equity concerns.
Lastly there are the levy opponents, a China-led group that strongly opposes a levy, arguing it would disproportionately harm developing nations and act as a tax on trade.
Despite the apparent numerical advantage of levy supporters, the consensus-based decision-making process of the MEPC presents a significant hurdle,
Nyhus pointed out. The strong opposition from key countries, including China, necessitates a diplomatic solution that can accommodate their concerns while advancing the cause of decarbonisation. “If we were only counting voices and votes, we would see that the levy proponents outnumber opponents almost 2 to 1, and in a straight up vote, the decision would be made handily. But MEPC almost never votes. It operates by consensus, and in this case, those opposing the levy included many very significant countries, meaning that the decision cannot be made without them also being brought on board.
“So this is maybe the reddest of the red lines to be resolved. And it is, of course, where the clever diplomacy needs to come into play.”
Given the opposing views, Nyhus warned that it may come down to the wire and the end of MEPC 83 before there is agreement. “Still, I remain an optimist and expect the member states to hammer out an agreement for approval at MEPC 83, and then adopt it in October 2025. While we have quite the challenge ahead of us, I remain cautiously optimistic that the MEPC will be able to land this plane on schedule,” he said.
Source: Baltic Exchange