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Countdown: Reflecting on MEPC/ES.2 and ISWG-GHG 20

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倒计时：回顾MEPC/ES.2与ISWG-GHG第20次会议

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カウントダウン：MEPC/ES.2およびISWG-GHG 20を振り返って

As the dust settles on negotiations at the extraordinary session of MEPC (MEPC/ES.2), we reflect on the key developments in this edition of Countdown. Member States were expected to decide on the adoption of the IMO Net-Zero Framework (IMO NZF) at this session, but voted to postpone this decision by one year. The following week, delegates continued the work on the IMO NZF by discussing the associated guidelines at ISWG-GHG 20.  

Center experts were on the ground in London for both meetings, presenting our work on fuel certification and contributing to the discussions about the IMO GFI Registry, LCA, and rewards for zero and near-zero emission energy sources, among others.  

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Reflections from the ground 

October’s MEPC meeting in London was indeed an extraordinary session – not just in name. In the time since the IMO NZF’s overwhelming approval in April1, political dynamics and uncertainties had complicated discussions and heightened tensions – ultimately leading to a postponement of the framework’s adoption when the session adjourned without a vote2.

Adoption requires a two-thirds majority of eligible Member States to vote in favor, meaning that serious opposition from just one-third could have conclusively undermined the framework – but this is not what happened. The additional time from this postponement can be used productively to resolve uncertainties and refine guidelines together – work already underway at the following week’s intersessional working group meeting, where discussions were notably more constructive.

Christian Føhrby

Government Affairs Manager

There was strong support for the IMO NZF from industry organizations3 who represent a significant share of the world’s shipowners and operators. These organizations want clarity and certainty. They want to see one set of global rules to be able to make business decisions. Many of those decisions are now on pause, waiting for the outcome of next year’s meeting. The Center will continue working with our partners in the shipping industry to support their decarbonization ambitions and point to existing regulatory opportunities in the meantime.

Joe Bettles

Climate Policy Manager

At the MEPC, some Member States expressed concerns about the current draft of the guidelines outlining the core elements of the IMO NZF. Their calls for clearer, more detailed guidelines underscore the importance of refinement to ensure a shared understanding and facilitate progress towards an agreement. The Center will support this process by providing expertise and contributing to the ongoing development of these guidelines.

Daniel Barcarolo

Head of Regulatory Affairs

The Center has been co-coordinating an informal group on fuel certification, whose work was very well received at the IMO. The group’s draft guidelines will serve as the basis for further work on certification. Our proposal for a template for the Fuel Lifecycle Label, focusing on well-to-tank emissions, was also welcomed and will be built on further. Moreover, the Center will continue to provide knowledge for the further development of the IMO’s LCA framework and short-term measures review.

Francielle Carvalho

Regulatory Affairs Manager

Post-meeting read-out: how are the details of the IMO NZF developing?

As you would expect from regulations designed to limit GHG emissions and incentivize a just energy transition, the IMO NZF is not a simple framework. A clear lesson from the recent meetings is that some parts of the regulation are more developed than others. Here, we’re sharing our read-out on which elements are most mature, and which need further development and alignment among Member States.

IMO GFI Registry

The GHG Fuel Intensity (GFI) Registry is an IMO-administered system for recording ships’ GFI-related transactions, such as crediting and transfer of Surplus Units. Recent progress towards making this registry a reality includes Member State commitments to developing a pilot program and the IMO Secretariat initiating preparatory work on the registry’s establishment – with a progress report expected for MEPC 84 in April/May 2026. Member States diverge on whether ships’ annual registry fee should be a fixed or tiered amount.

GFI reporting and verification

Under the IMO NZF, ships will report annual GFI-related data to flag States, which will verify the data and report it to the IMO GFI Registry. Here we see high convergence among Member States around submissions outlining reporting procedures and alignment with the IMO’s existing Data Collection System. Relevant Ship Energy Efficiency Management Plan (SEEMP) amendments will be developed by the ISWG-GHG.

GFI calculation

Ships will record and submit data that will be used to calculate their annual attained GFI. An outstanding question here is whether the GFI should be calculated based on ‘fuel equivalent’ or ‘effective energy’ when using certain technologies including solar, shore power, and wind power. Because these technologies provide propulsion energy without combustion, regulators must decide whether to calculate their GFI based on the equivalent fuel amount that would have produced the same output (‘fuel equivalent’) or on the actual energy supplied to the ship (‘effective energy’).

Fuel certification

Maritime fuels need to be certified to confirm they meet emissions-reductions goals. We see high convergence and considerable progress towards creating a robust fuel certification system that will be used by the IMO. Discussions of some technical details are ongoing.

ZNZ reward mechanism

According to the draft text for the IMO NZF, ships using zero or near-zero emission technologies, fuels, and energy sources (ZNZs) will qualify for ‘rewards’ from the IMO Net-Zero Fund. However, details of how ZNZs will be rewarded require further development – including any further eligibility criteria, inclusion of technologies, mechanism for payment, and timing of the rewards. Discussions during ISWG-GHG 20 revealed that, while ZNZ rewards are important to Member States, many need further information and analysis before they can take a firm position. We expect ZNZ rewards to be an important topic during ISWG-GHG 21, and one that the Center will be closely following and contributing to.

IMO Net-Zero Fund

The IMO Net-Zero Fund has two stated objectives: to reward the use of ZNZs and to support a just and equitable transition. Many aspects of the fund still need to be defined, including the governing provisions and how funds would be disbursed for a wide range of categories including infrastructure, research and development, capacity building, and impacts on food security. This will be one of the IMO’s most complex tasks, made more complicated by a few Member States’ opposition to creating a fund for a just and equitable transition. To help guide the Net-Zero Fund’s design, the IMO Secretariat will undertake a comparative analysis of similar funds.


Your questions answered: What does the MEPC/ES.2 outcome mean practically?

Q: Will IMO Member States vote on the exact same IMO NZF proposal one year from now?

In short, yes. Our current reading is that adjournment of MEPC/ES.2 effectively put the decision to adopt the draft Revised MARPOL Annex VI (i.e., the IMO NZF) on hold, and the same amendment will be considered for adoption when the MEPC reconvenes. Therefore, we expect the current draft to stay largely intact. However, specific dates will need to be revised to accommodate this delay – for example, moving deadlines currently in 2027 to 2028. Minor updates such as these could likely be completed in a drafting group when the MEPC reconvenes in October 2026.

Q: Are other parts of the proposal now up for discussion and renegotiation?

As far as we understand, this is possible but unlikely. Discussion or renegotiation of the substance of the regulation (e.g., adjusting Z-factors or changing Remedial Unit values) would likely take considerable time. Regulatory amendments at the IMO must follow the relevant treaty: in this case, MARPOL, which specifies clear procedures for amendments to its Annexes. Therefore, substantive changes would require a six-month consideration period in accordance with Article 16 (2)(a) of MARPOL, before any decision on their adoption.

With only one MEPC meeting between now and October 2026, we expect that opportunities to revisit the substance of the IMO NZF before the decision on adopting the current version will be limited. The current draft framework is the outcome of a multi-year process that brought together a wide majority of Member States around a single text. It is therefore difficult to envision a substantively different version that would gain wider support.

Q: What does postponement mean for the IMO NZF’s entry into force?

Under the IMO’s tacit acceptance process, at least 10 months must pass between an amendment’s adoption and its acceptance. If the IMO NZF is adopted in October 2026, this could mean acceptance by August 2027, entry into force in 2028, and first reporting period in 2029 – in other words, a delay of approximately one year compared with our previous projections.

Q: Can the decision to adopt the IMO NZF just be postponed again next year?

We are not aware of anything in the MEPC’s rules of procedure that would explicitly prevent a Member State from suggesting a motion to adjourn the meeting again. However, we believe that a firm answer to this question will require further consideration of these rules.

Q: Does this mean that the IMO is no longer working on industry decarbonization or reducing GHG emissions?

No – the IMO unanimously adopted its 2023 Strategy on Reduction of GHG Emissions from Ships, and the IMO NZF as agreed at MEPC 83 has not been rejected. While the decision to adopt the IMO NZF has been postponed, the IMO’s work on short-term measures and on safety of new fuels continues – as does the work on IMO NZF guidelines, including fuel certification, ZNZ rewards, and LCA. Developing additional certainty through these guidelines will help address concerns raised by Member States around lack of clarity. Additional time also provides more opportunity for the industry to communicate the benefits of a global standard on GHGs to Member States.

Center resources for sustainable investment beyond the IMO NZF

The Center will use the next year to demonstrate that the IMO NZF remains the clearest opportunity for international shipping to decarbonize. As the Countdown continues, companies can make use of additional pathways to create a business case for the transition.

Katalist is a book and claim platform, co-developed by the Center and RMI, that connects shipping companies that use sustainable fuel with buyers willing to pay a premium. You can subscribe to their newsletter here.

For companies operating in the EU, the EU ETS and FuelEU remain in effect, creating a business case for investment in sustainable vessels and fuels. Find more on these policies in our FuelEU Knowledge Hub, with resources to help you understand the policies and build a compliance strategy.

Authors: Matilda Handsley-Davis with contributions from the Regulation & Policy Hub

Download the slides from this newsletterReflecting on MEPC/ES.2 and ISWG-GHG 20
This is part of a series of newsletters on the IMO NZF, find previous editions and learn more hereIMO Net-Zero Framework

Feedback or suggestions for future editions? Reach out:

Sources

  1. https://www.zerocarbonshipping.com/news/countdown-historic-imo-agreement-lays-groundwork-for-maritime-decarbonization

  2. https://www.lloydslist.com/LL1155147/IMO-to-delay-Net-Zero-Framework-vote-for-one-year

  3. https://www.marinelink.com/news/imo-adjourns-industry-responds-531262