25 March 2024 (Lloyd's List) - INDUSTRY groups welcomed progress made by the the International Maritime Organization last week as the UN agency reaffirmed its commitment to introduce greenhouse gas curbs aligned with its net zero strategy.

The IMO agreed on a tentative ‘net zero framework’ outline for future work on a carbon price and fuel standard for shipping at Marine Environment Protection Committee 81, with potential additions to Marpol pollution regulations.

The talks set the stage for future work on mid-term measures to help shipping reach its climate targets in the decades to 2050, in line with last year’s revised GHG strategy.

Container carrier lobby group the World Shipping Council said the UN agency laid the foundation for an agreement to deliver on the 2050 net-zero target.

“Now the table is set for the discussions that need to happen on the two critical pieces; the fuel trajectory and an economic element. And we’re positioned to do that. So that’s good,” said WSC vice-president Bryan Wood-Thomas.

Mediterranean Shipping Company executive vice-president Bud Darr said “genuine progress” was made toward creating a global fuel standard and the foundational elements for a carbon price.

“All of the substantive proposals related to these regulations survived for further consideration, which will make it more possible to narrow the various approaches intersessionally,’’ MSC’s Darr added.

The WSC and shipowner group the International Chamber of Shipping tabled two of the five major GHG price proposals up for debate.

The ICS welcomed support “from around 60 member states” for a flat rate contribution system as the IMO’s economic mid-term measure, noting its Fund and Reward scheme includes such a flat rate contribution system.

Both industry groups said they would consider feedback received during MEPC 81 to further develop their proposals.

The other three proposals include Japan’s feebate mechanism, the Pacific Islands’ flat rate levy and China’s International Maritime Sustainable Fuels and Fund proposal that aims to integrate the economic and the technical elements in a single measure.

In a LinkedIn post, MSC’s Darr called China's proposal “meaningful and genuinely constructive”.

The global fuel standard received strong support from member states at MEPC 81 and the the intersessional GHG working group meeting (ISWGHG 16) held the week before.

Marine consultancy Umas said a key outcome from the working group was that the fuel standard’s trajectory is now explicitly linked to the IMO’s indicative checkpoints agreed under the GHG strategy. The indicative checkpoints refer to the IMO targets to reduce emissions by 20%, striving for 30%, by 2030 as well as cutting emissions by 70%, striving for 80%, by 2040.

Another key aspect of the fuel standard will be whether it will consider only ships’ tank-to-wake emissions, or also their upstream lifecycle (well-to-wake) emissions incurred in making, refining, and transporting the fuel to the ship.

Umas said a strong majority of countries called for the fuel standard to consider well-to-wake emissions. It added that supporters of a tank-to-wake approach also changed their position to subsequently consider well-to-wake emissions, albeit at a later date than other proposals.

China, Brazil and Norway were among the supporters of a tank-to-wake approach to initially allow use of certain alternative fuels with high well-to-wake emissions, as these countries co-sponsored the International Maritime Sustainable Fuels and Fund proposal.

Some member states argue that upstream emissions, occurring during energy production and storage before consumption in a ship engine, fall under the responsibility of each member state. These countries suggest the IMO should refrain from taxing upstream emissions.

Meanwhile, proponents of a well-to-wake approach argue that the IMO must consider full lifecycle emissions of all fuels to ensure shipping doesn’t shift emissions to other sectors.

Canada has proposed a direct per tonne GHG price on all tank-to-wake GHG emissions from fuels consumed on international voyages, with the price level determined by each fuel and pathway’s well-to-wake emissions profile.