Convergence around a smaller number of options during the last GHG meetings before approval, put the IMO in a strong position to drive an energy transition in international shipping

London, 4th October 2024 - The IMO’s Marine Environment Protection Committee 82nd meeting has concluded with a large amount of work remaining. However, negotiations are still on track for an agreement on a new MARPOL text (Chapter 5 of MARPOL Annex VI) that enshrines new mid-term policy measures capable of driving an energy transition in international shipping. As the pre-cursor meeting to the expected approval meeting in April 2025, this was not expected to be a meeting that concluded the key policy design elements. But the meeting did produce a full draft text for the MARPOL amendment, within which the details still to be finalised can be clearly identified for further work before April.

Three main options remain on the table; a flexibility mechanism on its own and no levy/universal price on GHG, a feebate mechanism (associated with a levy/universal price on GHG), and a feebate mechanism combined with a flexibility mechanism. Whilst it was not signalled in any way during the meeting as an intent of any member state, it is possible to gain insight into what would happen if a member state called a vote to decide on the outcome. An amendment to MARPOL Annex VI would require a two third majority from member states that had ratified MARPOL. If member states voted as per the positions expressed at ISWG-GHG 17, there would be a 76% majority in favour of a levy (35 member states vs. 11 member states who have ratified MARPOL Annex VI). However, this is only indicative and not conclusive, because member states could yet change position (either way), and because there are still a large number of member states silent on the matter, or ambiguous in their position, so far.

Positions on the economic mechanism expressed in ISWG-GHG17

Dr Tristan Smith, Professor of Energy and Transport at the UCL Energy Institute said: “investors looking to the levy to support business case for early adoption of new technologies and particularly e-fuels, and member states looking to the levy for support for a just and equitable transition, should be optimistic based on this meeting. They will also have to be patient – there is still a lot of work to be done before approval at MEPC 83 in April 2025”

The topic of impact on states arising from the measures (e.g. transport cost increases that result from the policy measures creating negative economic impacts, particularly on low-income countries) remains a key subject in the discussions and is therefore likely to be important to the way the discussions resolve at MEPC 83. The issue of food security became particularly elevated at this meeting, as many countries raised the issue that increased import prices of critical food commodities due to mid-term measures could increase the existing levels of food insecurity. There will be further work done on this issue with a report to MEPC 83.

Dr Annika Frosch, Research Fellow at the UCL Energy Institute, said: “Discussions at MEPC 82 show a growing majority of countries backing the levy as a stable source of revenue and crucial for a just and equitable transition. While some member states remain opposed due to cost concerns, the levy remains a strong contender among policy designs. If it were to come to a vote, the current positions suggested enough support to pass the measure with a clear majority, though positions may still evolve as negotiations continue.”

Other takeaways from the ISWG GHG-17 and MEPC 82 meetings include:

·       There is now an extensive draft MAPROL Annex VI Chapter 5 that has been supported by all member states as the basis for further negotiation. That draft contains a number of options that will need to be selected from but lays out clear MARPOL language for each option that frames the finalisation process.

·       The remaining finalisation of between WTW and adjusted TTW shows clear majority supporting WTW as the framing for GHG accountancy. But even in the ‘adjusted’ TTW alternative option, that the incentivisation of fuels on the basis of their overall WTW emissions would be similar.

·       The large majority of member states who spoke on the matter support the GHG Fuel Standard being set by the IMO’s more ambitious ‘strive’ targets, which correspond to a 30% absolute GHG reduction in 2030 and 80% absolute GHG reduction in 2040 (on 2008 baseline).

Marie Fricaudet, PhD Student at the UCL Energy Institute, said: “The question of revenue distribution is still a hotly debated question: there is now strong support for support for low-carbon technology, but an open question on whether and how such revenue would be able to address Disproportionately Negative Impacts and ensure a just and equitable transition. The large interest in the impact of the mid-term measures on food security brings a new light on this debate, with the impact on critical food security imports now a central issue in the framing of what a just and equitable transition could be.”