IMO Working Group Fails to Finalize GHG Emissions Pricing Scheme

International efforts to curb GHG emissions from shipping took a step forward as the IMO's Intersessional Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 18) concluded its latest round of discussions on Friday.

The IMO's 2023 GHG Reduction Strategy commits Member States to adopting mid-term measures to reduce GHG emissions from ships in late 2025, including:

• a technical element, namely a goal-based marine fuel standard regulating the phased reduction of a marine fuel's GHG intensity; and  

• an economic element involving a maritime GHG emissions pricing mechanism. 

However, no major breakthrough was reached towards a final agreement about a universal levy, says Guy Platten, Secretary General of the International Chamber of Shipping (ICS), even though it is widely supported by the shipping industry as the best mechanism to accelerate the transition to net-zero emissions by 2050.

About three quarters of IMO States now strongly support the GHG contribution system proposed by the ‘50-plus group’ of governments and ICS. However, concerns raised by a significant minority, including China and Brazil, must be addressed in a simple and pragmatic way to build complete consensus, Platten said.

“A major positive outcome is the broad agreement among governments to establish an IMO Fund, a concept ICS has long championed. It has also been generally agreed that this IMO Fund, expected to generate billions of US dollars annually from charges for ship’s GHG emissions, should be used to provide financial rewards for first movers and ships using zero and near-zero emission fuels (such as green methanol, biomethane, green ammonia and sustainable biofuels). These incentives are crucial for narrowing the cost gap with conventional marine fuels and catalyzing the production and uptake of new fuels.”

Significant details remain unresolved regarding the proposed GHG intensity fuel standard. However, ICS is pleased that its simpler proposal for GHG surcharge fees, which would be applied to ships unable to comply due to fuel availability constraints, remains under consideration.

“Importantly, we have seen widespread support from developing countries for this more simple and transparent approach instead of an overly complex system requiring ships to trade compliance units with unpredictable and volatile pricing. Another key issue for shipowners is whether pooled compliance among different shipping companies will be permitted, given the expected limited availability of compliant marine fuels,” said Platten.

“Achieving consensus is crucial for delivering the goals of the revised GHG Reduction Strategy, which were unanimously agreed by all governments in 2023.”

After reviewing the draft IMO net-zero framework, the working group Chair, in consultation with the Secretariat, prepared an updated version of proposed MARPOL Annex VI amendments. This version consolidates areas of agreement and introduces new possible bridging options for further discussion. It will be annexed to the group’s report to MEPC 83 as a “work-in-progress" and will be further considered at the 19th meeting of the Intersessional Working Group (April 1-4, 2025), ahead of MEPC 83.

Platten emphasized the need for urgent progress before then. “While ICS is broadly satisfied with the progress made on a radical new package of global GHG reduction regulations, including a GHG emissions pricing mechanism, much work urgently remains to be done. But despite divergence on many issues, it is encouraging that negotiations continue in a positive and cooperative spirit.”