THE International Maritime Organization has three main policy outlines to choose from to get shipping to net zero greenhouse gas emissions by or around 2050.

Next week, its Marine Environment Protection Committee is due to approve a GHG fuel standard (GFS) and a carbon pricing tool, to narrow the cost of green ship fuels.

There are three major plans on the table, details of which will be hashed out at this week’s GHG intersessional working group meeting.

GFS+Levy (ISWG-GHG 18/2/5)

Supported by more than 60 member states, representing more than half of the global fleet by gross tonnage. Each ship would pay a set levy on tonnes of CO2 equivalent emitted in the preceding year to an IMO Fund. Price suggestions range from $18.75 to $150 per tonne.

Supporters say this offers the fairest and clearest incentive for shipping to go green, while raising enough cash to reward small island developing states and least developed countries (SIDS and LDCs).

“It is likely that this group has the necessary majority to win a vote on the Marpol amendment,” Suissenégoce, a group of Swiss commodity traders, said in its position paper on MEPC83.

“That said, the objection to any form of levy from some member states remains strong and it is the preference of all to find a yet-broader consensus.”

Opponents of a levy include Angola, Brazil, Chile, China, Colombia, Ecuador, Indonesia, Malaysia, Oman, Paraguay, Peru, Saudi Arabia, South Africa, Thailand and Uruguay.

These countries argued (in MEPC83/inf.32) that a levy would have the highest costs, especially in the short term, endanger exports from developing countries, increase global prices and hurt food security.

The IMO’s comprehensive impact assessment has found a levy with revenue used for SIDS and LDCs would impose the lowest overall GDP hit of the measures on the table in 2050.

GFS+Flex/credit trading proposal: IMSF&F

Proponents include China, South Africa and UAE.

Instead of a simple carbon levy, this would use the GFS to raise funds. Ships over 5,000 gt would have to report an ‘attained GFI’, or fuel emissions intensity against a set of pre-determined ‘required GFI’ values.

Compliance would be through two ways:

• A flexibility mechanism to allow underperforming ships (with attained GFI above the required GFI) to buy surplus units (SUs) from overperforming ships. If there are too few SUs available, the operator could buy remedial units (RUs, also sometimes called deficit units).

• Pay a surcharge equivalent to buying an RU, with the revenue going to the IMO fund.

But their suggestion of using credit trading has drawn fire from green groups, to big shipping companies and commodity traders. These have argued a GFS would give LNG outsized financial perks, fail to raise enough money for the green transition and to compensate poorer countries.

J9 Bridge/Singapore Proposal: ISW-GHG 18/J/9

Proposed by the chair of the ISW-GHG, Sveinung Oftedal of Norway. The ‘bridge’ proposal takes the IMSF&F idea and adds another band, with differing stringency for the non-compliance penalty.

Dr Tristan Smith, of the UCL Energy Institute, has argued the J9 compromise would fail for the same reasons as the IMSF&F would.

The trouble with guidelines

Suissenégoce has identified another risk to the process of approving a mid-term measure, for adoption in October and entry into force from 2027/2028.

“All these proposals defer material aspects of the mid-term measures for conclusion in the ‘guidelines’,” the group said.

“This diminishes the investability of the transition, as agreement of the guidelines will be deferred until, potentially, 2027.

“Worse, the guidelines may be changed on an annual basis, removing investable certainty from the business cases of long-dated projects.”

Suissenégoce has argued that to address the shortcomings of a GFS, the following changes should be made:

• Ensure the calculation of deficit units in the GFS framework corresponds directly to actual emissions reductions;

• Limit the banking of surplus units to one year to ensure an incentive to transition to zero or near-zero emissions (ZNZ) fuels;

• Exclude fossil fuels from generation of compliance credits.

On Friday, Lloyd’s List reported fears among supporters of a levy that the European Union was about to abandon its support for a levy in the interests of a compromise with China.

The proposals are just that until MEPC83 is over, on April 11. But the deals that will determine which framework makes it into the resulting Marpol amendment — and from there to into international law — will be struck this week at ISW-GHG 19, which is closed to the press.