THE US has laid out its terms for a potential IMO agreement to replace the Net-Zero Framework, repeating warnings it will oppose any global carbon price on shipping.

In a diplomatic demarche sent to governments and seen by Lloyd’s List, the US said it would not tolerate any “financial penalty, carbon tax or multilateral fund”.

“Any proposal must eliminate penalties on LNG; recognise biofuels as a viable marine fuel; and support industry-led advances in alternative fuels, technologies, and other technologies without ‘picking winners’ via regulations,” the demarche said.

The US demanded “mandatory withdrawal/phaseout of any existing regional shipping emissions reduction scheme, including the European Union’s ETS”.

It said any NZF alternative regulation should follow the explicit acceptance procedure for adoption. This would make it easier to stop a deal coming into force, because the procedural bar for other governments to clear is higher.

The IMO changed its procedure from explicit to tacit acceptance more than 50 years ago. The IMO has said: “This process is very time-consuming and most of the amendments adopted this way never entered into force.”

The US demands are mostly the same as they were in October, when it and a group of petrostates pushed to delay for a year the vote on whether to adopt the NZF.

But the diplomatic language hints that the US would be prepared to accept an international deal, albeit one that is far less ambitious on climate than the IMO has so far considered.

“If the NZF or a substantially similar measure were to be brought back up at the IMO, our coalition will be ready to oppose, and it will be larger,” the US said. 

But it offered its positions “to inform any alternative proposal led by industry or another member state”. 

“Rather than pursuing a global emissions scheme that would restrict energy types, the IMO should look to foster an environment of energy abundance,” the demarche said. 

“The IMO must avoid rigid mandates and economic burdens. The IMO must not pick an arbitrary target in the future and try to reverse-engineer compliance, nor should it disadvantage any types of fuel.”

Those positions dovetail with the principles set out in a recent proposal by Panama, Liberia and Argentina for an alternative regulation that would leave diesel and LNG the only fuel options available to shipping, by limiting the options to what is cheap and available enough today.

The provenance of that plan is still unconfirmed, despite most sources suspecting the US of being behind it.

Delegates have worried since October that the US would simply shootdown any IMO proposal by threatening trade sanctions, as it did at the most recent MEPC.

Sources said no deal, or a weak IMO deal, would suit the US and petrostates. But it would also give the EU justification to keep and strengthen its own carbon rules, the ETS and FuelEU Maritime.

Behind the scenes, diplomats have been told in recent weeks that the US could tone down its attacks if presented with an IMO deal that benefits its LNG and ethanol exporters, a source told Lloyd’s List.

IMO secretary-general Arsenio Dominguez, who is under pressure to produce a deal, has pushed the European Commission to compromise with the US, as reported.

Meanwhile, Pacific Island states have pushed NZF supporters to stick to their guns.

In an unpublished submission to next month’s MEP84 meeting, the Pacific Islands — with the notable exception of the Marshall Islands — said the legal text of the NZF “represents the absolute limit of what they can accept”.

“Attempting to extract or alter the core components of the IMO NZF will not improve the likelihood of the group reaching agreement; it will cause the entire structure to collapse,” they said.

Removing the carbon price and Net-Zero Fund would “strip the Framework of its ability to drive a cost-effective global transition and ensure a just and equitable transition”.

Talks on the future of the carbon price will resume at MEPC84 next month.