Countdown Newsflash - Taking Stock after MEPC 82
As the dust settles from two weeks of intense negotiations at ISWG-GHG 17 and MEPC 82 in London, we reflect on the key developments in this third edition of Countdown to MTM. Our Center experts were on the ground, contributing to the discussions around the short-term measures (STMs) and mid-term measures (MTMs), which are both critical to reaching the IMO’s 2023 net-zero goal. From updates on revisions to the Carbon Intensity Indicator (CII), to the challenges of reaching global consensus, here we are sharing insights into how these critical measures are advancing.
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Reflections from the ground
Francielle Carvalho - Regulatory Affairs Manager
“We had two busy weeks covering the ISWG-GHG 17 and MEPC 82, where the MTMs dominated the conversation, but the Center also celebrated a success in fuel certification. We proposed a framework for the certification of sustainable marine fuels in an official IMO submission. Certification is a foundational piece for the governance of GHG emissions, and the Member States and NGOs unanimously agreed to support the initiative – and invited further work on the topic.
As the IMO rallies around the need for an agreement on the MTMs to meet the GHG strategy, we are observing growing convergence and collaboration among Member States, especially regarding the goal-based fuel standard (GFS). As we get closer to the final agreement next April, it is crucial that these measures provide real incentives for low-GHG energy uptake and shape the future of net-zero shipping. We also see opportunities to get more sustainable marine fuel producers involved to share their perspective on how ambitious measures are needed to create a case for upstream investment.“
Jan Otto de Kat - Regulatory Affairs Manager
“It is clear from the discussions at MEPC 82 that member states and organizations deem both the STMs and MTMs highly important. While the MTMs are essential for reaching the 2040 and 2050 decarbonization goals, the STMs can result in significant reductions in global fuel consumption by 2030 through proper CII regulations and improved energy efficiency measures.
Many who participated in the Working Group on Air Pollution and Energy Efficiency noted that there are some serious issues with CII that need to be addressed in the review process. A substantial list of CII challenges and gaps was created, which were prioritized and given indicative timelines. The highest priority items align well with ongoing Center CII work, such as enhanced enforcement via SEEMP, time in port, and improvement of CII metrics. The Center is in a unique position to be able to contribute with relevant input for the review of the STMs and for the development of the MTMs.“
Daniel Barcarolo - Head of Regulatory Affairs
“The road for developing and reviewing the MTMs and STMs does not end here, but we have clearly reached a major landmark on the pathway towards MEPC 83 in April. MEPC 82 achieved convergence on the MTMs, with countries actively collaborating towards shaping a converged set of regulations. MEPC 82 also marked the creation of a target plan for the review of the STMs. I’m leaving this MEPC with confidence that the IMO will deliver on these two measures and provide us with a concrete plan that we can work with. The greatest achievement was to see a clear focus on how to achieve the IMO 2023 strategy’s goals via the measures, not whether we can achieve them. I hope April will mark the confirmation that shipping is indeed on a pathway towards full decarbonization in 2050.“
Where things stand after MEPC 82
Below, our experts have consolidated their reflections and insights on both the technical and economic elements under discussion at MEPC. Although we discuss technical measures, such as the GFS, and economic measures, such as GHG pricing, separately here, they can and should complement each other to create the required incentives to transition to sustainable marine energy. Together, these elements are critical to ensuring that the MTMs can deliver on the ambitious net-zero goal.
Our reflections on the progress of technical measures:
- Overall: The discussions revealed a divide among Member States — some favor GHG pricing as a standalone economic measure, such as a levy or feebate, while others see it as part of a GFS covering a share of emissions, with revenue generation as a by-product. While the final structure and level of GHG pricing remains highly uncertain at this stage, there is agreement that revenue generated can be used to accelerate the uptake of zero and near-zero emissions energy and address the crucial issue of a just and equitable transition.
- Remedial unit (RU): There were no explicit indications from Member States on the level of the RU. Our assessment suggests that a lower RU could be politically feasible. However, a higher RU would be necessary to trigger the adoption of more decarbonization technologies. If the RU is set too low, it could be cheaper for ship operators to continue using fossil fuels and simply pay for RUs, undermining the transition to sustainable alternatives (more on this in future editions of the newsletter). While this higher value may be politically challenging, it is critical for driving the transition to sustainable marine fuels.
- GHG reduction pathway: An ambitious GHG pathway would align with the IMO’s Comprehensive Impact Assessment and live up to the goals set in 2023. Countries are fairly evenly split between supporting a strong reduction pathway sufficient to meet the GHG strategy, versus other proposals that previously pointed to the FuelEU targets (below the 2023 strategy) and now lack specific numbers, leaving the decision on precise targets for future negotiations.
- Flexible compliance mechanisms: Two key IMO proposals emphasized the need for flexible compliance mechanisms, and it is likely that such mechanisms will be included in the GFS. Flexibility can incentivize the use of sustainable marine fuels while lowering overall emissions. However, some stakeholders, particularly those in favor of strong GHG pricing, argue that this approach could weaken the impact of GHG pricing, and therefore, oppose the inclusion of such mechanisms.
Our reflections on the progress of economic measures, which centered on GHG pricing:
- Overall: The discussions revealed a divide, with some Member States opposed to GHG pricing such as levy or feebate, while others emphasized the need for an economic measure to accelerate the uptake of zero and near-zero emissions energy, and address the crucial issue of a just and equitable transition.
- Zero or near-zero energy definition: The current proposals lack a clear and consistent definition of 'zero and near-zero GHG emission technologies, fuels, and/or energy sources’, referred to as ZNZ. This ambiguity needs to be addressed to provide clear guidance for the industry and ensure that fuels qualifying for incentives meet agreed sustainability and GHG reduction criteria.
- Revenue distribution: Ensuring revenue distribution aligns with the principles of a just, equitable, and fair transition, as outlined in the 2023 GHG Strategy, is a key part of the negotiations. Discussions on how to distribute GHG pricing revenues for a just and equitable transition while incentivizing zero or near-zero energy technologies are still in need of further convergence. There are differing views on how best to achieve these goals, making it difficult to predict the outcome at this stage.
As we reflect on the key developments from MEPC 82, it’s clear that convergence is emerging among Member States. Our experts see discussions now centering on how to design and implement the necessary regulations, rather than debating whether we can achieve the 2023 IMO strategy, signaling a growing commitment to meeting the net-zero target by 2050.
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