MEPC 83: IMO’s compromise drops GHG levy

The IMO member states have voted in favour of a compromise two-tiered GHG intensity reduction plan after a week of negotiations failed to reach a consensus on a flat-rate levy.

TABLE: Annual GHG fuel intensity reduction targets for base and direct compliance, relative to the GFI reference value. IMO, ENGINE

The IMO’s Marine Environment Protection Committee (MEPC) has approved a compromise draft for Chapter 5 of the MARPOL Annex VI convention.

The approved draft introduces two-tiered greenhouse gas (GHG) fuel standard, that will require ships to progressively reduce their well-to-wake GHG fuel intensity (GFI) from 2028 onwards. The targets are benchmarked against 2008 levels, set at 93.30 grams of CO2-equivalent per megajoule (gCO2e/MJ).

GFI reduction targets will tighten over time, ranging from 4–17% in 2028 to 30–43% by 2035. The MEPC plans to review and further tighten targets for 2036–2040 during its 2032 session. According to the draft, the base reduction factor should reach 65% by 2040.

Non-compliant ships will need to balance their emissions shortfalls under a two-tier system.

IMAGE: Draft amendments to MARPOL Annex VI on the IMO Net-Zero Framework. IMO

Under the new IMO framework, ships that fail to meet the more ambitious “direct compliance targets” for GHG intensities must make up the shortfall through “remedial units”. These units are purchased by paying into the IMO Net-Zero Fund at a fixed Tier 1 carbon price, currently set at $100/mtCO2e for 2028-2030.

For ships that fall short of both the “base targets” and “direct compliance targets”, an additional Tier 2 compliance deficit must also be covered. This can be done in one of three ways: by using “surplus units” banked in previous years, receiving “surplus units” from other ships, or by buying additional “remedial units” at a higher Tier 2 price of $380/mtCO2e for 2028-2030.

Pricing for 2031 onwards has yet to be decided.

For context, the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS) has recommended a minimum price of $450/mtCO2e to align with IMO’s 2023 GHG Strategy.

Member states will revisit the draft for formal adoption at MEPC 84 in October, and the 2028 calendar year (1 January to 31 December) is the first reporting period for GHG intensity reductions.

By Konica Bhatt and Erik Hoffmann

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