Case gives clarity on the incorporation of standard terms. Credit: 3D Animation Production Company, Pixabay

Clock ticks towards MEPC 83 decision

 

The global maritime industry is holding its breath as the International Maritime Organisation (IMO) races against time to finalise its crucial mid-term greenhouse gas (GHG) reduction measures. With the critical Marine Environment Protection Committee meeting (MEPC 83) set to convene next week, April 7-11, 2025, significant hurdles remain, particularly concerning the design of the economic mechanism intended to drive decarbonisation.

Insights shared by Eirik Nyhus, director, environment for maritime at DNV, paint a picture of intense political negotiation and worryingly limited progress on key issues.

Speaking on a Baltic Maritime Impact podcast shortly after the conclusion of the Intersessional Working Group on Reduction of Greenhouse Gas Emissions from Ships (ISWG-GHG 18), Nyhus highlighted the meeting's central objective: "The central focus of working group meeting number 18 was to advance the political discussions and the development of the legal text for the midterm greenhouse gas measures, and to have this 'net-zero framework' ready for approval at MEPC 83."

This framework is built upon the IMO's agreement to develop two core components: a technical measure and an economic measure, both slated for entry into force in 2027. The technical measure, known as the Greenhouse Gas Fuel Intensity (GFI) regulation, aims to progressively reduce the carbon intensity of marine fuels. The economic measure is intended to incentivise the uptake of low- and zero-emission fuels and technologies.

However, the path towards consensus has been fraught with difficulty.

"The discussions remain intensely political - no surprise there - and we saw fairly limited progress,"

Nyhus said. The urgency is palpable. "Also, to be very blunt, we are running out of time. A large number of issues, big and small, remain under negotiation."

 

Headline challenges

Two major sticking points dominate the landscape: the precise calculation methodology for the GFI and, more contentiously, the structure of the economic measure.

Regarding the GFI, the debate centres on how to accurately assess a fuel's lifecycle emissions. "On the GFI, the chief disagreement is on how to calculate an appropriate greenhouse gas footprint," Nyhus explained. "The two approaches being negotiated are a traditional well-to-wake approach versus a tank-to-wake approach that takes well-to-tank performance and sustainability criteria into account." A crucial dependency here is the finalisation of the Life Cycle Analysis (LCA) guidelines, which are themselves still under revision and will provide the necessary data for either GFI calculation method.

Despite the lack of agreement at ISWG-GHG 18, Nyhus expressed cautious optimism on this front. "While no agreement was reached during the meeting, we believe there was movement and we expect to see this issue resolved. It should not be a showstopper for approval at MEPC 83." He acknowledged that other technical elements of the GFI, such as specific reduction rates and flexibility mechanisms, also need resolution, but characterised these as less likely to derail the process, suggesting political compromises are attainable. 

The real deadlock lies with the economic measure - Nyhus described this as "the chief stumbling block”.

Delegates are grappling with two fundamentally different concepts. The first proposes an economic element directly integrated into the GFI framework. Under this model, "ships not reaching compliance will incur costs proportional with their degree of GFI non-compliance”, Nyhus said.

The second, and more divisive, proposal is for a standalone GHG levy. This would require "ships... to pay for all their greenhouse gas emissions, with price proposals ranging from 18.5 to 150 US dollars per tonne of CO2 equivalents”.

The political divisions here are stark. While Nyhus observed "a general consensus on the need for a GFI linked economic element incorporating flexibility provisions”, this consensus notably excludes "a group of countries comprising primarily of a selection of Small Island Developing States (SIDS)”. Conversely, "a strong minority is in vocal disagreement with the need for, and acceptability of, a levy”.

Based on the dynamics at ISWG-GHG 18, Nyhus gave this assessment: "No decisions were made at the meeting … but in my judgement, the clear opposition by these countries make it exceedingly unlikely that the levy will be part of the final agreement." 

 

Spending rules

Further complicating matters is the question of revenue disbursement from any economic measure. While progress was described as "very limited”, Nyhus noted "general agreement on the principle that revenue should be used to reward over compliant ships using zero and near zero greenhouse gas emission technologies, fuels and/or energy sources - also called ZNZs”. However, critical details remain unresolved, including the very definition of a ZNZ fuel or technology and how precisely rewards would be applied. The operational aspects of managing the potentially vast sums flowing into a dedicated IMO fund also spurred discussion, but according to Nyhus, "all options put forward so far remain on the table for consideration at the next meeting”.

With MEPC 83 just days away, the time for negotiation is critically short. This intense time pressure necessitates significant behind-the-scenes activity. "It's therefore clear that there needs to be significant intersessional consultations between parties if there is to be consensus," he said. The expectation is for a high-stakes finale next week.

"It looks pretty certain that this is going to come down to the wire at MEPC 83, with a very real possibility that the meeting at some point simply will be presented with a take it or leave it proposal."

Based on the current trajectory, Nyhus anticipates a package deal emerging. "I expect this to contain legal text for both a technical GFI and the linked economic measure. We will move forward with both the elements. But I do not expect to see a levy being part of this. Instead, I expect the negotiations to yield a GFI linked instrument designed to provide the revenue stream necessary for hopefully everyone to come on board."

Crucially, Nyhus anticipates that Member States will strive for consensus rather than resorting to a potentially divisive vote. "MEPC last voted more than a decade ago in connection with adoption of the Energy Efficiency Design Index (EEDI), and that was a sufficiently painful experience for member states to not want to go down that road again."