Marine Environment Protection Committee (MEPC) 83 Meeting Brief
International Maritime Organization - Marine Environment Protection Committee (MEPC)
Background
As anticipated, the Marine Environment Protection Committee (MEPC) 83, which wrapped up on April 11th, along with the two earlier interim meetings of The Intersessional Working Group on Reduction of Greenhouse Gas (ISWG-GHG) 18 and 19, were notably eventful.
MEPC approved a landmark fee-based mid-term Greenhouse Gas (GHG) reduction measure that should be formally adopted in October and would then go into effect in March 2027 at the earliest, but likely in 2028. The measure was not adopted by acclamation, as it was the preferred MEPC practice, but by a majority roll-call vote of the IMO member countries.
The Vote
The vote exposed the multiple factions and their positions on fee-based regulations to limit GHG emissions. First, in a bombshell announcement early in the week, the US withdrew from the session, encouraged other nations to do likewise, and threatened reciprocal measures against any fees charged to US ships.
Sixteen mainly Middle Eastern and oil-producing states wholly rejected the measure. Many member states abstained at that time, including the critical bloc of Pacific Island nations that pushed hard for a more stringent levy on all carbon emissions, not just those exceeding an annual target. However, 63 of the 79 voting countries, including most European nations, Japan, Brazil, India, China, and some South American and African states voted to adopt the measure.
What was adopted
The approved measure for ships over 5000 gross tonnage (GT) is a two-tier compliance regulation based on the comparison of each ship’s well-to-wake (WtW) annual GHG fuel intensity compared to the 1st tier (Base) and the 2nd tier (Direct Compliance) targets. The emission reduction levels have been set initially for 2028 through 2035. They are reductions compared to the base WtW GHG fuel intensity (GFI) level for standard fossil fuels in 2008 of 93.3 gCO2eq/MJ (grams of CO2 equivalent emissions per Mega Joule of energy). Remedial Units for fuel emission levels exceeding the more modest Tier 1-based level would be priced at $380 per tonne of carbon dioxide equivalent (CO2eq) emissions on a well-to-wake basis. Remedial Units for GFI fuel level emissions exceeding the Tier 2 level emissions would be priced at $100 per tonne of CO2eq emissions on a well-to-wake basis. It’s only a fee for carbon exceeding one or both of the 2-tier thresholds. If you meet the thresholds, there is no carbon payment. GHG intensity reduction levels for Tier 1 begin at 4% for 2028 and reach 30% in 2035, and for Tier 2, they start at 17% in 2028 and reach 43% in 2034. See the graph below.
MEPC 83 2-Tier GFI Measure: IMO Net Zero Framework
Part of the regulation mandates unspecified rewards for the early adoption of “zero or near zero” carbon fuels, shown at the bottom of the graph.
Payments are made by purchasing the Remedial Units, with fees going into an IMO-administered Net-Zero GHG fund. Ships can also receive Surplus Units for reductions exceeding the Tier 2 reduction targets, with these Surplus Units being banked, traded, or transferred to other ships to cancel Remedial Units.
Impact on Shipping and GHG Emissions
Only time will tell, but some estimate that the measure may generate around $30-$40 billion in the first two years and about $10 billion annually, with funds used to subsidize the transition to low-carbon fuels and climate projects in developing countries.
Theoretically, zero would be deposited in the IMO fund if all ships complied with the Tier 2 targets. Still, there will likely be insufficient quantities of low-carbon fuel for full international fleet compliance, at least in the early years. But the measure also means fossil fuels can continue to be burned well into the future, limited only by the Carbon Intensity Indicator (CII) and regulations Energy Efficiency Design Index) (EEDI), (which have now been extended to 2030), with increasing financial penalties for required purchases of Remedial Units.
Many national delegations and environmental nongovernmental organizations (NGOs) believe that this measure will fall short of meeting the IMO's ambitious strategic goals of 20-30% GHG reductions by 2030, 70-80% by 2040, and ultimately net zero in 2050, which were adopted in 2023. However, depending on the attained and measured GHG reductions, the plan includes a provision for adjusting the targets in 2031.
The IMO Process and Reactions
IMO functions as a consensus organization, usually finding a middle ground for safety and environmental regulations. Relatively non-contentious issues are traditionally approved by acclamation, and contentious issues are approved by vote. Conventions are enacted by a 2/3 approval of member states, or amendments to existing conventions are approved tacitly by not receiving rejection by 1/3 member states within 24 months.
With 170 member countries and 110 participating NGOs, this process often requires hard-fought compromises from many and results in regulations that represent not the highest standard but rather the highest standard that enough members of the IMO can support.
In this case, we have very contentious issues of climate change, GHG reductions, and the first-ever international regulations using financial incentives and potential carbon levies. The IMO did precisely what it promised and adopted mid-term GHG reduction measures with both a technical and financial component by the end of the MEPC 83rd session.
Some countries could not support such a measure as it was deemed too stringent, and some felt it was ineffective in meeting IMO’s overall goals without a carbon price for all CO2 emissions.
what was passed was the world’s first mandatory global carbon pricing mechanism. Several major shipping industry groups positively noted the IMO outcome:
Guy Platten, Secretary General of the International Chamber of Shipping, said:
“Today will hopefully be remembered as a historic moment for our industry. If formally adopted, shipping will be the first sector to have a globally agreed carbon price, something which ICS has been advocating for since COP 26 (UN Climate Change Conference ) in 2021, when the industry agreed a net zero 2050 target.”
“Shipping is now at the forefront of efforts to decarbonize rapidly to address the climate crisis. The world’s governments have now come forward with a comprehensive agreement which, although not perfect in every respect, we very much hope will be formally adopted later this year. On behalf of the industry, I would like to thank Member States and the IMO for their exceptional hard work in achieving this agreement in challenging political circumstances.”
World Shipping Council President & CEO Joe Kramek said:
“This is a major milestone for climate policy and a turning point for shipping. Our industry has long been labelled as ‘hard to abate,’ but record industry investment and a new global measure can turn the tide on that.”