IBIA's representative to the IMO, Dr Edmund Hughes. Image Credit: IBIA

• Multiplier "could potentially replace financial rewards and so the need for revenues to provide them", says IBIA's Dr Edmund Hughes
• Without a fund, cash rewards for zero and near-zero fuels "would not be possible", but a non-fiscal route may work
• Several states reviewing positions and may be moderating "red lines" after ISWG-GHG 22
• Hughes moderates the regulatory panel at the IBIA Annual Convention in New York, November 10-12

IBIA's representative to the IMO, Dr Edmund Hughes, says China's multiplier proposal for zero and near-zero fuels and technologies could be a way round the deadlock over an IMO fund under the Net-Zero Framework (NZF), rewarding green fuels without needing revenues to pay for it.

"Such a multiplier, if designed correctly, could potentially replace financial rewards and so the need for revenues to provide them," he told Ship & Bunker following last week's ISWG-GHG 22.

The fund has proven a key sticking point for the proposed framework, with the US in particular one of its most outspoken critics, criticism that many feel ultimately led to adoption of the NZF being derailed at an extraordinary session last October.

The US delegation reiterated at ISWG-GHG 22 that an IMO-administered fund remains a red line.

China's proposal would apply the multiplier "where funding for monetary rewards is constrained" and have it "operate effectively in conjunction with the use of Surplus Units."

Hughes said it had received support from several member states at the meeting, but was clear about what losing the fund would mean for cash rewards.

"Without provisions for raising and a depositary for receiving revenues from a global measure it would mean financial rewards for the use of ZNZs would not be possible," he said.

"However, alternative approaches for incentivising uptake of ZNZs through widening the scope and use of Surplus Units and the application of a 'multiplier' might provide a non-fiscal solution if linked to other schemes such as Japan's proposal for 'direct voluntary contributions'."

Japan's contributions concept could also be integrated with other schemes to provide funds for the just and equitable transition that is a core principle of the 2023 IMO GHG strategy, he added.

That is a shift in emphasis from the position IBIA and ICS took in their joint submission calling for significant rewards paid from the framework's fund.

Hughes said industry bodies, ICS and IBIA among them, had backed adoption of the framework primarily to secure global regulation of shipping's GHG emissions and "to reduce the risk of proliferation of national/regional measures such as seen under the European Union".

Red Lines

On the week itself, he said "limited progress" had been made, as it was the first time member states had met to consider the proposals to amend the draft framework circulated since Marine Environment Protection Committee (MEPC) 84 in May, from Brazil, Liberia, Tuvalu, and Japan, and one submitted jointly by Australia, Canada, South Africa, and the UK.

"Despite the remaining divergent views it is evident that following consideration several Member States are reviewing their position and may be moderating their 'red lines' on several of the key policy issues," he said.

A gentler Global Fuel Intensity (GFI) reduction trajectory and greater flexibility in the supply and use of surplus units had been identified by many member states, he said, but they remained divided on the payment by ships for remedial units when unable to comply, and on the establishment of an IMO GHG fund.

Some new proposals had received support, including the idea of a "facility" for managing and disbursing revenues through established institutions rather than the IMO, notably from the US.

"As the Chair of the meeting observed the Group's general view was that the name of the mechanism matters less than its 'nature, purpose and functions' which all remain open for further definition and including how would IMO retain oversight," he said.

The working group closed on Friday with its chair reporting a willingness to present text to MEPC in November, and a UCL readout counting 38 states speaking for a central fund and 17 against.

The topic will be discussed further at the IBIA Annual Convention in New York on November 10-12, where Hughes, who headed the IMO's air pollution and energy efficiency work from 2013 to 2020 and has represented the bunker industry body at the organisation since 2023, moderates the regulatory and policy panel, Navigating a Changing Framework.

The NZF then returns to the table at MEPC 85 on November 30 to December 3, with the resumed extraordinary session to consider its adoption scheduled for December 4. For more information on the Convention, click here.