The 84th meeting of the IMO's Marine Environment Protection Committee is being held in London this week. Image Credit: IMO

Delegations of the IMO's Marine Environment Protection Committee (MEPC) are gathering in London this week for the next round in the ongoing fight over how to regulate shipping's GHG emissions.

The last time the committee met was in an extraordinary session in October, which ended in a chaotic manner as opponents of the proposed Net Zero Framework forced a one-year delay in voting on the measure. 

While some reacted to this delay by taking a pessimistic view that the regulation - several years in the making - could not be salvaged, work has continued behind the scenes from those seeking to clarify details of how it might function.

The question hanging over the shipping and bunker industries is whether anything has meaningfully changed since October.

The key issue is the extent to which the conversation has moved on. Continued stalemate and despondency favours the opponents of global GHG regulation, while supporters will be looking for evidence of progress on the technical details and early steps towards consensus.

NZF Opponents

The US spearheaded opposition to the NZF in October.

The Trump Administration had characterised the NZF as a UN-run global tax on shipping, strongly opposing the idea of a UN agency being entrusted with the billions of dollars likely to be raised in penalties for those failing to cut GHG emissions.

The US was reported to have issued threats against delegations considering voting for the NZF, primarily warning of potential tariffs against their country's exports but also including other measures such as visa restrictions for individual delegates.

The US Supreme Court's ruling in February that the bulk of the administration's tariff changes require congressional approval has now substantially reduced the potency of potential measures against delegations supporting the NZF. The fact that the administration now has to focus on a war in the Middle East and elections at the end of this year may also take its attention elsewhere.

But it has been notable that senior Democrats have largely steered clear of saying they would back the NZF. While the Biden Administration was mostly supportive of the 2023 IMO GHG strategy, this was while the strategy referred to long-term targets without concrete penalties being imposed in the near-term. It's not entirely clear that a change in government in the US would result in a different view of the NZF emerging in Washington.

When it comes to other opponents of the NZF in October like Saudi Arabia, some have engaged in recent discussions over how to amend the proposal, but their opposition to it in large part appears unchanged.

NZF Supporters

Supporters of the NZF have seen more of a change in position in the past six months. 

After the delay in October, several voices in the shipping industry started to question whether the regulation's prospects had been irreparably damaged. For some in the pro-NZF camp, that meant they needed to change focus to which parts of the framework could be removed to win more supporters and salvage the remainder of the regulation.

Much discussion has been around the fact that the primary US objection to the NZF has been concern over the IMO's capacity to manage a fund of the size likely to be generated by carbon penalties for shipping.

Some have advocated IMO-level regulation shifting to a pure carbon intensity standard for marine fuels, with responsibility for penalising those failing to meet this standard falling to flag states. Several IMO delegations have already started to move in this direction.

Another change has been in whether EU states can be relied upon to vote as a bloc to support the NZF.

EU member states typically all vote in the same manner at the IMO with a pre-agreed stance, and going into the October meeting it was assumed this practice would not change. But Greece and Cyprus both abstained on the last MEPC's decision to delay its NZF vote, meaning EU solidarity as a large bloc of support for the NZF now comes into question.

The war in the Middle East is also a significant change since October, both for supporters and opponents of the NZF. It highlights some of the weaknesses in fossil fuel supply chains, and has significantly narrowed the price gap between biofuels and conventional marine fuels, but also brings to the forefront concerns over the cost of living and the possibility of adding new regulatory costs to global trade.

What Will Happen This Week?

No final resolution to the NZF can be expected this week; at issue is more the narrative over its future.

Opponents of the framework would be happy with a week of fractious debate in which the division remains clear and no concrete areas of consensus are found, which would cement the view that hopes for global regulation of maritime GHG regulation must be put off for a few more years.

The US IMO submission calling for the cancellation of the EU-ETS for shipping - a regulation over which the IMO does not have authority - can perhaps be put into the category of proposals designed to draw heated discussion without any useful output.

For firm supporters of the NZF, and those that remain skeptical but want to see a more workable solution emerge, this week will need to be about demonstrating that some of the many technical questions around the framework can be resolved, and about showing increased support overall for global regulation.

For the shipping industry, meanwhile, the majority remain broadly supportive of global regulation, not least because the likely alternative trend is towards a fragmented set of rival regulations to the EU-ETS emerging all over the world. This would be likely to deliver compliance costs no lower than the NZF might produce, but with vastly increased complexity.