UCL has published its overview of the discussions from IMO’s ISWG-GHG 22. Image Credit: UCL

• UCL readout sees large majority still behind GHG pricing and a centralised fund to support the transition
• 38 member states spoke in favour and 17 against, two-thirds of those who took the floor
• Japan's direct-contributions alternative "robustly rejected"
• GFI trajectory likely softer to 2030, steeper to 2040; ZNZ multiplier may return
• Advice to investors: "the devil is still in the detail", but expect a decision at MEPC 85

The UCL Shipping and Oceans Research Group sees a large majority of IMO member states continuing to back GHG pricing and a centralised fund to support shipping's transition, following "steady progress" on the Net Zero Framework at this week's ISWG-GHG 22.

The view comes in its readout of the meeting published Friday, and rests on 38 member states speaking in favour and 17 against.

Neither the readout nor the IMO's own summary says how many of the organisation's 176 members took part in the session, though for comparison 127 states voted or abstained when adoption of the framework was adjourned last October.

Among those who took the floor this week that is a two-thirds majority, and UCL records a small number of those who spoke as ambiguous.

The finding nonetheless cuts against the impression of stalemate: the group of states pushing a technical-only solution without pricing "remained small and consistently composed of strongly fossil fuel aligned governments", the research group at the UCL Energy Institute said in a press release accompanying the readout on Friday.

Five alternative proposals were on the table, from Brazil, Tuvalu, Japan, the UAE, and Liberia, several of them "rather tentatively put forwards" by proponents whose stated preference remained the framework as agreed, the readout says.

Of those, Japan's proposal to replace GHG pricing with shipowner-directed contributions "was robustly rejected, particularly by the member states that would need to 'swing' to support it for this to start to build momentum."

That matters because direct contributions to existing IMO programmes were among the alternatives the US delegation said this week it could accept, alongside Brazil's "facility" concept.

On the Global Fuel Intensity (GFI) reduction pathway, the readout expects the trajectory "to be softened initially (around 2030), but then steeper in the period to 2040."

Rewards for zero and near-zero fuels remain broadly supported, and the analysis notes "broad support for a multiplier, despite it being taken off the table at the last meeting", which it says could yet see one incorporated.

A majority of states opposed adding energy-efficiency surplus units or printing units to manage a price shock, citing the risk of destabilising the surplus unit market, while China's proposal to net remedial unit payments against rewards in a single transaction won broad support, subject to guidelines and to concerns about bypassing the fund's governance.

"Whilst there are many positives to take away, there is clear potential for a return to a strong policy solution and decision making this December, there remains high uncertainty in the extent that both industry's transition and low-income countries' transitions will be supported," said Dr Tristan Smith, professor of energy and transport at UCL.

"There remains high risk that in the effort to find a creative way forwards, the equilibrium between these two aspects, that enabled the NZF in the first place, is lost to the detriment of the outcome overall."

The group's Dr Annika Frosch added that "a clear majority of delegations still regard a Fund, Facility, or similar financial structure as essential to implementing the 2023 IMO Strategy."

For those making investment decisions, the readout's advice is blunt: "Do not try to use this meeting as a signal you can finalise decisions around," it says, adding that "the devil is still in the detail."

It nonetheless expects a clarification or agreement at the Marine Environment Protection Committee (MEPC) in November, judging the risk of a repeat of last October's disruption to be lower, with the chair confident the group will conclude its work at MEPC 85.

The meeting did not progress draft MARPOL text, which UCL says will now have to evolve informally before ISWG-GHG 23 and MEPC 85 in November and December.

The full readout can be found here.