Spirit of IMO alive, but Net Zero Framework progress limited

Delegates at the ISWG-GHG effectively had similar views on the four-day meeting that ended on Friday, that there was no shift in positions, even if they expressed it in differing ways.

One called it an exercise in “political willy waving”, while another less colourful view was that the International Maritime Organization (IMO) had been given a “healthy dose of pragmatism”.

Others addressed some of the key issues more directly, saying that the IMO is not set up to handle major funds, “It’s not just the Greeks who are showing resistance to the IMO becoming a bank,” said consultant Martin Crawford-Brunt of Lookout Maritime, who was not present at the ISWG-GHG. He also said that efficiency should be the industry’s focus and not curbing the use of LNG.

SEA-LNG’s COO Steve Esau believed there was a genuine effort to find a way forward on the contentious issue of the maritime fund from carbon penalties that would help fund the transition.

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According to Esau the transition is not going to be free so there will need to be some sort of support for a ‘just and equitable’ transition.

While acknowledging that a fund is necessary in order for alternative fuels to become viable during the period when they are becoming established the mechanism for achieving that support, “needs to be goal-based and technology neutral, and it should be based on, greenhouse gas emissions reductions, not a solution or a framework that ascribes a particular lifetime to a particular fuel pathway,” said Esau.

Dr Tristan Smith, Professor of Energy and Transport at UCL Shipping and Oceans Research Group saw it another way: “There remains high uncertainty in the extent that both industry’s transition and low-income countries' transitions will be supported.”

However, Dr Smith added: “The group of member states focused on a technical-only solution and abandonment of GHG pricing, remained small and consistently composed of strongly fossil fuel aligned governments.”

Even so, Federal Maritime Commission (FMC) chair Laura DiBella, in an August statement claimed: “A well-designed global fuel standard can create the long-term demand certainty needed to unlock new investment and expand supply—particularly in the United States.”

For DiBella and the US, the point is not to “abandon” a fuel because future demand will force up prices, but “to design a framework that allows supply and infrastructure investment to grow alongside demand.”

DiBella said: “Efforts toward emissions reductions must be linked explicitly to demonstrated viability and realistic availability of alternative fuels, not a pre-determined, rigid implementation date or limited fuel options.”

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That means the debate around emissions reduction should include more fuel types, particularly LNG and Bio-LNG, which, coincidentally, are fuels that the US has in abundance and wants to sell to the rest of the world.

Esau, by contrast wants to see a level playing field and for fuels to compete openly in a free market.

But when asked if fossil fuels should lose their subsidies in order to achieve that level playing field, he said: “In an ideal world there should be a completely level playing field, but I don't think we can have a view on upstream fossil fuel subsidies.”

Even considering DiBella’s stated position and the understanding that the key players that forced the postponement of the agreement at last October’s Extraordinary Session were continuing to work against the NZF some, including Esau, felt that there had been some positive shifts towards a final agreement.

Em Fenton, senior director climate diplomacy at Opportunity Green, said this statement from DiBella was seen by some as a “softening” of the US position.

Fenton argued that there was a return to the “spirit of negotiation” usually seen at IMO discussions, following the acrimony of last October’s Extraordinary Session. That said she emphasised the necessity “for the final regulation to have teeth with penalties for non-compliance and a just and equitable transition.”

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A more upbeat tone was taken by Dr Smith when he said that most states confirmed their support for the regulation and its compliance mechanisms.

“The strongest support was for the two least controversial options common to all proposals: reducing GHG intensity and pooling/transfer of surplus units (SU),” he said.

A majority of states rejected Japan’s proposals for direct contributions, where the printing of SU’s to manage price shocks, was seen as destabilising and that it would impact investments.

China’s netting proposal, balancing RU’s and reward payments into a single transaction gained traction across the member states.

According to Dr Smith support for the “NZF ‘’as is’ remains the obvious answer (and most supported way forwards), but the process to realise that conclusion formally makes this a difficult political solution.”

In that vein Gavin Allwright, secretary general of the International Windship Association, cautioned that, “the numbers looked secure last September ahead of the Extraordinary Session, but the support failed to materialise at meeting.”

“I don't think that the numbers really indicate where we're going to end up on this because if you are under threat or you're under sanction, or under pressure, you've got to be very, very strong to go against the prevailing situation,”

Other than that Allwright believed, “there was not a lot of convergence” over the key issues.

Fenton was more upbeat, pointing to the African contingent of states for whom the fund was the most important issue on the table, she said for that reason they were keen for the NZF to pass.

Even so, both Allwright and Fenton noted that the threat that raised its head last autumn still existed today with an unlikely alliance of the US, Panama, Liberia, Saudi Arabia and Russia, pushing for a technical solution only.

Though Fenton felt there was “enough on the table to avoid the worst concessions demanded by some”.

Dr Annika Frosch, Research Fellow at UCL Shipping and Oceans Research Group commented that while there was intense debate over the NZF’s design, “a clear majority of delegations still regard a Fund, Facility, or similar financial structure as essential to implementing the 2023 IMO Strategy.”

While it is thought that there will be a compromise on the greenhouse gas fuel intensity reduction, at least until 2030, the major sticking point is the just and equitable transition plans with the IMO operating a fund.

Overall, the mood for most was satisfied that the NZF was still on the table but frustration that little progress was made towards a resolution over the two major issues, emissions pricing and the just and equitable resolution.

That was summed by Allwright: “I thought that it was roll up your sleeves and let's get some work done mode. That's why I came back to Germany [SMM]. And I just felt terribly disappointed that I didn't feel there was any real progress made.”

With one more ISWG ahead of MEPC85 from November 30 to 3 December the Extraordinary Session will meet on the 4 December where Arsenio Dominguez is adamant there will be no need for a vote, because the member states will reach a negotiated agreement.

Others do not share his confidence.