The MEPC 81 meeting concluded on 22nd March 2024, further clarifying the risk and opportunity both for the international shipping value chain’s commercial decision making, and for this sector’s contribution to minimise the risks of dangerous climate change, UMAS noted in a report, highlighting six (6) key takeaways from the discussions that took place during the Committee.
The meeting itself was not a point of adoption for measures, but it was a chance to test whether the member states of the IMO were as committed to advance and implement policy measures capable of delivering the Revised GHG Strategy adopted in July 2023
UMAS noted the following key outcomes and insights from the meeting:
#1 New chapter initiated
Annex VI of MARPOL now has a very early draft of a new chapter (Chapter 5) – “regulations on the IMO net-zero framework”. This new chapter is just a framework of subheadings for now, but includes all the structure needed to adopt any of the GHG policy options currently under consideration (Goal-based Fuel Standard, flexibility mechanisms (a type of economic measure that involves credit-trading like an ETS), GHG levy, fund management and revenue disbursement, further details can be found in the ISWG GHG 16 readout).
#2 Unanimity of member states endorsing the new chapter
IMO does not need to make decisions by unanimity, but it helps the future work if that is the case. Previous negotiations on short-term measures were more fractious and difficult in the run up to agreement/adoption – similarly so was the initial strategy negotiation that was ultimately not supported by all countries. Building on the unanimity associated with the adoption of the Revised GHG Strategy, the new MARPOL chapter was well received by all countries which is a positive signal for further cooperation.
#3 The fate of energy and equitable transition are coupled
The MEPC 81 debate largely reiterated points that had previously been heard at MEPC 80, with polarisation around whether or not to implement a GHG levy (referred to as universal GHG price), which would incentivise lower GHG emissions whilst also guaranteeing the raising revenues for deployment towards both, the energy transition (e.g. the transition), and equitable transition (including but not limited to a technologically inclusive transition). Encouragingly for both the energy and equitable transition agendas, there was positive momentum built at the meeting, with an increased number and diversity of countries supporting a GHG levy.
#4 General lowering of risks to timely and robust policy
The IMO had already committed in its Revised GHG Strategy to reach agreement at MEPC 83 (April 2025), adoption by the end of 2025, and entry into force of the new MARPOL chapter’s regulations in 2027. The meeting progressed a range of topics that are all pertinent both to the timeliness, e.g. whether or not the IMO will succeed in meeting that timeline, and robustness of the agreement on policy measures. The meeting evidenced that risks on both items have reduced, but still remain – given the complexity and novelty of policy-design work the IMO is undertaking.
#5 There’s a clarifying calendar for the remaining work
Thanks to the information in the Revised GHG Strategy, there was already some clarity on the timeline up to the points of agreement/adoption in 2025. However, the meeting has clarified both an expert workshop (on the modelling and analysis base of the measures), and the agenda for the next IMO Working Group meeting (late September), which has been setup to advance the substance and detail in the new MARPOL Chapter 5 drafting.
#6 The risk to ‘wait and see’ just increased again
Although the direction of shipping’s transition was primarily set at MEPC 80 with the Revised GHG Strategy, any transition creates uncertainty and risk relating to timing. Investors in the assets (the fleet, infrastructure such as ports, energy supply chains) that enable both the incumbent fossil fuel paradigm, and that will be needed in the future zero GHG emission paradigm, face both technology risk (uncertainty about which zero emission technology will be most competitive and when), and political risk (uncertainty about exactly how policy will disincentivise fossil fuels and incentivise zero emission fuels).
One risk management strategy is to ‘wait and see’ so that decisions are only made when certainty has arrived. However, this is not risk-free as at the same point when the fate of fossil fuel technology becomes absolutely clear, and/or the opportunity for zero emissions technology becomes absolutely clear, opportunities to manage risks related to asset disposal values and to take future market share opportunities will have already been passed over.
…UMAS concluded.
