| IMO Regulatory Trends |
MEPC 83 Key Highlights

The draft amendments to MARPOL Annex VI, setting forth the implementation measures for the IMO’s mid-term measures aimed at achieving the target of “Net-Zero GHG emissions from international shipping by 2050” as established in the “2023 IMO Strategy on Reduction of Greenhouse Gas Emissions from Ships” (Resolution MEPC.377(80)) adopted at the 80th session of the MEPC have been approved.

Due to sharp divisions among member States, unanimous agreement could not be reached. Accordingly, at the request of a specific Member State, the measures were approved through a voting process, and they include the following key elements:

▶ IMO GHG mid-term measures shall apply to all ships of 5,000 GT and above, and all applicable ships shall collect GFI data starting from 1 January 2028 and report the relevant data to the Administration for GFI verification in early 2029. It was agreed that expanding the application of the measures to ships of 400 GT and above would be decided through further deliberations in the future.

▶ The GHG reduction pathway for international shipping will be structured based on a dual-target approach (base target and direct compliance target), with levies on individual ships' emissions imposed under a grading scheme. Ships that fail to meet the Direct Target (Tier 1) due to the use of high GHG emission fuels must offset their emissions exceeding the Direct Target by paying the cost of purchasing Remedial Units (RUs) (USD 100 per GHG tonne) into the IMO Net-Zero Fund.

▶ However, ships that fail to meet the Base Target (Tier 2) must offset their emissions exceeding the Base Target by purchasing, in addition to the Tier I amount, Surplus Units (SUs) (at market price) from ships using low-GHG fuels or by paying the cost of purchasing Remedial Units (RUs) (USD 380 per GHG tonne) into the IMO Net-Zero Fund. The cost of the aforementioned remedial units will remain valid only until 2030, and the price applicable from 2031 onward will be subject to revision through a separate review to be conducted by 1 January 2028. However, in accordance with the principle of no backsliding, it is anticipated that the price will be increased.

▶ Ships using Zero or Near-Zero GHG fuels and technologies can receive incentives to compensate for the capital expenditure put into new building construction and the price gap between alternative fuels and fossil fuels. The exact scope of beneficiaries eligible for incentives, as well as the detailed pricing, will be determined through the future development of separate technical guidelines or equivalent instruments.

▶ The CII reduction rate for the years 2027 to 2030 has been determined as follows:

▶ Considering that the fuel consumption occurring during port waiting time and idle time is mostly incidental and beyond the shipowners’ control and cannot be considered as transport work based on the ship’s movement, it has been agreed that the relevant fuel consumption occurring should be excluded from the Attained CII calculation and the CII reference line. Thus, further discussion on reviewing IMO DCS data, examining CII metric (defining the scope of fuel consumption excluding anchoring, port waiting, and berthing), recalculating the reference lines (amending Guidelines G2), and assessing the possibility of amending other IMO instruments will take place in Phase 2, which will be implemented beyond 2026.