Guide to the IMO Mid-Term Measures

Scope: Legislating fuel emissions requires decisions about the “boundaries” of emissions that can be attributed to fuels. The IMO strategy mentions that emission reductions should take into account well-to-wake (WTW) GHG emissions as addressed in the LCA guidelines, meaning the scope would include the full lifecycle emissions from feedstock to fuel production processes and their use onboard. Some proposals for the MTMs, however, focus on a tank-to-wake (TTW) approach, measuring only the emissions onboard the ship. Others call for a “TTW with sustainability criteria” method that begins with TTW values but moves to WTW over time. The differences between these approaches are significant.

For example, the emissions from ammonia produced from natural gas occur upstream and would not be counted in a TTW approach. Depending on how the targets are set, the choice of emissions scope could significantly impact the cost of compliance for fossil fuels.

Also known as a Technical Standard or GHG Fuel Standard, a GFS would limit the emissions per unit of energy, expressed as gCOeq/MJ. Progressively tightening intensity targets would push companies to phase out fuels with higher climate impacts by exposing a growing share of emissions to a penalty.

The effectiveness of the GFS depends on how much companies pay for non-compliance. The price of remedial units is critical because it will determine whether it is more favorable to invest in sustainable marine fuels or continue business as usual and simply pay to pollute.

Some proposals suggest introducing flexible compliance mechanisms, allowing ships to exceed or fall short of GHG fuel intensity targets while remaining compliant through banking and trading “surplus units”. Ships that generate surplus units by achieving intensity below the target can earn revenue through trading which can lower the high costs of sustainable marine fuels. For those unable to access these fuels, securing surplus units provides an alternative compliance option to remedial units. For more on flexibility, see our second newsletter which provides an in-depth analysis of the mechanisms.

Member States are evaluating proposals for a direct cost on each unit of GHG (that is, per tonne of CO2eq) emitted onboard. This has been called a “contribution” because it would generate revenue that could be mobilized to incentivize sustainable marine fuels and technologies, offset the potential economic damage from higher shipping costs, be recycled back into communities and countries affected by the climate crisis, or some combination of these. Even modest GHG pricing would mobilize billions of dollars per year — particularly early on, when the industry will continue to rely on fossil fuels.