IMO Multiplier Could Replace Cash Rewards for Green Fuels if Fund Fails: IBIA

A proposed multiplier for zero and near-zero greenhouse gas (GHG) fuels could offer the International Maritime Organization (IMO) a way to incentivise cleaner shipping fuels if negotiations fail to establish a central fund under the proposed Net-Zero Framework (NZF), according to the International Bunker Industry Association (IBIA).

Dr Edmund Hughes, IBIA’s representative at the IMO, said China’s proposal for a multiplier could potentially provide an alternative to direct financial rewards if it is designed to operate effectively within the framework.

Speaking to Ship & Bunker after the latest meeting of the IMO’s Intersessional Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 22), Hughes said the mechanism could reduce the need for revenues to finance monetary incentives for the uptake of zero and near-zero emission fuels.

IMO Fund Remains a Major NZF Dispute

The proposed IMO fund has remained one of the most contentious elements of the NZF negotiations.

The United States has been among the strongest opponents of an IMO-administered fund and reiterated at ISWG-GHG 22 that such a mechanism remains a red line for its delegation.

The dispute over the fund was also widely seen as one of the factors contributing to the failure to adopt the NZF during the IMO’s extraordinary session last October.

Hughes said the consequences of abandoning the fund would extend to the proposed financial rewards for ships using zero and near-zero GHG fuels.

Without provisions establishing a mechanism for raising revenues and a depositary capable of receiving those revenues, direct financial rewards would not be possible, he said.

China’s Multiplier Proposal Offers Alternative Incentive

China’s proposal would introduce a multiplier in circumstances where funding for monetary rewards is constrained. The mechanism would operate alongside the use of Surplus Units within the proposed framework.

Hughes said the proposal had attracted support from several IMO member states during the working group meeting.

He also suggested that expanding the scope and application of Surplus Units, combined with a multiplier, could create a non-fiscal incentive for the adoption of cleaner fuels.

Such an approach could potentially be linked with other mechanisms, including Japan’s proposal for direct voluntary contributions.

Hughes said Japan’s concept could also be integrated with other schemes to generate resources for a just and equitable transition, which is a core principle of the IMO’s 2023 GHG Strategy.

Industry Position on Financial Rewards Has Evolved

The possible use of a multiplier represents a change in emphasis from an earlier position taken by IBIA and the International Chamber of Shipping (ICS).

In a joint submission, the organisations had called for significant financial rewards for cleaner fuel use to be funded through the framework’s proposed fund.

Hughes said industry groups, including IBIA and ICS, had supported adoption of the NZF primarily because it would establish global regulation of shipping’s GHG emissions and reduce the risk of fragmented national and regional measures.

The European Union’s regulatory approach has been cited as an example of the regional measures that could proliferate if a global IMO framework is not established.

Member States Consider Changes to Key Provisions

Hughes described progress during ISWG-GHG 22 as limited, noting that it was the first meeting at which member states considered proposals to amend the draft NZF text circulated following MEPC 84 in May.

The proposals came from Brazil, Liberia, Tuvalu and Japan, as well as a joint submission from Australia, Canada, South Africa and the UK.

Despite continued disagreements, Hughes said several member states appeared to be reassessing their positions and potentially moderating their red lines on some of the framework’s major policy issues.

A less stringent trajectory for reducing Global Fuel Intensity and greater flexibility in the supply and use of Surplus Units were among the areas where broader support appeared to be emerging.

However, member states remained divided over payments by ships for remedial units when they fail to meet requirements, as well as over whether an IMO GHG fund should be established.

Alternative Revenue Facility Gains Attention

Some new proposals received support during the meeting, including the concept of creating a facility to manage and distribute revenues through existing institutions rather than directly through the IMO.

The proposal received support from the United States, among others.

Hughes said the chair of the working group had noted that the name of the mechanism was less important than its nature, purpose and functions. These elements, including the way in which the IMO would maintain oversight, remain subject to further negotiations.

The development could provide a potential pathway around the dispute over an IMO-administered fund while retaining some form of international revenue management under the NZF.

NZF Returns to MEPC in November

ISWG-GHG 22 concluded with the working group’s chair indicating a willingness to present draft text to the Marine Environment Protection Committee (MEPC) in November.

A University College London (UCL) readout of the meeting found that 38 states had spoken in favour of a central fund, while 17 opposed it.

The issue will receive further attention at the IBIA Annual Convention in New York from November 10 to 12. Hughes will moderate the regulatory and policy panel at the event.

Hughes previously headed the IMO’s air pollution and energy efficiency work between 2013 and 2020 and has represented IBIA at the organisation since 2023.

The NZF is scheduled to return to MEPC 85 from November 30 to December 3, followed by a resumed extraordinary session on December 4 to consider its adoption.

What Is the Proposed IMO Multiplier?

The proposed multiplier is intended to provide an alternative incentive mechanism for zero and near-zero GHG fuels when direct monetary rewards cannot be adequately financed.

Rather than relying entirely on cash payments from an IMO-administered fund, the approach could increase the value or impact of qualifying fuel-related units within the framework.

Its final design, relationship with Surplus Units and interaction with other financial mechanisms remain subject to negotiations among IMO member states.

The outcome of those discussions will determine whether the multiplier becomes part of the final NZF and whether it can address the continuing disagreement over how clean-fuel incentives should be financed.