GCMD unpacks cost and compliance tool for IMO’s new climate framework

The Global Centre for Maritime Decarbonization (GCMD) has unpacked a cost and compliance calculator aimed at exploring how the International Maritime Organization’s GHG Global Fuel Intensify (GFI)-linked pricing system could impact operational costs in shipping.

As noted by the GCMD, the tool could prove ‘useful’ for industry stakeholders who are assessing fuel options, planning newbuilds, or seeking to understand the operational implications of the IMO Net-Zero Framework.

During the 83rd meeting of the Marine Environment Protection Committee (MEPC), the IMO Net-Zero Framework, which is hailed as the first in the world to combine mandatory emissions limits and greenhouse gas pricing across an entire industry sector, was finally given the green light.

The approved measures, which include a new fuel standard for vessels and a global pricing mechanism for emissions, are due to be formally adopted in October this year and enter force in 2027.

Compliance with the GFI entails two targets: the Base Target and the Direct Compliance Target. Ships that emit below the latter target are not planned to be penalized. Instead, they can earn surplus units, according to the IMO, which can be passed on to other vessels that need them or ‘banked’ for future use.

As informed, ships that emit above the Direct Compliance Target but below the Base Target will need to pay a penalty of $100/ton CO2eq, which scales with non-compliant vessels between these two thresholds. The penalties will reportedly be paid into a net zero fund, set up and administered by the International Maritime Organization.

Regarding emissions beyond the Base Target, as per the IMO, this will incur higher penalties amounting to more than $380/ton CO2eq, with the fees going into the same fund, but with the option to be balanced with banked or traded surplus units.

It is understood that vessels that use zero or near-zero (ZNZ) fuels, with a GFI below 19g CO2eq/MJ before 2035 and 14g CO2eq/MJ after 2025, are eligible for financial rewards.

The IMO’s recently adopted regulation has elicited mixed reactions. While some stakeholders have described it as a “historic” step toward decarbonizing the shipping industry, others have expressed criticism, stating the framework ‘lacked ambition and fairness.’

Specifically, ministers from the Republic of Fiji, the Republic of the Marshall Islands, the Republic of Seychelles, Solomon Islands, Tuvalu, and the Republic of Vanuatu, as well as a representative of the Republic of Palau abstained in the final negotiations, refusing to support an agreement that would “do too little, too late to cut shipping emissions and protect their islands.”

What is more, the Clean Shipping Coalition, an international association of civil society environmental protection organizations, voiced concerns regarding IMO member states’ missing the UN body’s own 2030, 2040, and 2050 climate goals, accusing them of “failing the people and regions most vulnerable to climate change.”

Organizations like the Global Maritime Forum have also argued that the current emission goals are ‘inadequate’ and that they need to be ‘enhanced’ to speed up the transition to next-generation fuels and encourage the necessary production investments.

Without immediate investment in low-emission fuels, the GMF concluded that the maritime transportation industry faces the risk of missing its 2030 mark for clean fuel uptake and its overarching net zero ambition for by or around 2050.