Regulatory Round-up – Q1 2024

Edmund Hughes, IBIA’s representative at IMO reports on developments

It is a great pleasure to find myself writing this as your representative to the IMO

2024 is going to be another important year in the regulation of emissions from international shipping and will result in ramifications, some of them significant, for the marine fuel supply chain.

Indeed, the year has already got off to a notable start. On the 1 January shipping was brought into the European Union’s Emission Trading Scheme (EU-ETS). This, as part of the EU’s “Fit for 55” package of measures, will be joined by the Fuel EU Maritime initiative from 1 January 2025. Both these regional regulatory instruments will impact international shipping and the fuels used by ships in the short term and will add to the international requirements such as the IMO’s Carbon Intensity Indicator (CII) in driving demand in this decade for alternative fuels such as biofuels and methanol.

However, it is the adoption by IMO last July of the 2023 Strategy for the reduction of GHG emissions from ships that was not only the most significant event last year concerning efforts to address GHG emissions from international shipping but is likely, in the mid- to long term, to have even greater significance.

For example, for all engaged in the bunker fuel supply chain the following paragraph from the 2023 Strategy is likely to have one of the most consequential effects over the coming decades:

“3.2The levels of ambition and indicative checkpoints should take into account the well-to-wake GHG emissions of marine fuels as addressed in the Guidelines on Life cycle GHG intensity of marine fuels (LCA guidelines) developed by the Organization¹with the overall objective of reducing GHG emissions within the boundaries of the energy system of international shipping and preventing a shift of emissions to other sectors.”

¹Resolution MEPC.376(80)

Future regulatory measures currently under discussion at IMO, and timetabled to be agreed by mid-decade, including a global “fuel standard regulating the phased reduction of the marine fuel’s GHG intensity” and a “maritime GHG emissions pricing mechanism”, are expected to see this requirement built into them with significant implications for the whole marine fuel supply chain. The “Well-to-Wake” principle is already included in the Fuel EU Maritime requirements due to come into effect from next year and experience from other sectors already implementing GHG intensity requirements for fuels across their whole supply chain clearly illustrates that this could have major ramifications for the bunkering of global shipping!

This is because the concept of “Well-to-Wake” (WtW) means that the declared GHG intensity of marine fuel when used on board the ship, in terms of grams of CO₂ equivalent per Megajoule of energy (gCO2eq/MJ), will need to account fully for the CO₂ equivalent emissions and the energy used in the production and supply of the marine fuel to the ship. So, in theory, the emissions from a bunker barge may need to be incorporated into the GHG intensity that is provided with the fuel bunkered to the ship! The bunker operator may need therefore, as an entity in the marine fuel supply chain, to not only monitor and calculate the gCO_2eq/MJ for each stem for the fuel supplied to the ship but also that this calculation be verified and certified by one of the bodies responsible for certifying “sustainability” of fuels that operate globally. There is even the possibility that bunker traders and indeed anyone engaged in the supply of bunkers and who has input into the final delivered product may need to be verified and certified by one of those bodies to assure the chain of custody.

We have seen already the beginnings of such requirements with the supply of biofuels and the adoption by the Marine Environment Protection Committee of IMO last July of MEPC.1/Circ.905 Interim Guidance on the use of Biofuels under Regulations 26, 27 and 28 of MARPOL Annex VI (DCS AND CII), that became applicable from 1 October 2023. In this guidance biofuels meeting the GHG reduction/sustainability criteria certified by an internationally recognised certification scheme e.g. International Sustainability and Carbon Certification (ISCC), Roundtable on Sustainable Biomaterials (RSB), etc.).

Indeed, IBIA is aware of a draft proposal that may go forward to IMO that identifies that reporting of low and zero carbon fuels from fuel producers or suppliers will eventually be carried out using an IMO mandated fuel certification scheme, as it is done currently in the international aviation sector under the ICAO’s CORSIA scheme.

The concern is that not only are regulatory measures being deliberated and, in my view, going to be agreed soon that will embody the WtW principle but that those considering the design of those measures do not consider current practices as an impediment to their adoption. For example, during a recent ad-hoc workshop on the Lifecycle Assessment (LCA) guidelines for marine fuels (MEPC.376(80)) held at IMO last December when IBIA, as represented by IBIA Board member Nigel Draffin, provided a description of the marine fuel supply chain in a presentation to the workshop and referred to the current operation of bunker barges as “the milk round” it was indicated by a delegate from an IMO Member State that the way ships are currently bunkered may have to change!

This explains why, in part, IBIA agreed to co-sponsor the ICS proposal for a simplified global GHG fuel standard (see WB article, page 27, Q4, 2023) that has been submitted to the intersessional meeting of the working group on reduction of GHG emissions from ships (ISWG-GHG 16) that will meet in the week preceding MEPC 81 in March. Both ICS and IBIA recognise that an IMO GHG fuel standard for 2030 which will help to create a global market for marine fuels with a reduced GHG intensity but that the design of needs to be kept as simple as possible if, as identified by the 2023 IMO GHG Strategy, governments wish to have a workable system in place within the next 18 months, that can be uniformly and consistently implemented and that keeps the administrative burden for bunker operators and suppliers to a minimum.

The joint ICS and IBIA submission is also another example of the current mantra being espoused concerning the need for greater collaboration between entities in the marine fuel supply chain and indicates that it is it not only true but a necessity. Other initiatives such as the Clean Energy Maritime (CEM) Hubs Initiative partnership between the International Association of Ports and Harbors (IAPH), the Clean Energy Ministerial (CEM) and the International Chamber of Shipping (ICS), intended to accelerate the production, transport, and use of low-carbon fuels that will be transported by shipping for the world, is an example of collaborative efforts needed to support the ‘net-zero’ goal “by or around” 2050 that IMO has agreed.

The next few months will see some key meetings take place at IMO. In addition to the ISWG-GHG 16 and MEPC 81 meetings in March there is also the PPR Sub-Committee in February where items of interest to the bunkering community include possible further regulation of wash water discharges from Exhaust Gas Cleaning Systems (EGCS) and guidance for control of Black Carbon emissions including discussion about whether for fuel oil there should be H/C ratio testing and reporting. I look forward to reporting on the outcomes of these meetings in the next edition.

For now, though may I wish a fair wind and good seas to all.

Edmund Hughes