Regulatory round-up

Regulatory round-up

Edmund Hughes reports on developments at the IMO

It is a great pleasure to find myself writing this as your representative to the IMO .  I will not only seek to relay constructively the position of IBIA to the membership of the Organisation but also to ensure that the voice of the bunkering industry is heard and acknowledged across the wider maritime sector in the coming energy transition for shipping. 

2023 IMO GHG Strategy

Much has been said and written already about the adoption by IMO last July of its revised 2023 Strategy for the Reduction of GHG emissions from ships.  This strategy is a momentous moment for international shipping as it sets the agenda for the sector for the next couple of decades. Politically it is very significant as, unlike the initial strategy adopted in 2018, this instrument was adopted without reservation.  That means 175 Member States all agreed that this is the policy template that international shipping should follow to achieve net-zero GHG emissions from international shipping by or around 2050. 

Whilst this is not a ‘mandatory”’ instrument, which is the way  international shipping is regulated, it would be a significant misjudgement to think that this will not have lasting impact. That impact, will be seen most quickly in the adoption of “mid-term measures” by 2025 which will be mandatory and consist probably of “a goal-based marine fuel standard regulating the phased reduction of the marine fuel’s GHG intensity” (a technical element) and possibly “an economic element, on the basis of a maritime GHG emissions pricing mechanism”.

In addition to the “net-zero” mid-century goal, the 2023 Strategy identifies some other clear goals that will be the focus for this decade including that by 2030 – at least 5%, striving for 10%, of fuels, technologies, energy sources to be ‘zero or near-zero GHG emission’ and carbon intensity of fuels to decline over this decade. I have already identified that a global standard for GHG fuel intensity is likely to enter into force by 2028.  In addition, to respond to the call for greater operational energy intensity the Carbon Intensity Indicator (CII) requirement is likely to be strengthened.

As I see it there are three main elements to the decarbonisation of shipping: the ship (including the seafarer), the port and the fuel/energy. If you draw a Venn diagram of these elements then bunkering is right at the centre.  The implications are therefore clear in that going forward use of alternative fuels is expected to grow: biofuels, methanol, LNG then (after 2030?) hydrogen and ammonia.  Most significantly is that as part of the 2023 Strategy upstream emissions from production and supply of fuels (“pathways”) are to be accounted for in future regulations and those pathways will need to be verified to demonstrate compliance with regulations. Indeed, to reflect that MEPC in July adopted resolution MEPC.376(80), Guidelines on Life Cycle GHG Intensity of Marine Fuels (LCA).

What are the implications for the bunker operators? 

In addition to the EU-ETS (2024) and FuelEU Maritime (2025) requirements a likely global GHG fuel standard and a possible global “GHG emissions pricing mechanism” will increase the value on accurate and transparent fuel data as shipowners/fuel buyers and authorities increase their scrutiny of fuel data bringing additional risks.  The consequence will be greater adoption of Mass Flow Metering with digitalisation and the use of AI offering potential solutions for bunker operators.

Biofuels and CII

Biofuels have an important role to play in the decarbonization of international shipping, certainly in the short to medium to term.

Under IMO regulations for the CII the Guidelines (G1) identify that CO2 emission conversion factor (Cf) is to be provided by fuel oil supplier, supported by documentary evidence.  However, due to the lack of guidance for biofuels, and following concerns expressed that some flag States were applying a carbon factor of zero to ships in their fleet that were using biofuels that could lead to flag shopping, on 1 October 2023, Interim Guidance of Marine Biofuels came into force. This guidance covers biofuels that have been certified by an international certification scheme, and that provide a well-to-wake GHG emissions reduction of at least 65% compared to the well-to-wake emissions of fossil MGO of 94 gCO2e/MJ (i.e. achieving an emissions intensity not exceeding 33 gCO2e/MJ) according to that certification, may be assigned a carbon factor (Cf) equal to the value of the well-to-wake GHG emissions of the fuel according to the certificate multiplied by its lower calorific value (LCV).

One of the key reasons why sustainable biofuels are needed is because for many ships trading the oceans today, in addition to taking up as much of the low hanging improvements in energy efficiency as possible, the only solution to improving the Carbon Intensity Indicator (CII) for the ship is to adopt biofuels.  For ships already rated E or even D they are going to be under increasing pressure, if not by enforcement authorities, then by charterers and other external stakeholders to improve their operational carbon intensity.

As highlighted above, in response to the 2023 Strategy the CII is likely to be strengthened and a review is ongoing for the CII requirements. IMO has invited international organisations to collect data and submit information and proposals during the current data gathering stage. For those of you who think this regulation is proving a little challenging to implement the review may bring some respite for certain ship types but at the same time it is likely to see the thresholds for achieving the ratings strengthened to bring the regulations in line with the 2023 Strategy “levels of ambition” for 2030.

The uptake of biofuels has also brought unintended consequences for bunker operators in relation to the carriage of biofuels. Bunker barges carrying up to B24 can remain certified under MARPOL Annex I. However, for B25 and higher blends then the bunker barge needs to be certified under MARPOL Annex II as the biofuel is considered a “noxious substance”.  Ironically, the IMO itself in recognising the growing use of biofuel blends issued guidance under MARPOL Annex VI that blends up to B30 will be regarded in the same way as regular oil-based fuels. Use of B30 to B100 is also permitted for “engines certified in accordance with regulation 13 of MARPOL Annex VI which can operate on a biofuel or a biofuel blend without changes to its NOX critical components or settings/operating values outside those as given by that engine’s approved Technical File.”

As with the interpretation of carbon factor for biofuels, without IMO guidance we are likely to see varying interpretations of requirements occurring especially when we are dealing with matters under the sole jurisdiction of a national authority and the activity is taking place in territorial waters/inland waterways/port limits.  The categorisation of biofuels have been prepared for the carriage of biofuels as cargo for transport internationally. There may be a case for an understanding to be agreed for the bunker industry for supply to ships for use as fuel so as not to be put in place an impediment to the uptake of biofuels by ships seeking to reduce their carbon footprint…those ships cannot be supplied with biofuels if bunker barges cannot carry them!

Final Word

Finally, it would be remiss of me to fail to acknowledge the excellent work of my predecessor, Unni Einemo, who represented you so well at the IMO especially leading up to and following the introduction of IMO 2020. I very much hope to be able to continue that good work going forward. 

A fair wind and good seas to all.

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