Bunkerspot — 2025-04-23
Maritime and Ports
Organisations representing suppliers of ammonia, methanol, LNG, green hydrogen and wind propulsion have welcomed the ‘strong signals’ sent by the IMO’s global GHG pricing agreement, which they hope will help accelerate investment in both the production and uptake of new fuels and energy sources in shipping.
‘For the first time in history, global shipping has an emissions pricing scheme,’ Trevor Brown, Executive Director of the Ammonia Energy Association (AEA), emphasised. ‘The impact of this should not be undersold,’ he told Bunkerspot.
He argues that the framework, which was approved by the IMO’s MEPC 83 meeting on 11 April, will make a ‘business as usual’ approach more costly for shipping companies, thereby strengthening the business case for ammonia as a marine fuel.
He anticipates this will ‘diminish the effect of the “chicken-and-egg” quandary’ by which a lack of clear demand signals from shipping has so far dampened investment in green fuel production, which in turn has slowed down orders for vessels capable of using those fuels.
Two critical aspects of the IMO framework that will help increase demand, Brown added, are the ability for shipowners to pool compliance surpluses from vessels that overperform on the targets, and the potential of receiving financial rewards for the uptake of zero or net-zero (ZNZ) fuels. ‘The AEA is confident many will take the opportunity with both hands,’ he emphasised.
As a result, the AEA expects a growing number of fuel production projects to reach a final investment decision (FID). ‘Increasing the value proposition for marine ammonia fuel gives confidence to all value chain partners, making investment decisions easier.’
Gregory Dolan, Chief Executive Officer at the Methanol Institute, also believes that the agreement that was reached at MEPC 83 will give more certainty to potential producers and users of alternative fuels, describing it as ‘a catalyst for innovation and investment’.
While acknowledging that ‘there are questions over the strength of the measures’, he highlighted that the framework nonetheless provides ‘practical measures’ to support shipping’s decarbonisation.
Dolan expects that, by helping close the cost gap between fossil and renewable fuels, the GHG pricing mechanism will enhance the competitiveness of green methanol, with specific rewards for ZNZ fuels providing further encouragement for investment.
‘The direct impact on investment decisions in renewable fuels is highly nuanced and depends on several factors, with the IMO framework being an important step in the right direction,’ he told Bunkerspot.
Encouraging renewable production pathways
Dolan added that as the IMO’s GHG intensity targets, which are measured on a well-to-wake basis, become more stringent, ‘this will further encourage the move to greener energy production.’
He remarked that conventional ‘grey’ methanol can be blended with blue, bio- or e-methanol to achieve the required GHG intensity as the thresholds are gradually tightened. ‘Now the situation is about ensuring the fuel provided meets the carbon intensity measures required within the framework,’ Dolan explained.
SEA-LNG’s Chief Operating Officer, Steve Esau, also believes that the IMO’s Net-Zero framework has the potential to foster investment in greener production pathways, including bio- and e-LNG.
‘This regulation will actually provide very strong signals to the continued development of the bio-LNG bunkering market,’ he said in an interview with Bunkerspot. ‘I think it will be a significant catalyst for investment in those greener fuel supply chains.’
Under the tiered system adopted by IMO, fossil LNG would not face penalties until 2030, according to SEA-LNG. However, it would be subject to ‘Tier 1’ penalties of $100 per tonne of CO2e from 2030 to the mid-2030s, after which it would fall under the higher ‘Tier 2’ penalties of $380 per tonne of CO2e.
However, owners can avoid those penalties by using liquefied biomethane and e-methane as drop-in fuels, Esau pointed out.
He emphasised that the use of ‘green’ forms of all fuels, such as methanol, ammonia and LNG, will depend on how their cost compares to penalty fees. Much will also depend on the detailed guidelines that will set out how the reward mechanism will work in practice, he added.
‘We need to understand what, ultimately, the cost of compliance will be for the different fuel pathways, because that will determine where the investments actually go,’ he explained. ‘The crystal ball is incredibly cloudy at the moment.’
A level playing field
SEA-LNG welcomed the fact that the penalty mechanism included in the IMO’s framework does not favour any fuel in particular.
‘We're very happy that the IMO has stuck to its guns on goal-based technology neutral regulation,’ Esau said. ‘We think that’s very positive, and it provides us a level playing field for all the alternative fuel pathways to now compete.’
This ‘technology-neutral’ aspect of the agreement was also praised by Gavin Allwright, Secretary General of the International Windship Association (IWSA), who is pleased with the inclusion of wind propulsion in the equation for the GHG intensity of the energy used on board.
While he was disappointed by the level of ambition of the final compromise text, Allwright insisted that achieving a deal was ‘very, very important’ given the geopolitical context in which negotiations took place.
‘It’s saying to everybody in the industry that carbon pricing has hit and is staying,’ he said in an interview with Bunkerspot. ‘It’s only going to get larger, it’s only going to get tighter.’
‘Yes, it’s consequential. Yes, it’s an important agreement. Does it do enough? Absolutely not, especially when focusing on the delivery of a just and equitable transition,’ he added. ‘This is the starting gun, we need to rachet things up far quicker.’
‘A nudge, but not enough’
Allwright described the IMO GHG pricing mechanism as ‘another lever’ that will incentivise investment in technologies such as wind propulsion, adding to existing regulatory pressure from the EU’s Emissions Trading System (ETS) and FuelEU Maritime, but also to geopolitical issues which have resulted in longer voyages around the Cape of Good Hope and additional costs.
‘All of these aspects come together into a quite strong market signal to move,’ he highlighted. ‘But standing on its own, the IMO framework is a nudge, but it’s not enough.’
The Zero Emissions Ship Technology Association (ZESTAs), which represents stakeholders in zero-emission ship equipment, renewable energy and hydrogen production, stated that the agreement ‘will have some impact, but nothing stupendous.’
‘It shifts the dial a couple of notches, but not a lot,’ ZESTAs’ Founder and Secretary General, Madadh MacLaine, told Bunkerspot.
She highlighted that, if formally adopted by IMO member states in October as scheduled, the regulation would ‘send a message of hope’, signalling to first movers currently taking financial risks to reduce their fleet’s GHG emissions and energy consumption ‘that at some point there will be an agreement strong enough to support their business cases.’
‘At this point in time, you can’t write this into a business case,’ MacLaine illustrated. ‘You can’t put it into a spreadsheet yet. It gives a sense and a feeling for where things are going rather than a clear indication.’
‘For me, the most important thing will be to ensure that there is no backsliding,’ she said.