MEPC 83 Webinar: Your guide to the mid-term GHG measures

B30: 30% biofuel

BND: Bunker Delivery Note

CII: Carbon Intensity Indicator

DCS: Data Collection System

EEXI: Energy Efficiency Existing Ship Index

ESD: Energy Saving Device

FAME: Fatty Acid Methyl Ester

FLL: Fuel Lifecycle Label

GESAMP: Group of Experts on the Scientific Aspects of Marine Environmental Protection

GFI: Greenhouse Gas Fuel Intensity

HFO: Heavy Fuel Oil

IMO: International Maritime Organisation

LCA: Life Cycle Assessment

MARPOL: International Convention for the Prevention of Pollution from Ships

MEPC: Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO)

(O)CCS: (Onboard) Carbon Capture and Storage

RO: Recognised Organisation

RU: Remedial Unit

SEEMP: Ship Energy Efficiency Management Plan

SFCS: Sustainable Fuels Certification Scheme

Tier: Levels of non-compliance

UCOME: Used Cooking Oil Methyl Ester

VLSFO: Very Low Sulphur Fuel Oil

WTT: Well To Tank

WTW: Well to Wake

ZNZ: zero or near-zero fuel

Will the GFI scheme replace CII?

There is no indication that CII will be phased out at this stage. What happens to CII after 2030 is unknown.

Can Tier 1 ships remediate Tier 2 ships?

No, a ship which experiences a Tier 1 deficit (attained GFI greater than the direct compliance target but less than the Base target) will not receive any Surplus Units to transfer to a ship with a Tier 2 deficit. Only a ship that has a GFI lower than the direct compliance target will receive Surplus Units which can be transferred to a ship with Tier 2 deficit.

What is the difference between remediating Tier 1 and Tier 2 compliance?

Surplus units can be transferred to any other ship (which has a Tier 2 deficit to balance) there is no limitation on transferring Surplus Units only to ships owned by the same company.

Is this the first time that IMO collects money by penalising vessels? What will the IMO do with the money?

The revenue generated by the Mid-term GHG measure will go into an IMO Net-Zero Fund, managed by IMO. The Fund will distribute revenue to, amongst other things, rewards for the use of zero or near zero emissions fuels and technologies, supporting SIDS and LDCs through R&D into zero, and near Zero GHG emissions fuels and technologies and funding infrastructure in the same states.

Who is responsible for achieving compliance? Does this vary with existing regional regulation E.g. FuelEU / EU ETS

The draft regulations set out that the 'ship' must act in response to the regulations. It is understood that the responsibility of compliance will be put on the owner of the ship or an entity that has assumed responsibility for operation of the ship from the owner which has been assigned as the ISM Company. In Fuel EU maritime the ISM Company is responsible for compliance. Ie EU MRV/ ETS it is the owner unless the ISM company is delegated the function.

Can Tier 1 deficits be remedied with alternative compliances?

Tier 1 deficits must be balanced by buying remedial units at the Tier 1 rate of $100/ tonne CO2 equivalent. This guarantees revenue generation into the IMO Net-Zero Fund.

Can banked surplus units from ship A be used to remedy deficit of ship B?

No, once Surplus Units have been banked, they can only be used for balancing later Tier 2 deficit of the same ship.

Do ships need to be in a compliance pool (similar to Fuel EU) to be able to share surplus units for deficit ships?

No, there is no need for a ship to be in a formal 'pool'. Surplus Units can be transferred to any other ship providing it has a Tier 2 deficit to be balanced.

Can surplus units from one ship be transferred to only one ship or to several ships?

Surplus Units can only be used to:

• transfer to another ship
• banking for later use
• voluntarily cancelling

Where a ship accrues multiple Surplus Units, each one can be used for a different purpose. For example, if a ship accrues 10 Surplus Units, these could be transferred to up to10 differing ships, providing they have Tier 2 deficits needing balancing.

Can banked units offset compliance deficit of the same ship or transferred to other ships?

Banked Surplus Units can only be used to balance later Tier 2 deficit of the same ship that banked the unit(s)

Ships have a useful service life of 25-30 years. For new build vessels coming into service from 2025, which fuel pathway should the owner choose for 2050 vision taking IMO carbon footprints and ship demolition into account?

The emissions associated with the construction and decommissioning of a ship are not in scope. Only the emissions associated with fuel production and use are in scope. There is no 'one size fits all' answer to which fuels a ship should use. Each ship should have its existing GFI assessed and then forecasting of energy savings that can be implemented (to reduce overall energy use which drives the magnitude of any remedial units which must be purchased) as well as the GFI of individual fuels that are or may become available on the routes the ship will serve to inform decision making on fuel selection. LR's Advisory services can assist in this process. 

Can you bank surplus units to then offset against a deficit on another ship later?

No. Once a Surplus unit is banked it can only be used to balance Tier 2 deficit of the ship that banked the unit.

Do we know how the IMO mid-term measures will work within the EU, where the EU ETS and FuelEU Regulations are already in place?

The EU's ETS and Fuel EU Maritime are separate regulatory frameworks.

Once the IMO regulations enter into force, a ship calling at ports in scope of the EU's regulations will need to comply with both EU and IMO requirements.

Can surplus credits (either banked by the company or purchased via a private agreement from another company) only be used to meet Tier 2 deficit? Or can they be used for Tier 1 or 2 deficit?

No, Surplus Units can only be used to balance Tier 2 deficits.

While a vessel is in a position of surplus compliance, should its operator disable its energy saving devices, to maximise tradeable/bankable/pooled surplus units?

Every scenario will be unique to each ship and there is no 'one size fits all' answer to this question. If a ship is exclusively using energy sources that have individual GFIs below the direct compliance target, increasing energy use may increase the number of surplus units for which the ship is eligible.

However, other regulations such as the CII will need to be considered which measures overall carbon efficiency. Using more energy than needed may negatively impact CII. If a ship uses a mixture of fuels, some of which have a GFI greater than the direct compliance target, turning off energy efficiency may put the overall ship attained GFI over the direct compliance target.

What is the benefit of banking surplus units if they only last 2 years, as it will take longer for a vessel to cross the tier 1 and tier 2 boundaries?

This is currently unclear. In the scenarios we have assessed we have not yet observed a scenario where a banked Surplus Unit will still be valid at the point the ship will experience a Tier 2 deficit that the Surplus Units banked can be used to balance.

There are however scenarios where a banked surplus unit can be used. For example, a ship using a well-performing biofuel followed immediately by a year using a fossil fuel where a Tier 2 deficit is experienced would mean the surplus units banked from the biofuel could be used to balance the Tier 2 deficit from the fossil fuel.

How are WtT defaults set? What’s the pathway for updating LCA defaults, establishing new defaults for specific regions, etc? Will defaults be automatically reviewed at regular intervals?

IMO Member States will submit proposed default emissions factors for fuel production pathways to IMO, which will be assessed by GESAMP. A default WtT value will then be included in the IMO's LCA Guidelines. There is not yet any indication how frequently these will be reviewed.

If a ship is in Tier 1 deficit but not Tier 2, is it supposed to pay $100/tonne CO₂ equivalent; and if the ship is in Tier 1 and Tier 2 deficits it may pay for $380/tonne CO₂?

Tier 1 deficits will always require buying remedial units at a Tier 1 rate of $100/tonne CO₂eq. Tier 2 deficits must be balanced separated which, if through remedial units, is priced at $380 tonne CO₂eq. When a ship is in Tier 2 deficit there will also be a Tier 2 deficit, and both must be balanced separately so both a rate of $100/ tonne CO₂eq and $380/ tonne CO₂eq will need to be paid (if using remedial units to balance both for the corresponding amounts of Tier 1 and Tier 2 deficits.

Can deficits be offset through surpluses within the same company fleet? How will this be recorded?

Tier 2 deficits can be balanced by obtaining a Surplus Unit from another ship and this will be recorded in a central IMO GFI Register.

Why is it necessary to set up “double award” both through emission trade and ZNZ financial award?

The draft regulations have not been set up with 'double awards' in mind. There are two motives for the differing parts of the regulations. The ability for Surplus Units to be 'traded' goes part of the way toward reducing the price gap between compliance and non-compliance whereas the ZNZ rewards are intended to incentivise first movers and create a demand for ZNZ fuels and technologies.

If ship management companies must run exercises for EU ETS, FuelEU, IMO DCS, and now for the GFI, aren't there any synergies? example between IMO DCS and GFI?

The continued review of the IMO's short term measures (CII and EEXI) has within its work plan the need to consider synergies with the mid-term measures (GFI). The EU's regulatory framework is separate from the IMO so the two will exist in parallel. However, the EC will review the situation with regards to Fuel EU Maritime as per that regulation. What the review will lead to is unknown at this point.

What happens if you don't comply, particularly with the US saying it does not apply there?

Any ship that does not hold a valid Statement of Compliance required by these draft regulations calling at a port of a signatory to the regulations will be liable to detention.

In LR’s modelling, will RU tier 1 and tier 2 of 100 -380$/tCO2 be kept after 2030?

Yes.

How is shore power connection WTW going to be calculated? Are ports required to provide extra details on the power production supplied?

Whilst this detail is yet to come in supporting guidance, it is understood that Member States would need to submit emissions factors for the power supplied to account for the method the energy was produced (coal, nuclear, wind etc). It is likely that differing emissions factors would exist for shore power in differing regions.

 Are ZNZ rewards based in yearly energy consumption?

The whole draft regulatory framework considers annual data reports so yes ZNZ rewards would be for annual consumption of fuels eligible for reward.

 How do I calculate the WTT parts?

These will be calculated using emissions factors in the IMO's LCA Guidelines. The guidelines require significant development to include these after receiving proposed WtT factors for differing fuels produced in differing regions of the globe.

How do the deficit/Remedial Unit calculation work? (i.e. how to go from GFI to quantity of tonnes beyond threshold)

The formula for deriving a ship's compliance balance is:

(Direct compliance target annual GFI – Attained annual GFI) × Energy total.

Whilst the regulations do not specify this, the direct compliance target annual GFI and the attained annual GFI are assumed to be unit of gCO2eq/MJ. Therefore, a multiplier of 10^-6 would need to be applied to convert from gCO2eq to tonnes of CO2eq. As the compliance balance is said to be in units of tonne CO2eq. Depending on the nature of a negative balance both tier 1 and tier 2 deficits have their own calculations in the draft regulations.

What is the biofuel blend rate for case 3. on slide 6

B30, ramping up to B90 by 2040

Can you provide a synonym for Tier?

Tier is the phrase used in the draft regulations. In this context it means differing levels of non-compliance.

What is RO?

RO refers to a Recognised Organisation authorised to conduct statutory survey and verification on behalf of a flag Administrations

What is B30 in brief?

B30 refers to a blend of biofuel and fossil fuel in which 30% is biofuel.

Could you please expand on / give examples for non-mechanical propulsion / propulsors? Would aux. engines on a sail ship be considered?

As the draft regulations have an exception for ships not propelled by mechanical means, if a sailing ship has no mechanical propulsion i.e. can only be propelled by sail, then any auxiliary engine would not be in scope of the regulations.

 Will be data collected from 01 Jan 2027?

Data collection will start from 1 January 2028 and that year's data will be assessed in 2029.

What is the maximum time banking of units can be kept?

The draft regulations state that surplus units are valid in the year they are issued and a further 2 years so in practice they will be valid from July in year Y (year of issue), July in year Y+1 and July in year Y+2. July is the relevant month as a ship must decide what it wants to use its surplus units for in July and in further years July is the month the ship must decide how to balance any compliance deficit.

What would the slide 6 TCO look like for a "green fuel", for example green Ammonia?

LR can run similar TCO calculations for different fuels. The TCO will depend on the fuel price, vessel efficiency and the amount of "green" fuel consumed to reduce deficits.

Is it possible for a vessel with banked surplus, but falls into tier 1 deficit in the 3rd year, will not be able to use its banked surplus in as it needs to buy tier 1 deficit at US$ 100/t?

Correct, at this stage we are unclear if a banked surplus unit can be used in this way. See also answer to row 20

 LR Advisory Case Study: 91.60 gCO2e/MJ for HFO corresponds to FuelEU default value, and not the IMO initial default values? From the Draft 2024 LCA Guidelines we get a default of 92.78 gCO2e/MJ for HFO, and as high as 95.48 gCO2e/MJ for VLSFO?

Whilst it is possible to calculate a WtW value for HFO and VLSFO in the range cited in the question, the IMO's LCA Guidelines continue to be developed, and no agreed figure is included in the TtW column for either HFO or VLSFO in appendix 2 to the guidelines. Therefore, we continue to use FuelEU maritime figures in our modelling pending finalisation of IMO agreed WtW figures.

Can Tier 1 surplus be sold to Tier 2 deficit?

There is no Tier 1 surplus. Surplus Units are generated when a ship has an attained GFI less than the direct compliance target this is not specific to a tier.

Are units worth a fixed value regardless of tier? If they are the same, is the banking and spending done on a gram-by-gram basis, e.g. it was 30 g below last year, and 5 g above this year, so I need to spend 5 g, leaving me with 25 g to spend elsewhere?

Remedial Units have a set price of $100/tonne CO2eq for Tier 1 remedial units and $380/tonne CO2eq. Surplus Units have no set value. Surplus units will most likely be traded on an open market in which their upper value will equal the Tier 2 remedial unit value ($380/tonne CO2eq) as pricing them above this would make buying a remedial unit more cost effective.

Alternatively, if there is widely available compliant fuel in a given year, the price of buying that fuel will create a baseline value of a surplus unit, as a surplus unit priced above the cost of a compliant fuel would make the compliant fuel more cost effective than purchasing surplus units.

 What specific GHG reduction targets are set for hybrid-electrical propulsion and what are the GHG emissions associated with onshore power supply (OPS) for use in port but also for charging batteries to later use at sea?

The GFI reduction targets are not applicable to a specific fuel, they are universal for a ship's attained GFI to be measured against. Regarding OPS see answer in row 31

 In calculating TtW, methane slip rate is given in LCA 2024, however new design on dual fuel engine introduces iCER (exhaust gas circulation) to reduce methane slip rate. Is there any regulation on how to use the superior emission data and how can this emission data can be verified, and by which authority?

This area needs additional detail in supporting guidelines, which are not yet developed. The assumption at this point is that default emissions factors will be available and set conservatively. Actual emissions factors could also be used where a fuel production and consumption pathway is superior to a default factor, and this would need to be certified by an IMO recognised fuel certification scheme. Those schemes will be identified and considered in the future.

Could you please share an example of calculation WtW for LNG carriers with XDF main engine?

Energy Transition | LR

 Are there case studies for ships using LNG as fuel

This depends on the amount of energy used by the ship and the default emissions factor that is agreed by IMO for LSFO which is still pending. See also answers to Row 56 and 57

Please specify the data collection and verification mechanisms, including the role of RUs/SUs if a "Tier 1" deficit occurs i.e., compliance falls between the Base and Direct Compliance levels, or “Tier II” performance exceeds the base target, can any measures other than pooling and compensating be used?

Ships will be required to collect fuel data in accordance with the procedure in their approved SEEMP. The verification of the collected data will occur in the year after data collection by the Administration or its RO. Tier 1 deficit can only be balanced by the purchase of Tier 1 remedial units ($100/tonne CO2eq) and Tier 2 deficit can be balanced by either Tier 2 remedial units ($380/tonne CO2eq), use of previously banked surplus units or obtaining surplus units from another ship.

MEPC 83 agreed to increase the accessibility of DCS data, while strengthening data anonymisation. Which DCS data will be made transparent and which data will be anonymised? Please clarify the financial responsibilities of the ISM operator/owner and the charter party under the IMO pricing and reward mechanism. How will the system function in practice, and how can all parties avoid unexpected financial losses?

MEPC approved amendments to MARPOL Annex VI, which will allow public user accounts access to the DCS database. However, this will not include the IMO number or name of the ship so it will not be easy to identify which ship is which. The level of publicly available data will include, among other things, the DWT and GT of the ship, the miles travelled in the reporting period, the mass of fuel used and CII rating.

The regulations apply to ships, but it is implied (and further detail will come in guidance) that the owner or a separate entity will be responsible. The arrangements in this case between owner and charterer are not covered in the regulations and will be determined by the charter party agreement.

 Is data submission for CII/ EEXI /DCS systems continue with GFI reporting?

The regulations bringing the draft new Chapter 5 to MARPOL Annex VI on the mid-term measures (GFI) are separate to those in chapter 4 of that Annex (DCS and CII, EEXI/ EEDI) so a ship will be required to collect and report information related to GFI, DCS and CII.

How are the +6,727 SUs in are calculated out in slide 6?

Based on the compliance balance generated by burning biofuels. Cumulatively the vessel will generate 6,727 tCOeq of surplus over the timeline

 What is the difference between Base and Direct Compliance?

There are two targets: Base and Direct Compliance. Direct Compliance is a more stringent target, intended to align with the 'striving for' GHG reduction targets in the IMO GHG Strategy. A ship meeting this target will not face penalty. The Base targets are aligned with the 'base' targets in the strategy which, if not met, lead to a penalty.

Is shore power or wind-assisted propulsion included in any way in the GFI standard?

There is further guidance to come from IMO. However, the working assumption is that energy from WAPS will be included in the attained GFI calculation where it generates 0 emissions for the energy it uses and brings the overall GFI of the ship down.

What are the two WtT defaults listed on page 12 of your Summary note. WtT of 17.4 and then another of 27.95 and 23.78. Which number do we use to assess our impacts?

Energy Transition | LR

Was there any simulation for different fuel pathways with incremental bio/e drop in fuel % to meet IMO Dir compliance?

LR can help to run similar TCO calculations for different fuels.

What are the financial rewards for using ZNZ?

The rewards for ZNZ use are not yet known, including how the reward is calculated and what rate the reward will be.

The Lloyd's Register Briefing Note on MEPC83 says there are three WtT LNG proposed from 17.4 to 27.95 gCO2e/MJ. There is a big difference - what is likely to be applied as a default value?

The LR Summary report figures reflect submissions for default values - for detail see the individual MEPC proposals). The GESAMP will appraise and recommend back to IMO the default value to be used in the LCA Guidelines.

How did you predict the future biofuel price until 2040?

We predict biofuel price based on LR's fuel production cost models and demand-side pricing models

How do you obtain the emission savings from ESD? How is this measured or calculated?

This is estimated based on LR's extensive database and experience of ESD projects, leveraging real-world fuel saving data from ESDs

ZNZ fuel below 19 gCOeq/MJ and biofuel under FEUM typically has a WtW of 16.4 gCO2eq/Mj. Would biofuel be eligible for such additional reward?

ZNZ reward criteria is not yet established. It’s assumed that if a fuel was certified as sustainable and had a WtW GFI below the threshold it would be eligible for reward.

 

 

 

 

 

 

 

 

 

How will Fuel EU and GFI work together?

There is no indication at this point that the EU will relax or revoke its regulatory framework because of the draft Net-Zero Framework IMO has developed. For now, at least, the two regulatory frameworks will co-exist and ships in scope of both will need to comply with both.

For cruise ships sailing in EU waters will this come on top of the ETS? Also is GFi applicable for ships with diesel electric propulsions?

The IMO's draft regulations have application to all ships of 5,000GT or above. If a ship with diesel electric propulsion is of 5,000GT or above it will be in scope of the IMO regulations.

Is this a global Fuel EU system?

The Fuel EU maritime and the draft GFI framework developed by IMO are similar in architecture but with subtle differences such as reduction rates and methods for calculating GFI of individual fuels.

Can we use Diesel Electric to avoid this regulation?

A ship will be required to calculate a GFI for its annual attained GFI. The regulations do not facilitate one fuel or technology being 'compliant'. A ship using diesel electric propulsion, like any other ship will need to assess its WtW GFI for the fuel it uses.

Can the Certification Scheme be a book and claim, or are physical flows required?

At this stage we do not have the detail in the supporting guidelines to understand how the certification schemes will operate and if a 'book and claim' system will be applicable or not.

Could you please explain the process of adoption?

The draft regulations will be presented to MEPC at its second extraordinary session in October 2025 for adoption. This will be a decision of the MARPOL Annex VI parties (the countries that are signatory to MARPOL Annex VI) where there are 109 MARPOL Annex VI parties and at least a 2/3 majority will need to agree to the regulations at that stage for them to be adopted. Once adopted the regulations are set in stone and follow an entry into force procedure which ends 16 months after adoption.

How is carbon negative biofuel production, like Bioenergy + CCS technology, viewed in this analysis? Can inland Carbon capture be used in the calculation by the vessel operators?

Detail is yet to come for CCS and biofuels and how they will be treated and the resultant GFI of those energy sources.

Will Fuel pathways need to be certified one by one, for example a green ammonia project?

Yes, the current assumption is that fuel production needs to be certified. More detail will come as the supporting guidelines are developed.

First generation biofuels seem to be allowed. Will there be regulations to forbid these and only allow second gen biofuels?

Supporting guidelines will be expected to clarify sustainability criteria for biofuels which will dictate how they are treated under this system.

What type of biofuel are you considering, FAME food and crops, UCOME or advanced FAME?

UCOME was used for the example

Is it possible to use food and crops biofuels for IMO compliances?

The IMO is refining its LCA Guidelines to consider food security and indirect land use change amongst other sustainability criteria. This will affect how differing feedstocks are treated under these draft regulations

How is biofuel availability modelled?

LR can help to run similar TCO calculations for different fuels.

Has LR estimated the value of reward for ZNF fuels?

LR can run estimations for ZNZ rewards based on a range of cost values.

LNG seems to be less positioned in relation to this new regulation compared to FuelEU – is this correct?

That is correct, however the fully loaded cost of LNG (fuel cost + penalties) will still be competitive over other fuels due to the high energy density and competitive price point.

Are engines available now to burn 90%B100?

Theoretically, yes. A marine 2S engine can operate on B90 but would require extensive testing and engagement with the engine maker before doing so

Do you see an issue with the availability of the biofuel, especially considering development of synthetic fuels and competition from other sectors e.g. haulage etc.

Yes, we do expect challenges around biofuel availability due to the structure of the biofuel market. It is important to consider other fuel options when evaluating vessel GFI compliance

Would B30 classify as ZNZ fuel? Its B100 component of the blend could classify. Would B30 then be reported as two separate fuels (i.e. 1) a B100 component and 2) a fossil component) under the ZNZ clause?

Yes, that is correct.

For a LNG carrier, because the fuel consumption is much less than LNG consumption, what action could be taken to reduce deficit?

The main action would be to increase the efficiency of the ship through ESDs and the optimisation of energy consumers

Has the IMO indicated whether their well-to-tank emissions will consider primary data for upstream emissions, which could significantly impact blue molecules? Or will fuel suppliers need to rely on default values, which might be punitive?

There will be an option to use a default (conservative) emissions factor for most fuels, however a fuel producer can certify their fuel to an actual emissions factor if it is proven to be superior to the default factor.

On the latest MEPC Summary report, it states the new proposals for WtT default emissions factors for LNG. What about the WtW of LNG?

We understand that default factors will be used for the TtW portion unless a superior factor is proven and submitted to IMO for consideration.

What hope is there for green ammonia at say 800$/tonne? As the 380$ penalty enough for this fuel to ever be adopted?

The remedial unit prices need to be put into context of the compliance deficit. Assuming a ship takes no action and continues to use fossil fuels the continued reduction of the targets will lead to significant compliance deficit leading to larger compliance costs which will over time make compliant fuels such as green e-fuels commercially viable.

Is there any concept of fuel oil non-availability?

Unlike the sulphur regulations, there is no consideration in these draft regulations for fuel oil non-availability.

Why do you need pilot fuel on an Aframax tanker burning 100% HFO?

To support the combustion of HFO.

Do you have case studies for switching to methanol or ammonia fuel? When do you think this kind of switch should be made?

LR can help to run similar TCO calculations for different fuels.

Is there any way for compliance and cost saving under GFI rules similar to using bio-fuel suitable for LNG carriers? 

Mass balancing of Bio-LNG could be an option for LNG carriers, but it remains to be seen how that will be covered under IMO LCA guidelines

Is there sufficient low GFI fuels available for the current fleet?

It is believed that now there is not sufficient fuel meeting the GFI limits at the scale required to meet demand of the global fleet. The intention of the regulations is to create demand for those fuels to become available at scale.

Is there any expected provision for aftertreatments for calculating GFIs e.g. for dealing with methane slip from a natural gas-powered ship?

Yes, the LCA framework the IMO has and continues to develop considers all factors in WtW emissions including methane slip.

Does this mean in future Fuel Quality will matter (verified by GFI), and not the Emission or carbon emission/CII?

As the draft regulations are designed and considering how CII regulations are currently drafted, at some point we assume that a ship that complies with GFI will by default comply with CII. It is therefore unclear what the future of CII will be and if it will change from a carbon intensity to a general energy intensity metric.

When will the precise calculation method for attained GFI be made available by the IMO? Do we expect that this method will mirror the one used by FuelEU?

The method to calculate attained GFI is available in the draft regulations.

E-ammonia GFI is much below the second threshold of 14 and will not only benefit from Surplus Units but also from incentives as NZF. Do you think, that MEPC 83 will act like a catalyst specially for e-ammonia out of all the e-fuels.

LR understands the regulations have been designed in such a way to incentivise the uptake and demand for very low GHG intense fuels such as e-fuels.

Can Surplus Units only be used only when going further than the base target?

Surplus Units can only be used to balance Tier 2 deficit which is generated when a ship's attained GFI is greater than the base target. Surplus units only generate when a ship has a GFI less than the direct compliance target. If a ship's GFI is between the two targets or above the two targets no Surplus units will be generated for that ship.

If your attained GFI is in Tier 2 territory, do you have to buy RUs at Tier 2 price down to the Base line and from the Base to the Strive at Tier 1 price, or do you have to buy at Tier 2 price all the way down to the Stive line?

Tier 2 deficit is only applicable for the non-compliance between the attained GFI and the base target which can be balanced by using Surplus Units or the Tier 2 Remedial Units ($380/tonneCO2eq). There will also be a Tier 1 deficit between the two targets which must be balanced by purchasing Tier 1 remedial units ($100/tonneCO2eq)

Is Fuel GFI based on fuel type, or can it differ between different refiners/sources, such as BP Angola fuel and Exxon Guatemala fuel?

We assume fossil fuels will be assigned conservative default values, so all fuel production globally is treated equally. For 'sustainable' fuels, LR assumes they will be assessed uniquely for the exact fuel production pathway, however, further detail is needed in supporting guidelines yet to be developed by IMO.

Will the domestic routes not counted in the GFI calculations?"

If a ship is not operating exclusively in the waters of its flag state, then a ship will need to comply in full i.e. all operations over the year.

How does the methane slip emission accounted in the GFI calculations?

These are included in the WtW GFI of the fuel source.

Thinking of charterparty arrangements, is it possible to break down the GFI requirements on a per voyage basis and not aggregate annual reductions as against the baseline, but CO2 limits per nm that produce one or other penalty?

The GFI requirements apply on an annual basis. The regulations do facilitate partial data reporting on change of company so if the charterer assumes responsibility as the ISM company it is possible for them to report for the portion of the year they are responsible for the ship. The following year the owner/ company will be responsible for compliance balancing so the charter party agreement will need to cover the distribution of penalties or rewards.

Is there a limit of how many times a ship owner can purchase Tier 2 GFI deficit? Ship owners could abuse this purchasing, by increasing shipping costs, which then the consumers pay for their lack of transitioning or investments in greener systems. Are hope new ships will charge less, since they will already comply with GFI, hence brokers will choose the "greener" ships.

There is no limit on how long a ship can be in a deficit. A ship can be in a deficit (either tier) indefinitely providing they balance with purchased remedial units or surplus units (in the case of Tier 2 deficit). The regulatory framework is designed to create competition in the case of the question asked here. i.e. a ship that continues to use VLSFO will quickly get to a point where the penalties double the total fuel bill making the ship unattractive on the spot market etc.

"If a vessel uses ZNZs fuel but its annual weighted GFI exceeds the Tier 1 threshold, can it still receive the ZNZs reward?"

This will be clarified in supporting guidelines to be developed, however the working assumption is the ZNZ reward is for a specific energy source not the overall attained GFI. Therefore, the ZNZ reward would apply to any individual fuel that meets the requirements for the reward irrespective of the overall ship attained GFI.

What are your views on the acceptability and GFI of blue ammonia as fuel?

Until we receive the supporting guidelines on calculating a WtW GFI for all fuels we cannot accurately assess any specific fuel.

With fuels being delivered with a GFI label based on supplier assessment, is there any indication as to how negative carbon intensity fuels could be considered? Many fuel producers of biomethane provide sustainability documentation that indicates the fuel to have a negative CI, this is currently recognised under EU regulations but not IMO.

Until we receive the supporting guidelines on fuel sustainability and how biofuels will be assessed we cannot say for certain how fuels that in theory have a negative emissions factor will be treated on a well to wake basis under the IMO regulations.

Some of the default values on WtT are inconsistent with peer review papers. How can a company get these new studies into the appropriate IMO committees to review and use of a number better than the defaults (e.g. 17.4 g/MJ for LNG)?

Where a fuel pathway claims a superior emissions factor to the default in the IMO's LCA Guidelines, an actual superior factor can be used. This will need assessment and certification by a recognised scheme however, the supporting guidelines to clarify this are yet to be developed.

What does weighted average, in the context of GFI, mean?

The weighted average of all fuel and energy GHG energy intensity weighted by the total energy consumed. i.e. the sum of each GHG intensity of each energy source multiplied by the amount of energy used from each divided by total energy.

Who will manage the GFI Register? The IMO in London will need to expand considerably. What will be the Registry fee?

The administration fee for the GFI register is to be determined in future work. The register will be administered by the IMO Secretariat.

When will GFI's or currently available fuels (e.g. brown LNG, biofuels etc.) be finalised?

In the October 2025 meeting of MEPC a work plan for follow up work will be agreed. At that point we will learn when the LCA Guidelines will be further developed to include WtW values for all existing fuels.

Who is responsible for the GFI reports when a vessel has changed ownership/DOC holder during the year? FuelEU expects that the owner at the end of the calendar year is responsible for the entire year. Will IMO expect the same?

Whilst it is not specifically stated in the regulations, the ship owner or ISM company is assumed to be responsible at the point compliance balancing is required (July the year after data collection).

There are provisions for partial data collection and reporting on change of company or flag. However, the distribution of penalties and rewards will need to be managed through contract between owners as they change.

Will it be possible to enrol a vessel below 5000MT into the GFI scheme?

Ships of less than 5,000GT are not in scope of the regulations, however there is nothing at this stage to suggest a ship below this threshold could not voluntarily comply and report into the GFI register.

With the addition of methane as an applicable GHG for GFI and not including a pooling metric, are LNG and BioLNG less applicable as alternative fuels?

Depending on the makeup and source of fuel this will determine how a fuel's GHG WtW intensity is derived. We are yet to receive default values for fuels such as LNG so we cannot say for certain how these will be assessed. However, using Fuel EU maritime defaults (as a good estimate) fossil LNG would be in direct compliance at least in 2028 providing methane slip was limited.

Many modern LNG carriers have engines with a methane slip rate around 0.7%-0.8% ± 0.15%, lower than the value set in IMO’s LCA (1.7%). Exhaust gas circulation technic (such as iCER) can make this even lower. How can this be verified?

If a fuel consumption can achieve a better value than a default value, it will need to be certified to the superior actual value.

How much GHG would be reduced by 2030? 

As the reduction rates are set as a GHG energy intensity it is hard to say how these relate to total GHG reductions. This would require forecasting the total energy use in the sector in 2030 etc. A variety of literature is available on this subject for those wishing to forecast total GHG reduction. It is also difficult to accurately assess at this stage whether direct compliance will be met or if operators will pay for compliance and at what point the compliance bill could no longer be tolerated.

There is a final meeting of MEPC in autumn 2025 to finally vote for this. What is the likelihood of changes and what could this changes be?

The approved regulations by MEPC 83 will be circulated to the MARPOL Annex VI parties for adoption in MEPC Extraordinary session 2 in October. If a vote occurs at that meeting 2/3 of the MARPOL Annex VI parties must vote positively for the regulations to be adopted.

What is the impact for ship builders in these requirements?

Ship builders are not specifically addressed in the regulations. They will be assumed to fulfil arrangements within orders which may be influenced by the regulations for differing arrangements and fuel consumer types.

Have Port Operations been considered or is it only a vessel's operation?

The IMO regulations apply to ships not ports.

The penalties of $380 Tier 2 and $100, T1 which will come into force from Jan 2027 onwards is in addition to existing penalty from the Fuel EU?

Penalties would not be payable until 2029 under the IMO regulations as the first year of data collection is 2028 with any penalties for this data being paid in 2029. These regulations are in addition to FuelEU where applicable.

Is budget of ZNZ unlimited? When will reward be defined?

The ZNZ reward system will be clarified in supporting guidelines which are to be developed.

Is there an increased penalty if ships must pay for the 380$ penalty? (as in fuel EU, where next year you pay 10% more of the actual final balance achieved)

The $380/tonneCO2eq is applicable to remedial units for balancing Tier 2 deficit only.

Is there a penalty for operators if they have many consecutive years of non-compliance?

There is no additional penalty for having a compliance deficit each year providing it is balanced each year.

Is there precedence of such regulations being pushed back or cancelled?

There is no precedence as such for regulations of this nature being 'pushed back' after approval. The key will be in the adoption stage at MEPC's extraordinary session in October when the regulations will be considered for adoption. If adopted the regulatory text is set in stone and could only be 'cancelled' if (within 10 months from adoption) a third of the MARPOL Annex VI signatories submit a formal objection or signatories whose flag registers equal at least 50% of global gross tonnage.

Do you see the 5000tonnes limit reducing to cover smaller vessel in the future?

Yes, there is a review clause built into the draft regulations which calls for a review after 5 years and the review is specifically to consider reducing the application threshold to 400GT.

Noted that the regulations enter into force on 01 March 2027, will there be any data collected from the ship from then or will the data collection start from Jan 2028 onwards?

Data collection will start from 1 January 2028.

How do CII, ETS and FuelEU influence the results of your case study?

Including EU ETS and FuelEU would increase the costs considerably, but the overarching themes will still hold - increasing vessel efficiency and reducing gCO2e/MJ will reduce costs and improve compliance performance

Is this a merger or equivalent to FEUM/ EUETS?

There are differences between the three regulatory regimes so owners and operators should familiarise themselves with the IMO's regulatory requirements as these apply universally not just to ships calling at specific ports and regions.

How will developing countries accommodate the MEPC 83 decision? Is there any risk of decreasing vessel ownership?

The regulations have built into them the need for revenue generated to go, in part, to supporting developing countries and small island developing states in deployment of infrastructure. The detail of the workings of this is yet to come in supporting guidelines.

Is pooling allowed between Tier 1 compliant and Tier 1 deficit?

No, Tier 1 deficit must always be balanced with purchase of remedial units at the Tier 1 rate of $100/tonneCO2eq.

If a country of bunker supply fails to implement the Sustainable Fuels Certification Scheme (SFCS) on schedule and, under exceptional conditions, a vessel must bunker fuel with a BDN (Bunker Delivery Note) but without an FLL (Fuel Lifecycle Label), what are the proper legal and jurisdictional procedures to consume such fuel? How should well-to-tank GHG emissions be calculated in this case? 

The regulations are established such that only IMO recognised fuel certification schemes will be recognised, not national schemes. In the case of a failing of the fuel certification scheme to certify a fuel pathway this would need to be considered further by MEPC as the appropriate organ of IMO. However, there is no provision in the draft regulations for relaxation of the need for fuels to be certified. Again, there is uncertainty if fossil fuels which have a default emissions factor also need certification by a fuel certification scheme or if they could just use the default emissions factor. Further information on this scenario will come in the development of the associated guidelines.

Can owners join another company's pool to share surplus, or face the situation when they need to comply, but the surplus has expired.

There is no mention of forming pools in the draft regulations. The ability for a ship that generates a surplus to transfer it to another ship is not limited i.e. a ship that generates a surplus unit may at that point transfer the unit to any other ship which has a tier 2 deficit which needs balancing.

When you say the destiny of the credits should be decided at that point, any specific information of What is the timeframe to decide what to do with credits?

Ships will be given 1 month (July) each year to decide what to do with any surplus units that are generated. However, a ship operator would be able to estimate fairly accurately at the start of the year the number of Surplus Units that will be generated in July by the IMO GFI Register and therefore begin the decision-making process from that point. However, once a surplus unit has been decided i.e. to transfer to another ship or to be banked that decision cannot be undone after input to the GFI Register.

Does the new proposed IMO regulation mostly mimic FuelEU regulation?

There are similarities however there are differences between the two so operators with ships in scope of both should familiarise themselves with both.

Will there be exemptions for icebreakers?

There is no mention of icebreakers in the application exception clauses. As it stands, any icebreaker of 5000GT or more will be in scope of the regulations.

Can banked surplus from Company A be sold to Company B to balance compliance in a different year than they were generated/required?

No, once Surplus Units have been banked, they can only be used for balancing later Tier 2 deficit of the same ship.

Would Fuel certification wait for concluding 5th IMO GHG study?

No, the need for fuel certification schemes to be recognised in the draft regulations. There is no link to the 5th IMO GHG Study which assesses the performance of the global fleet and forecasts into the future.

Will guidelines development begin only after MEPC ES 2?

This is our understanding yes. The ES 2 session of MEPC will develop a work plan to deliver all the needed guidelines.

How can the IMO regulate the price of the surplus units traded? This is a commercial transaction.

The IMO does not regulate the value of Surplus Units. This will be controlled by the market and the price of the Tier 2 Remedial Unit.

Is pooling included in the regulation?

The regulations make no reference to pooling. Transfer of surplus units can be to any other ship that has a tier 2 deficit which must be balanced.

As the required CII trajectory has been revised, do we need to revise vessel's SEEMP III, before having IMO new SEEMP guidelines?

The SEEMP III will require amendment to demonstrate how the required CII will be met. The timing of which LR will put separate communication out after reviewing the revised reduction factor guidelines in a class news.

If regulations apply to ships operating only in waters of their flag states, does this mean that emissions from, say, a Greek-flagged ship globally outside Greek waters will be allowed to emit without paying?

Regulations apply to all ships of 5000 GT or more. There is an exception for ships which operate exclusively in the waters of their administration. In this example, a Greek-flagged ship operating in Greece only would not be required to comply with the regulations but if it does voyages outside those waters, it would.

Why does IMO opt for emission trading instead of a more cost-effective levy system?

This was the subject of delicate negotiations between IMO Member States. LR is not able to comment.

What are the main differences between the new IMO - GFI regulations and FuelEU Maritime?

The main differences are the Z factors (reduction targets), In the IMO GFI Surplus Units have an expiry whereas in FuelEU they do not, the cost for compliance is different in each and to transfer compliance in FuelEU a ship needs to join a formal pool. For more information on FuelEU see LR's website here https://www.lr.org/en/services/statutory-compliance/fueleu-regulation/

Why are there two targets - Base and Direct Compliance?

Direct Compliance is a more stringent target, intended to align with the 'striving for' GHG reduction targets in the IMO GHG Strategy which a ship meeting this target will not face penalty. The Base targets are aligned with the 'base' targets in the strategy which, if not met, lead to a more significant penalty.

Are seafarers now required to "help" the company with these various calculations?

There is no specific obligation onto seafarers regarding compliance with the regulations. It is understood the owner or ISM company will be responsible for compliance.

If a vessel sail as RoPax within its flag state and not internationally, was this then excluded from the regulation as an exception?

Yes, if a ship operates exclusively in the waters of its flag state the regulations do not apply.

For ships using Primary Wind Propulsion as opposed to WAPS, what could be a price range for the RUs be?

If a ship achieves an attained GFI below the direct compliance target, there will be no compliance deficit and therefore no remedial units required.