April 15, 2025
Siglar's Head of Legal Affairs, Sinem Ogis, is back from an intense but important week at IMO MEPC and shares her reflections here.
The IMO Working Group on GHG began formal discussions on the proposed regulation from Monday, 7 April to Friday, 11 April 2025, as part of MEPC 83. A key focus of the meeting, particularly relevant to shipowners and charterers, was the pricing of Remedial Units (RUs) and the GHG intensity reduction factors (Z factors).
Prior to MEPC 83, there was a disagreement around the technical and economic elements of the proposal. The technical element focused on introducing GHG intensity limits, similar to the EU’s FuelEU Maritime regulation. The economic element proposed a global flat-rate carbon tax, similar to the EU ETS.
Due to strong opposition, especially regarding the economic measure, Singapore presented a compromise solution: a “Two-Tier GHG Intensity Mechanism”, which ultimately became the basis for the proposal that progressed through the Working Group.
The regulation now includes two compliance thresholds:
Ships exceeding the BT must pay at the Tier 2 benchmark rate: USD 380/tonne CO2eq (WtW).
Both benchmark rates will be reviewed in 2030, and revised rates will apply from 2031 onward.
The draft regulation received majority approval for circulation as a draft amendment. However, for formal adoption at the next IMO meeting in October, the regulation will require a two-thirds majority. The current voting outcome at MEPC 83 is as follows: Yes - 63 countries; No - 16 countries; Abstained - 24 countries.
As of recent records, there are 108 Parties to MARPOL Annex VI. This means that 72 affirmative votes are needed for the draft amendments to be adopted.
If the regulation is adopted in October, a 10-month “tacit acceptance” period will follow. During this period, similar to above, if more than one-third of the Parties object, the amendment will not proceed further.
Considering all timelines, if all procedures are successfully completed, the regulation would enter into force in mid-March 2027, with the first reporting period, as per the regulation, commencing on 1 January 2028.
Saudi Arabia, together with 15 other countries - Qatar, Indonesia, Malaysia, Thailand, Russia, Iraq, Iran, Venezuela, Oman, Kuwait, Jordan, Bahrain, and Pakistan etc - is currently opposing the regulation. However, they are not necessarily against the regulation itself, but rather against the way the reduction targets have been set.
If the regulation fails to gain adoption due to political resistance and the lack of a qualified majority, it could significantly delay the progress. In such a scenario, regional frameworks, such as the EU ETS and FuelEU Maritime, may become the de facto standards. This could urge the European Commission to extend the scope of current regulations and strengthen their application to maintain alignment with climate objectives (Paris Agreement).
However, the message from the industry is clear: failure to adopt a global regulatory framework would send a negative signal and slow the momentum toward decarbonisation.
Therefore, given the current momentum and the approval of the draft regulation at MEPC 83, industry is optimistic that the regulation will be adopted as is and come into effect from 2028.
Regarding the further application of FuelEU Maritime regulation stipulates (article 30/5) that unless IMO adopts measures deemed equivalent in ambition and scope, the EU is likely to maintain its regional regulations to ensure alignment with its climate objectives. Further clarification from the European Commission is expected upon the official adoption of the IMO regulation.
There are two key issues that remain open for discussion:
Regarding the first question: under the principle of “no more favourable treatment” (article 5(4)), ships from non-party states must still comply with the regulation when entering the ports or waters of countries that are parties to MARPOL Annex VI. This effectively closes the flag-of-convenience loophole and supports a fair, consistent application of the rules across the global fleet. However, we expect further clarification on this point in the forthcoming MARPOL Annex VI guidelines.
As for the second question: the proposed regulation does not apply to ships engaged solely in domestic voyages, but it does encourage national-level action. This opens the door for national GHG intensity measures to emerge. We are already seeing this trend through the EU ETS, the upcoming UK ETS (from 2026), and ongoing discussions around a Turkish ETS. Turkiye plans to begin with its MRV system and subsequently implement a national ETS, due to the absence of a global carbon pricing mechanism under the current IMO framework-though the exact details are still to be confirmed.
Could we see similar national or regional frameworks emerge for GHG fuel intensity as well?
While the full answer is not yet known, one thing is clear: the regulatory landscape is becoming increasingly complex.
Siglar's Head of Legal Affairs, Sinem Ogis, is back from an intense but important week at IMO MEPC and shares her reflections here.
The IMO Working Group on GHG began formal discussions on the proposed regulation from Monday, 7 April to Friday, 11 April 2025, as part of MEPC 83. A key focus of the meeting, particularly relevant to shipowners and charterers, was the pricing of Remedial Units (RUs) and the GHG intensity reduction factors (Z factors).
Prior to MEPC 83, there was a disagreement around the technical and economic elements of the proposal. The technical element focused on introducing GHG intensity limits, similar to the EU’s FuelEU Maritime regulation. The economic element proposed a global flat-rate carbon tax, similar to the EU ETS.
Due to strong opposition, especially regarding the economic measure, Singapore presented a compromise solution: a “Two-Tier GHG Intensity Mechanism”, which ultimately became the basis for the proposal that progressed through the Working Group.
The regulation now includes two compliance thresholds:
Ships exceeding the BT must pay at the Tier 2 benchmark rate: USD 380/tonne CO2eq (WtW).
Both benchmark rates will be reviewed in 2030, and revised rates will apply from 2031 onward.
The draft regulation received majority approval for circulation as a draft amendment. However, for formal adoption at the next IMO meeting in October, the regulation will require a two-thirds majority. The current voting outcome at MEPC 83 is as follows: Yes - 63 countries; No - 16 countries; Abstained - 24 countries.
As of recent records, there are 108 Parties to MARPOL Annex VI. This means that 72 affirmative votes are needed for the draft amendments to be adopted.
If the regulation is adopted in October, a 10-month “tacit acceptance” period will follow. During this period, similar to above, if more than one-third of the Parties object, the amendment will not proceed further.
Considering all timelines, if all procedures are successfully completed, the regulation would enter into force in mid-March 2027, with the first reporting period, as per the regulation, commencing on 1 January 2028.
Saudi Arabia, together with 15 other countries - Qatar, Indonesia, Malaysia, Thailand, Russia, Iraq, Iran, Venezuela, Oman, Kuwait, Jordan, Bahrain, and Pakistan etc - is currently opposing the regulation. However, they are not necessarily against the regulation itself, but rather against the way the reduction targets have been set.
If the regulation fails to gain adoption due to political resistance and the lack of a qualified majority, it could significantly delay the progress. In such a scenario, regional frameworks, such as the EU ETS and FuelEU Maritime, may become the de facto standards. This could urge the European Commission to extend the scope of current regulations and strengthen their application to maintain alignment with climate objectives (Paris Agreement).
However, the message from the industry is clear: failure to adopt a global regulatory framework would send a negative signal and slow the momentum toward decarbonisation.
Therefore, given the current momentum and the approval of the draft regulation at MEPC 83, industry is optimistic that the regulation will be adopted as is and come into effect from 2028.
Regarding the further application of FuelEU Maritime regulation stipulates (article 30/5) that unless IMO adopts measures deemed equivalent in ambition and scope, the EU is likely to maintain its regional regulations to ensure alignment with its climate objectives. Further clarification from the European Commission is expected upon the official adoption of the IMO regulation.
There are two key issues that remain open for discussion:
Regarding the first question: under the principle of “no more favourable treatment” (article 5(4)), ships from non-party states must still comply with the regulation when entering the ports or waters of countries that are parties to MARPOL Annex VI. This effectively closes the flag-of-convenience loophole and supports a fair, consistent application of the rules across the global fleet. However, we expect further clarification on this point in the forthcoming MARPOL Annex VI guidelines.
As for the second question: the proposed regulation does not apply to ships engaged solely in domestic voyages, but it does encourage national-level action. This opens the door for national GHG intensity measures to emerge. We are already seeing this trend through the EU ETS, the upcoming UK ETS (from 2026), and ongoing discussions around a Turkish ETS. Turkiye plans to begin with its MRV system and subsequently implement a national ETS, due to the absence of a global carbon pricing mechanism under the current IMO framework-though the exact details are still to be confirmed.
Could we see similar national or regional frameworks emerge for GHG fuel intensity as well?
While the full answer is not yet known, one thing is clear: the regulatory landscape is becoming increasingly complex.
