LEE Jungyup, Green Ship Technology Team

  1. Understanding the Mid-Term Measures

1) New Chapter 5 - Regulation on the IMO Net-Zero Framework

 (1) Application

  - All ships engaged in international voyages of 5,000 GT and above
  - Applicability to semi-submersible vessels will be determined after further review

 (2) Calculation of GFI (gCO2eq/MJ)

 (3) GFI Target Calculation

   - (GFI Baseline) 93.3 gCO2eq/MJ 

     (representing the average GFI of international shipping in the year 2008)
   - (GFI target) 93.3 gCO2eq/MJ × (1 – Base/Direct reduction rate(%))

 (4) Base/Direct Target Reduction Rate

     - Reduction Targets for 2036 - 2040 will be determined by 1 January 2032
      - Basic Target for 2040 : 65%

 (5) Alternative Compliance Approach

  - If the Direct Target is not met, ships must comply through the purchase of RU/SU
  - (SU, Surplus Unit) Transferable credit (tCO2eq) obtained by ships that surpass 

     the Direct Target
  - (RU, Remedial Unit) Non-transferable credit (tCO2eq) purchased from the IMO GFI registry
   * Alternative Compliance Approach (Refer to Fig.2 below)

  2) 대체 준수 방안

  - SU can be used once for only one purpose: Banking, transfer, or voluntary mitigation
    * However, different-purpose usage is allowed (e.g., bank -> transfer)
  - SU is valid for two years from the issuance date

[Example Case]

• Annual energy consumption = 1,000,000 MJ      = 93 gCO2eq/MJ

• Base GFI target = 90 gCO2eq/MJ         = 87 gCO2eq/MJ

• Direct GFI target = 85 gCO2eq/MJ       = 80 gCO2eq/MJ

* This has been created for explanatory purposes only.

 (6) ZNZ(Zero or Near-Zero)
  - (Definition) Technologies, fuels, or energy sources with zero or near-zero GHG emissions
  - (Threshold) Until the end of 2034 19.0 gCO2eq/MJ From 2035 onward 14.0 gCO2eq/MJ
  - Guidelines on the definition of ZNZs, of ZNZs rewards and the methodology to determine

    such rewards will be developed by 1 March 2027

 (7) Sustainable Fuel Certification Scheme (SFCS)

  - (Definition) Certification for fuels that comply with relevant guidelines and regulatory

     requirements
  - Certified information on the Fuel Lifecycle Label (FLL) should accompany the Bunker Delivery

     Note (BDN) upon fuel delivery
  - IMO will publish a list of recognized SFCSs by 1 March 2027 and update it every 5 years

 (8) Review Clause

  - Every 5 years, a review will be conducted on the following:

   • Amendment to the annual GFI reduction target

   • Amendment to ZNZ threshold value

   2. Impact Assessment of Mid-Term Measures

  1) Macro-Level Analysis: Global Maritime Sector Cost

    -  Fuel consumption data(ton) based on 2023 IMO DCS
    -  GFI by fuel type based on FuelEU Maritime

   -  2023 Attained GFI of international shipping = 90.29 gCO2eq/MJ

   -  Estimated Costs (2028–2030) assuming no fuel mix changes

   * RU2 cost may vary depending on SU market price

   -  RU1 could generate an annual fund of approx. USD 10.56 billion

  2) Micro-Level: Individual Ship Regulatory Compliance Cost Analysis (2028)

   -  Case    2028 GFI

* Given the assumption of eligible emissions for compensation defined as 'direct GFI - ZNZ GFI', the amount of reward for use of ZNZ fuels is estimated 300(B30)~550(e-fuel) USD/tCO2eq

  3. Regulatory Considerations

1) ZNZs rewards and RU Pricing after 2030

 (1) Methodology for ZNZs and Price Levels (to be finalized by 1 March 2027)

 (2) RU pricing after 2030 (to be finalized by 1 January 2028)

2) Fuel Price Impacts and Compliance Costs by Fuel Type

 (1) Estimated Compliance Cost Increase by Fuel Type

  - 91.6-94(HFO), 90.6-94(VLSFO/MGO), 76.3-80(LNG)

(2) Outlook of E-fuel

- Widespread e-fuel adoption is expected no earlier than 2030, provided that ZNZs reward and post-2030 RU pricing help narrow the price gap between conventional fuels and e-fuels.