Six Pacific island states have told the International Maritime Organization (IMO) that the proposed Net-Zero Fund is a "functional requirement" for any mid-term measure designed to cut greenhouse gas (GHG) emissions from shipping while ensuring a just and equitable transition.

Fiji, Kiribati, Nauru, Palau, Tuvalu, and Vanuatu submitted the argument to the IMO last month ahead of the 22nd session of its Intersessional Working Group on GHG emissions from ships, scheduled for September. The meeting forms part of the IMO's work toward adopting mid-term measures under its revised 2023 GHG Strategy, which targets net-zero emissions from international shipping by or around 2050.

The countries said the fund is central to the IMO's mid-term measures under the Net-Zero Framework (NZF) and should be developed in parallel with guidelines on GHG fuel intensity and on zero- and near-zero-emission fuels and technologies.

"The IMO Net-Zero Framework is a package that cannot function without all its necessary elements," the group stated.

They also described the fund as the "singular guarantee that the transition will not leave Member States behind."

"Without the IMO Net-Zero Fund, developing countries, especially small islands developing States (SIDS) and least developed countries (LDCs), will be left to bear all the cost of the transition, with no guarantee of the support these countries require," the submission said.

For Pacific island nations, which face existential threats from sea-level rise, the equity dimension of shipping decarbonization is inseparable from the climate impacts they are already experiencing.

Structure of the Net-Zero Framework

The proposed NZF combines a global fuel standard with a GHG pricing mechanism. Ships exceeding set emissions thresholds could be required to make payments into the IMO Net-Zero Fund. The fund would then use the revenue to reward low-emission ships and support developing countries in managing the transition. The framework is among the most contentious elements of the IMO's climate agenda, as member states remain divided over how revenue should be collected and distributed.

51% of Fund Revenue Proposed for Just and Equitable Transition

Under the Pacific states' proposal, no less than 51% of available revenue after administrative costs would be allocated to Just and Equitable Transition (JET) support.

"After Administrative Costs, no less than 51% of available revenue shall be allocated to JET Support, with the remainder allocated to ZNZ Rewards," the proposal states.

The remainder would fund rewards for zero and near-zero (ZNZ) GHG technologies, fuels, and energy sources.

The proposal also calls for safeguards to prevent a disproportionate share of funding from being captured by a small number of recipients or higher-capacity applicants. These safeguards would include minimum allocation floors specifically for SIDS and LDCs.

Additionally, the Pacific states are seeking targeted support for domestic fleet upgrades and port infrastructure in developing countries, as well as assistance for states that face disproportionately higher transport costs as a result of the transition. The outcome of the September working group will feed into the Marine Environment Protection Committee's broader timeline, which envisages approval of mid-term measures in 2025 with entry into force in 2027.

Source: Ship & Bunker