Options A–C: NZF Framework

These three options preserve the IMO Net-Zero Fund and the two-tier compliance pricing mechanism established in the draft revised MARPOL Annex VI (Circular Letter No. 5005).

Option A — NZF As Is. Adopt the NZF text as circulated in CL 5005 without modification. Resume MEPC/ES.2 and complete the Article 16 adoption vote. Proponents: Fiji, Kiribati, Nauru, Palau, Solomon Islands, Tuvalu, Vanuatu (MEPC 84/7/28); Solomon Islands and Mexico (MEPC 84/7/34).

Option B — SIDS Contingency. A fallback position if the NZF text is reopened: set the direct compliance Z-factor to 100% for all years and price Tier 1 deficits at Tier 2 rates (US$380/tCO₂eq). This effectively collapses the two-tier structure into a single flat price on nearly all fuel carbon content, producing dramatically higher Fund revenue (~US$50B/yr at entry into force) and correspondingly higher near-term compliance costs. Proponents: Fiji, Kiribati, Nauru, Palau, Tuvalu, Vanuatu (MEPC 84/7/36).

Option C — Brazil Package. Preserve the NZF architecture with a structured three-part package: the NZF text as approved at MEPC 83 (with date adjustments), priority implementation guidelines developed in parallel, and explanatory notes to address misunderstandings. Fold MEPC/ES.2 into MEPC 85 rather than resuming separately. Explicitly technology-neutral, including recognition of onboard carbon capture and storage (OCCS) as a compliance pathway. Proponent: Brazil (MEPC 84/7/37).

Japan’s bridge proposal (MEPC 84/7/49) provides supplementary procedural context for Options A and C. It proposes a facilitated process to build consensus on implementation details without reopening the core regulatory text. Japan 7/49 is not treated as a separate pathway because it does not propose a structurally distinct policy architecture — it is a procedural mechanism to advance adoption of the existing NZF text.

Options D–F: Alternative Approaches

These three options do not preserve the IMO Net-Zero Fund. They represent fundamentally different approaches to maritime emissions regulation, or no regulation.

Option D — Market-Linked Alternative. Replace the NZF’s fixed GFI trajectory with a market-responsive standard that tightens only when qualifying fuels pass a three-gate test (affordability within 15% of VLSFO, availability at ≥5% market share in 5 of 7 bunkering regions, scalability at ≥5% CAGR for 3 consecutive years). No Fund, no RU pricing, no revenue collection. Compliance incentives linked to the existing Carbon Intensity Indicator (CII) framework. Proponents: Argentina, Liberia, Panama (MEPC 84/7/38).

Option E — Oil-State Principles. Replace the NZF with an unspecified framework based on technology neutrality, food and energy security safeguards, consensus-based decision-making, and explicit (opt-in) acceptance. No fully developed alternative is proposed. Proponents: Algeria, Bahrain, Iraq, Kuwait, Russian Federation, Saudi Arabia, Somalia, UAE (MEPC 84/7/30); UAE separately (MEPC 84/7/32).

Option F — End NZF. End all consideration of the NZF. No pricing mechanism, no Fund, no multilateral framework. Pursue emissions reductions through technology development and voluntary measures. Use explicit acceptance for any future GHG regulation. Proponent: United States (MEPC 84/7/41).

3.1 Quantitative Treatment (Options A, B, C)

Options A, B, and C are modelled using the same 7-step reduced-form engine described in the NZF Design methodology. The engine takes CIA Task 3 Scenario 24 as its reference point and produces country-specific estimates of GDP impact, consumer price impact, and trade cost impact.

Options A and C are economically identical — the Brazil Package preserves the NZF’s pricing architecture without modification. Both are computed at the NZF Design module’s default parameters:

These defaults represent the midpoint of the negotiation space for each parameter. Users who wish to explore how different NZF design choices affect outcomes can switch to the NZF Design tab, which exposes all parameters as interactive sliders.

Option B is modelled using the same engine with two modified parameters reflecting the collapsed two-tier pricing structure:

At 2040 and 2050, α = 1.0 for all options (fleet decarbonisation eliminates the two-tier effect), so Options A, B, and C converge. The 2030 comparison is where they differ materially.

No CIA scenario directly models Option B’s collapsed-tier configuration. CIA Scenario 26 (GFS with a high levy of US$150–300/tCO₂eq and revenue disbursement to developing economies) serves as a directional lower-bound proxy — Option B’s effective price exceeds S26’s modelled range. The “roughly 2× the 2030 cost impact of A/C” comparative framing is robust because the same model is applied to both and the relative scale is reliable even when absolute magnitudes carry uncertainty.

Option B is modelled in the Pathways Explorer only, not in the NZF Design module. The NZF Design module’s credibility rests on the validated sensitivity ratio (SR) range of 0.85–1.45, within which the proportional scaling model is empirically verified against CIA cross-scenario data. Option B produces SR ≈ 2.8 at 2030, which is well outside this range. The comparative framing in the Pathways Explorer — directional comparisons with prominent uncertainty caveats — is appropriate for this extrapolation. Presenting it in the NZF Design module with the same visual precision as validated results would be misleading.

3.2 Qualitative Treatment (Options D, E, F)

Options D, E, and F cannot be modelled quantitatively because they do not specify the parameters required by the engine:

• Option D proposes a market-responsive GFI trajectory whose stringency depends on future fuel market developments that are inherently unpredictable. The three-gate test creates a circular dependency: the target tightens only when fuels are available, but investment in those fuels depends on regulatory certainty about future targets. The compliance cost range is bounded between near-zero (gates never triggered) and the S24 reference without fiscal offset (market eventually matches NZF trajectory but with no Fund to recycle revenue).

• Option E sets out principles for a future framework but does not specify GFI targets, pricing levels, or any quantifiable parameter. It cannot be modelled without assumptions that would amount to designing the framework on the proponents’ behalf.

• Option F proposes no framework, no pricing, and no Fund. There is nothing to model. The relevant comparison is against the status quo (business-as-usual emissions trajectory and existing regional regulations).

For these options, the Explorer presents structured qualitative analysis across each dimension, grounded in the source submissions and existing regulatory facts (e.g., EU ETS costs on European routes, CII enforcement limitations). The qualitative content follows the same dimension structure as the quantitative options, enabling direct comparison.

3.3 The Structural Divide

The most consequential analytical distinction is between Options A–C (which preserve the IMO Net-Zero Fund) and Options D–F (which eliminate it). For developing economies, this determines whether there is any multilateral mechanism to offset compliance costs through revenue recycling, to fund infrastructure investment, or to address disproportionate impacts including food security.

4.1 Fund Revenue and Disbursement

What revenue does each option generate, and how does it flow to developing states? This is the most quantitative dimension. For Options A/C, the engine computes country-specific fiscal offsets at the default parameters. For Option B, the engine computes at modified parameters. For Options D/E/F, revenue is zero — the analysis focuses on what the absence of Fund revenue means for just transition support.

4.2 Compliance Costs and Trade Impacts

What cost burden does each option impose, and how does it pass through to freight rates? For Options A/B/C, the engine produces maritime logistics cost (MLC) increases and sensitivity ratios (SR). For Option D, the cost range is bounded qualitatively. For Options E/F, cost analysis focuses on the regulatory patchwork — existing regional regulations (EU ETS, FuelEU Maritime) impose costs on specific routes, with revenue flowing to non-IMO jurisdictions rather than to an international fund.

4.3 Food Security

How does each option affect food prices for import-dependent economies? The NZF contains a dedicated food security regulation (Reg. 43) requiring the Committee to monitor and address disproportionate food price impacts. Options A/B/C inherit this mechanism plus Fund resources for mitigation. Options D/E/F have no equivalent provision. For Option B, the timing mismatch between the immediate cost shock and the lag before Fund disbursement becomes operational is noted as a structural feature.

4.4 Timeline to Implementation

When does each option produce a functioning framework? Analysis is grounded in IMO procedural rules: MARPOL Article 16 tacit acceptance procedure, the agreement-in-principle to adoption to entry-into-force sequence, and the specific calendar proposals before MEPC 84. Options A/C target adoption at MEPC 85 (late 2026) with entry into force in 2028–2029. Options D/E would require reopening negotiations, adding years of delay. Option F proposes no adoption timeline.

4.5 Enforcement and Compliance

What mechanisms ensure compliance? The NZF’s enforcement architecture combines financial enforcement (RU pricing creates a direct cost for non-compliance), the GFI Registry (transparent recording of compliance status), and port state control. Option D relies on the existing CII framework, whose corrective action plans have well-documented enforcement limitations. Options E/F propose no enforcement mechanism.

4.6 Regulatory Landscape

What is the broader regulatory context? A global IMO framework provides governance representation for all member states, including developing countries. In the absence of an IMO framework, maritime emissions regulation defaults to regional actors — the EU ETS, FuelEU Maritime, and potentially other jurisdictions. This creates a structural asymmetry: costs are imposed on shipping serving developing-country trade routes, but revenue and governance remain with the regulating jurisdiction. The analysis treats the EU ETS as current fact, emerging initiatives (e.g., Djibouti) as publicly announced, and other jurisdictional actions as potential.

IMO Submissions Referenced

Impact Assessment

Compliance Cost Analysis