26/10/26
Q&A: IMO net-zero plan unlikely by 2026: IBIA
Q&A: IMO net-zero plan unlikely by 2026: IBIA
Sao Paulo, 26 October (Argus) — The International Bunker Industry Association
(IBIA) will hold its annual convention on 10-12 November in New York, ahead of
the International Maritime Organization (IMO)'s MEPC 85 meeting later in the
month. Participants will be looking for greater clarity on the proposed net-zero
framework and its implications for investment, fuel pathways and the pace of the
shipping sector's energy transition. Ahead of the IBIA annual convention, Argus
spoke with IBIA's president Adrian Tolson about the industry's expectations for
the event and the forthcoming MEPC 85, the outlook for ethanol and biodiesel in
the Americas, and the challenges for LNG in North America. Regulatory certainty
is the maritime sector's most urgent need, said Tolson. But he expressed
skepticism that the current IMO Net Zero Framework proposal would pass without
significant compromises. He also warned that prolonged uncertainty has delayed
investment in alternative-fuel infrastructure, while stressing that no single
fuel is likely to dominate the sector's energy transition. Instead, biofuels may
play a larger role in South America than in North America, where policy
incentives make them less competitive, while LNG remains constrained by
infrastructure bottlenecks despite abundant US production. The bunker industry
will gather at the IBIA conference just weeks before a potentially decisive MEPC
85 . What is IBIA's expectation for the meeting and how important is it to have
a net-zero framework approved by the end of this year? A global regulation is
very important. It's important to have a consistent regulation on a global
basis. What the industry wants to avoid with the IMO meeting is some sort of
regulations that coexist in the world and that are inconsistent with one
another. And what is decided in fact doesn't matter that much, what is important
is to have some sort of decision and some sort of clarity. But when you look at
the net-zero framework as it was proposed initially, my view is that the
regulation is in trouble and is unlikely to pass. What will come out of it is a
bit hard to say, but I think there will be a compromise at some level, and I
think it will not include any version of the net-zero fund that was proposed
initially. Our expectations are not brilliant right now. This could change in
the next couple of weeks. There might be new compromises, but I'm not
optimistic. Until the IMO provides a clear net-zero framework and emissions
rules for each fuel pathway, the industry has paused some investments in
production, storage, and bunkering infrastructure needed to support the energy
transition. Once there is an adopted and approved framework, is the sector in a
comfortable position to tackle the new regulatory regime? I think the answer to
that is no. Many of the projects that were proposed were related to the net-zero
framework passing, and many of those projects have already failed to get to FID
[final investment decision]. So the uncertainty has slowed down the process. And
there are external events that also brought investments to an impasse. In the
US, some of the Inflation Recovery Act measures had an impact on production of
hydrogen-based fuels. There haven't been big infrastructure investments in
alternative fuels in the Americas already. Most of the investment in alternative
fuels that contribute to maritime decarbonization have been made for other
reasons, like all the investments in LNG. And if you look at the other
alternative fuels in the maritime area, there is limited investment at the
moment. There is going to be a challenge if suddenly we are all surprised in
early December if the IMO approves the existing net-zero framework. The industry
would need to rush. But it is possible to build projects once there is
regulatory certainty. I think the regulatory part will kickstart everything
else. Until then, you won't see much. T alking about geopolitical tensions and
their impact on bunker fuels, since the start of the US-Iran war, MGO prices
have doubled at some ports and it is now traded close to $1500/metric tonne (t)
. Has this price surge driven a push for greater energy security and more
alternative fuel options in the bunker sector? Has there been a tangible impact
on investments? It hasn't happened yet. I mean, a short-term event like this, I
don't think it will, by itself, drive a big shift in alternative fuel policy or
anything like that. But it becomes a relevant point for governments, policy
makers and investors when they look at the alternative fuels potential. It seems
increasingly clear to the market that there will be no single "fuel of the
future", but rather a mix of fuels that takes into account the potential of each
region, as well as the economic viability within each country and port. Now
looking at only the Americas, could we say that the fuel of the future will
likely be biofuels — ethanol and biodiesel? I think we can't assume that. The
region has capacity for production of both fuels. Biodiesel and renewable diesel
are drop-in fuels, which makes it more interesting when compared to other
possibilities. But the challenge in the United States is the Renewable Fuels Act
and the RIN system, which make biofuels of every nature in the US very expensive
to the bunker sector because selling products as road fuel has more governmental
incentives. And the Act seems unlikely to be changed any time in the short term.
But in Latin America it is different. There has been some development on
biodiesel supply. In this region, bio could be more competitive. The US also has
similar ethanol production capability, but it faces the internal regulatory
factor. I just got back from SIBCON in Singapore, where the Brazilian biofuels
and bioethanol groups were there and showed strong supply capacity. For ethanol
the challenge is bigger than for biodiesel, of course, because you need alcohol
engines and a strong global regulation. And there are also storage requirements,
barging requirements, that are slightly more rigorous in terms of safety. But in
Brazil, there's plenty of bioethanol storage because Brazil's been using ethanol
for more than 60 years. I think the appeal of the alcohol fuels is that they
would use existing infrastructure, and there is supply available. So they are a
better fit [within] the energy transition. The only issue is that the market
still needs to be convinced to buy an alcohol engine. By now, the market size is
still limited and potential demand is limited at the moment. We will probably
see a small amount of biodiesel, renewable diesel supply in North America. And
we will see more bio in South America. In North America, is LNG more attractive
than biofuels? We can say that. It is more primed for growth than bio. But LNG
has its challenges too. The US is a massive producer of LNG, and there are a lot
of LNG bunkering activities going on, but not in the major ports. And also there
is a considerable number of vessels being built that can run on LNG. The
challenge is to put the infrastructure in place. There is no liquefaction
facility on the US west coast except a very small one in Puget Sound,
Washington. There are plenty of liquefaction facilities on the US Gulf coast.
But almost none of them can load a bunker barge because most of them are built
to supply huge vessels, and not bunker barges, which are very small. The whole
US Gulf coast with all its millions and millions of cubic feet of gas exports
can't actually load a bunker barge. It's just because they weren't built to load
small vessels. The east coast has few facilities too. Despite significant
storage capacity, it lacks suitable bunker infrastructure. And a facility and
even a bunker barge, because of regulatory issues in the US, [require] huge
investment. By Gabriel Tassi Lara Send comments and request more information at
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