A new analysis by Opportunity Green warns governments of the wide-ranging risks posed by Japan’s proposal at the International Maritime Organization , ahead of adoption negotiations on the Net-Zero Frameworkthis November and December in London.

Japan’s latest proposal for changes to the NZF would significantly alter the agreed policy architecture, undermining even further the chances of making the 2023 Revised Strategy a reality. The primary changes involve: removing the Net-Zero Fund, the key pillar of “economic measure”; making the purchase of Surplus Units (SUs) the primary mechanism for addressing compliance deficits; and introducing an industry-led “direct contribution” as a global financing mechanism.

Opportunity Green highlights four interconnected risks for IMO member states in this scenario:

1. Scrapping a just and equitable transition: A global IMO Fund is the tool to ensure climate vulnerable developing countries are supported in shipping’s clean transition, which countries committed to under the Revised Strategy. As it stands, the NZF would generate $10-15bn in additional, predictable compliance revenue to help countries meet their needs: investments in zero-emission ship technologies and energy and more resilient trade infrastructure. Removing the Fund also means losing the enforcement mechanism for the Framework.
2. Depriving countries of the power to shape the maritime transition: Replacing the Fund with “direct contributions”, a system where companies are in charge of deciding where revenues are directed, effectively transfers decision-making power to companies. It could result in larger fleet owners paying compliance revenues back into their own supply chains and infrastructure, as opposed towards the needs of the global sector or climate vulnerable developing countries.
3. Weakening incentives for zero-emission energy: Using SUs for compliance would undermine incentives for early uptake of zero-emission energy and fuels, allowing companies to effectively pay to pollute instead of investing in their transition.
4. Undermining emission reduction: Weak incentives for zero-emission energy and fuels would also mean prolonged use of high-emitting fuels such as fossil-based liquefied natural gas (LNG) and biofuels in the industry. This would mean shipping cannot meet the emission reduction targets countries have committed to.

At the upcoming round of negotiations in November and December, countries are urged to retain key principles of the NZF and adopt the agreement in its current form to keep a fighting chance of meeting the IMO Revised Strategy and support states in meeting their international legal obligations on climate change.

Em Fenton, Senior Director at Opportunity Green, said:

“Under Japan’s proposal, countries would be forced to concede the power to shape the global maritime transition to the private sector, with no safeguards or guarantees to deliver justice and equity. It’s like giving up the driving seat and letting big businesses not just hold the wheel but also pick the route. The ones set to lose the most are climate vulnerable and developing countries in the global majority. The Net-Zero Framework as agreed in April last year is the best, fairest and most effective solution on the table that can still drive the clean transition.”