IMO’s Net Zero Framework could bring higher penalties for shipowners even if they use solutions that consume less fuel and emit fewer greenhouse gas (GHG) emissions than alternatives.

That counter-intuitive finding is the result of comparing standard engine configurations used in two mainstream LNG-fuelled vessel types. The calculations, conducted by WinGD, show how using emissions intensity to calculate penalties—rather than using overall emissions could incentivise shipowners towards higher emitting technologies.

To avoid these unintended consequences—and to avoid disincentivising those existing in low emission technologies—regulations need to allow the use of actual emissions as a basis for calculating penalties, meanwhile ensuring that factors used to calculate emissions intensity are accurate and representative of actual emissions.

A step forward for maritime decarbonisation

WinGD fully supports the IMO’s Net Zero Framework, which is due to be formally adopted during an extraordinary session of the Marine Environment Protection Committee in October. The regulation will be a critical element in meeting the industry ambition of net zero emissions by or around 2050. A key goal of the regulation will be to incentivise development and uptake of the fuels and technologies that can help shipping reach this goal.

To understand the impact of IMO’s Net Zero Framework and GHG Fuel Intensity pricing mechanism, WinGD modelled two ship scenarios: a 174k LNG carrier; and an 8,000 TEU container vessel. In both cases, fuel consumption, emissions and IMO penalties were calculated for engine configurations—including main and auxiliary engines—based on WinGD's low-pressure X-DF dual-fuel LNG technology and competing high-pressure low-speed technology.

Unintended consequences

In all cases, the inherent fuel efficiency of configurations with X-DF main engines delivered lower total operating costs, comprising fuel cost and IMO penalties. The X-DF configurations also produced lower overall GHG emissions than their high-pressure counterparts.

However, the impact of the higher GHG intensity attributed to LNG used in low-pressure engines means that X-DF engines were exposed to higher penalties. In the case of the LNG carrier, these penalties roughly halved the total cost advantage of the X-DF configuration. In the case of the container vessel, the impact was even more significant.

The table below illustrates the modelling and how, for the same vessel application, an engine configuration that results in higher emissions can result in lower IMO penalties.

​	2 x low-pressure (Otto cycle) low-speed/two-stroke 5X72DF-2.2 VCR​	2 x high-pressure (Diesel cycle) low-speed/two-stroke counterpart	Difference, high-pressure counterpart vs X‑DF
Total annual energy consumption (GJ, ‘000)​	780.10​	850.49 ​	+9.0%
Total annual well-to-wake GHG emissions (t CO2e, ‘000)​	64.94​	69.46	+7.0%
Attained GHG fuel intensity​ (gCO2e/MJ)​	83.25​	81.67	-1.9%
Total penalties under IMO Net Zero Framework 2028-2035 (US$ million)	20.95	19.88	-5.1%
Total fuel cost 2028-2035 (US$ million)	58.69	64.36	+9.7%
Total operating costs (fuel and IMO penalties) 2028-2035 (US$ million)	79.64	84.24	+5.8%

^{Table 1: Fuel consumption, emissions and IMO penalties for alternative engine configurations for a 174,000m3 LNG carrier}

The cases clearly show that more fuel-efficient technology can be subjected to higher penalties under IMO's Net Zero Framework - effectively undermining recent investments that technology providers, fuel producers and shipowners have made in solutions that offer lower emissions.

Emissions intensity vs emissions

This is a result of using emissions intensity—or total emissions divided by fuel consumption—rather than overall emissions as a basis for calculating penalties.  In the scenarios above, LNG used in low-pressure engines has a higher emissions intensity due to its higher methane slip.

If a solution that produces lower emissions can be said to have a higher emissions intensity than one producing higher emissions, this indicates a misalignment in the factors used in the calculation—higher methane slip should not deliver higher emissions intensity if overall GHG emissions are lower.

WinGD is investing heavily to reduce methane emissions, from 1.7% of gas consumption less than a decade ago to under 0.7% today, and in many applications (such as those in the scenarios above) offers lower total GHG emissions than high-pressure engines. But these advances are not recognised by a penalty scheme based on the current emissions intensity calculations.

Without accurate emissions intensity calculations, penalties based on actual emissions at the funnel would be a more representative solution. The fact that the current calculations for emissions intensity can lead to such results risks blocking investment in the future development and uptake low-emission technologies, rather than incentivising them.