The Numbers: One Reference, Two Ladders, Two Prices
Every regulation eventually comes down to a handful of numbers someone in your office will have to defend in a budget meeting. The framework has five that matter: one reference, two target ladders, and two prices.
The reference: 93.3
The anchor for everything is 93.3 gCO2eq/MJ: the well-to-wake GHG fuel intensity of the average energy used by international shipping in 2008. Every target in the framework is written as a percentage reduction from this single value. For calibration: conventional fuel oil sits in the low-to-mid nineties well-to-wake, which is to say the world fleet of 2008 burned almost nothing else, and a ship burning only fuel oil operates at roughly the reference to this day.
Two ladders, not one
Each compliance year carries two targets, both carved from 93.3 (DNV's GFI explainer):
| Year | Base target | Direct compliance target |
|---|---|---|
| 2028 | 4% below → ~89.6 | 17% below → ~77.4 |
| 2035 | 30% below → ~65.3 | 43% below → ~53.2 |
| 2040 | 65% below → ~32.7 | to be set at review |
The ladders step year by year between those anchors, and the direct compliance ladder beyond 2035 is left for a later MEPC to fix. Two ladders create three zones, and the zone your attained GFI lands in decides what the year costs:
- At or below the direct compliance target: fully compliant, and the margin below the target becomes surplus units (SUs), tonne for tonne of CO2-equivalent avoided.
- Between the two ladders: a Tier 1 deficit: the shortfall against the direct target, priced at USD 100 per tCO2eq.
- Above the base target: the portion above the base ladder is a Tier 2 deficit at USD 380 per tCO2eq, stacked on top of the full Tier 1 band beneath it.
Both prices are fixed in the approved text for 2028–2030; later prices are left to the MEPC. The deficits are settled by acquiring remedial units : the money flows to the Net-Zero Fund (lesson 4).
Run the fuel-oil ship through 2028 to see the design's intent. At an attained GFI of roughly the reference, she is above the base target from day one: a thin Tier 2 band (93.3 down to 89.6) at the painful price, and the full Tier 1 band (89.6 down to 77.4) at the moderate one. The expensive tier bites first and shallowly: a deliberate early-years signal that says start moving rather than shut down. By the mid-2030s the same ship's Tier 2 band has grown wide, and the signal says something much louder.
Surplus units: the market half
Surplus units are what turn the standard into a market. A ship that beats the direct compliance ladder, say a methanol dual-fuel newbuild running a large green-methanol fraction, banks SUs within a validity window or transfers them to other ships, including ships in someone else's fleet, for whatever price the two parties agree (MMMCZCS framework hub).
The tier prices then act as guardrails on that market. Nobody pays more for an SU than the remedial unit that would cover the same deficit, so USD 100 is a practical ceiling for covering Tier 1 shortfalls and USD 380 for the Tier 2 band. Below those ceilings, price finds its level on supply: the more over-compliant tonnage exists, the cheaper compliance becomes for everyone else. If that logic feels familiar, it should: FuelEU Maritime's pooling works on the same principle, and lesson 5 leans on the comparison.
Two habits to take from this lesson. First, always convert percentages to absolute intensities before reasoning about fuels"30% below reference" is 65.3 gCO2eq/MJ, a number you can hold up against a bunker delivery note. Second, remember which ladder a quoted target belongs to. The gap between base and direct compliance is not pedantry; it is the difference between paying USD 100 and USD 380 per tonne, which across a VLCC's annual consumption is the kind of difference boards notice.