Zero and Near-Zero Fuels and the Net-Zero Fund

6 min read

What you'll take away Define the ZNZ threshold and its 2035 tightening, explain which fuel pathways can meet it, and describe what the IMO Net-Zero Fund would collect and pay for.

The target ladders in lesson 3 are the framework's stick. This lesson is the carrot: a defined class of fuels good enough to earn money rather than merely avoid paying it, and a fund to pay them from.

What counts as zero or near-zero

The framework draws a hard line: a fuel or energy source is zero or near-zero (ZNZ) if its certified well-to-wake GFI is at most 19.0 gCO2eq/MJ, tightening to 14.0 gCO2eq/MJ from 2035 (MMMCZCS framework hub). Set that against the 93.3 reference: the first threshold is roughly an 80% reduction, the second roughly 85%. This is not "cleaner than fuel oil" it is close to actually clean.

The crucial word is certified. ZNZ is a number attached to a fuel pathway under the IMO's life-cycle assessment guidelines, not a label attached to a molecule. Ammonia synthesized with renewable electricity can clear 19.0; ammonia made from unabated natural gas cannot: identical molecule, entirely different well-to-wake story. The same split runs through methanol, hydrogen and diesel-like e-fuels, and biofuels qualify or fail on feedstock and land-use accounting. Fossil LNG, methane slip included, is not in the conversation: it can trim a ship's attained GFI against fuel oil, but it sits several times above the threshold. What these pathways are, how they are made and what they cost is the territory of our Alternative Fuels course; here, what matters is the line they must get under.

Why does the threshold step down in 2035? Because the rest of the framework is moving. By the mid-2030s the direct compliance ladder itself approaches 53 gCO2eq/MJ, and a 19.0 fuel, remarkable in 2028, is merely good. Tightening to 14.0 keeps the reward pointed at the pathways the 2040s will actually need, rather than subsidizing the previous decade's winners.

The reward, and the fund that pays it

Ships using ZNZ fuels would be eligible for financial rewards per unit of ZNZ energy used, paid from the IMO Net-Zero Fund (IMO FAQ). The reward rate itself is not fixed in the approved text: it is left for the MEPC to set, one of the implementation decisions still in the pipeline while adoption is pending. The design intent, though, is explicit: narrow the price gap between ZNZ fuels and conventional bunkers from both ends. The tier prices raise the cost of staying dirty; the reward lowers the cost of going clean; the gap a shipowner actually faces is the distance between the two.

The Fund's income is the remedial-unit money: the Tier 1 and Tier 2 contributions from ships that missed their targets (lesson 3). Its outgoings, as set out in the approved text, fall into three families:

  • rewards to ships for ZNZ fuel and energy use;
  • transition support: innovation, research, demonstration, and bunkering and supply infrastructure, with attention to developing countries;
  • impact mitigation: addressing disproportionate negative impacts on vulnerable states, small island developing states and least developed countries chief among them, alongside training and technology cooperation.
money in money out Ships in deficit remedial units USD 100 · Tier 1 USD 380 · Tier 2 IMO Net-Zero Fund Rewards for ZNZ energy use certified GFI at most 19.0, then 14.0 from 2035 Transition support innovation, R&D, bunkering supply Impact mitigation SIDS, LDCs, training, technology The reward rate is not fixed in the approved text: the MEPC would set it.
The Fund is a closed loop: deficits pay in at the tier prices, and the money leaves along three routes. Eligibility for the reward is a certified well-to-wake number, not a fuel family, which is why the pathway documentation matters more than the product name.

That third family is easy for a commercial reader to skim past and a mistake to ignore: the fairness of the distribution is one of the issues on which member states diverged in the adoption debate (lesson 6). The Fund is not a side pocket; it is the political heart of the bargain.

For a shipowner, the practical readings are these. First, ZNZ eligibility is a certification question: start asking fuel suppliers for pathway documentation, not just product names. Second, the reward means a ZNZ business case cannot be evaluated on bunker price alone: a fuel that looks uneconomic against USD-per-tonne comparisons may close much of the gap once avoided remedial units, earned surplus units and Fund rewards are all on the same spreadsheet. Third, timing matters: while ZNZ supply is scarce, the ships able to burn it capture reward money and surplus-unit value at their richest, and both thin out as the rest of the fleet catches up. That spreadsheet, all four revenue and cost lines on one page, is exactly where the next lesson goes.

Check yourself

1. A fuel qualifies as zero or near-zero (ZNZ) when its well-to-wake GFI is at most what, before 2035?
2. From 2035, the ZNZ threshold tightens to what value?
3. What determines whether a specific batch of fuel counts as ZNZ?
4. The Net-Zero Fund's income would come from where?
5. Why does the ZNZ threshold tighten in 2035?
6. The Net-Zero Fund is intended to pay for which of these?

Select all that apply.

7. Fossil LNG qualifies as a ZNZ fuel under the 19.0 gCO2eq/MJ threshold.
8. What is the ZNZ threshold before 2035, in gCO2eq/MJ?
gCO2eq/MJ