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

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

Read regulation 39.1 as it is written, because the wording carries as much as the numbers. The GFI threshold for zero or near-zero GHG emission technologies, fuels and energy sources, ZNZs, "shall be set at not greater than 19.0 gCO2eq/MJ for an initial period until 31 December 2034, and from 1 January 2035 ... not greater than 14.0 gCO2eq/MJ" (MMMCZCS framework hub). Three things follow.

These are ceilings, not lines already drawn. "Not greater than" tells the Committee how strict the threshold must be at a minimum when it fixes the operative value in guidelines. The regulation rules out anything looser than 19.0; it does not promise exactly 19.0. Quote it as a ceiling in any paper someone will act on.

The dates are calendar-precise. 19.0 governs the initial period until 31 December 2034 and 14.0 applies from 1 January 2035, so a delivery either side of that new year is judged against a different bar.

ZNZ is not only fuels. The definition covers "technologies, fuels and energy sources", which puts wind propulsion and shore power in the same category as green ammonia, and the Committee may approve additional ZNZs later. Set the ceilings against the 93.3 reference and the first 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 synthesised 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 subsidising the previous decade's winners.

The reward, and the fund that pays it

This is where the text is thinnest, and it is worth knowing how thin. Regulation 39.2 says ships "may receive rewards from the IMO Net-Zero Fund for the ZNZs used, taking into account guidelines to be developed" (IMO FAQ). May, and guidelines to be developed: no rate, no formula, no entitlement. Regulation 39.3 then requires the Committee to define the reward and the methodology for calculating it no later than 1 March 2027.

Do not plan against that date. The instrument containing it has not been adopted, so the deadline binds nobody, and the substance behind it is genuinely unsettled: at ISWG-GHG 21 the working group was still split between a flat rate determined by the IMO and a reverse-auction mechanism, and the IMO's own technical officer, briefing an ISCC conference on 10 June 2026, said that all options stay on the table for now, though convergence might come easier around an IMO-determined rate at first (IMO presentation, June 2026). Those two designs pay very different money to the same ship, and they differ exactly where it hurts: a flat rate is bankable when a newbuild is ordered, an auction price is not known until the auction clears.

The design intent is clear even where the mechanism is not: narrow the price gap between ZNZ fuels and conventional bunkers from both ends. The tier prices would raise the cost of staying dirty; the reward would lower the cost of going clean; the gap a shipowner actually faces is the distance between the two. Today only one of those two halves has a number attached to it.

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, and with an explicit mandate to keep assessing the framework's possible effects on food security.

That last clause is not decoration. Much of what a bulk carrier moves is grain and fertiliser, and much of the ZNZ fuel supply the framework is trying to call into existence competes for the same ammonia plants, arable land and clean electricity that feed people. The drafters wrote the tension into the Fund's terms of reference rather than pretending it away.

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.