Fuel Transition Strategy and Cost Under the IMO Mid-Term Measure: Comparing Fuel Mix and Total Cost by Scenario
Compares fuel mix and total cost across three scenarios (non-compliance, base target, enhanced target) under the IMO mid-term measure, showing the regressive structure in which the most compliant path bears the highest near-term cost, and the need for government reward and support.
This contributed article quantifies, by scenario, what fuel-transition pathways actually emerge under the IMO mid-term measure (Net-Zero Framework) and how their costs diverge.
Background
At MEPC 83 in 2025 the IMO approved the mid-term measure, shifting regulation from an efficiency focus to absolute reduction and carbon pricing. Emissions above the fuel greenhouse-gas intensity (GFI) standard incur a remedial unit (RU) charge from $100 (Tier 1) to $380 (Tier 2) per tonne, or require buying surplus units (SU). Emission cuts have become a cost, not a choice. The question is whether that price signal is strong enough to actually drive a fuel switch.
Method and Scenarios
A linear-programming (LP) cost-optimization model is run on GISIS fuel data for 2019 to 2021 (15,387 vessels of 5,000 GT and above), reflecting fuel cost (OPEX) and a 10% annual switching cap, over 2028 to 2035. SU trading is excluded. Three scenarios are set by level of regulatory response: non-compliance, base target, and enhanced target.
Key Findings
| Scenario | Fuel mix (2035) | Cost structure |
|---|---|---|
| Non-compliance (BAU) | All fossil (HFO, MGO) | Lowest near-term, surging later as the levy accumulates |
| Base target | Half-plus fossil, e-ammonia 17.5% | $100 levy, middle and buffering |
| Enhanced target | Bio-methanol and green ammonia scale up, LNG 3.1% | No levy, highest near-term but stable long-term |
On fuel cost alone, the enhanced target runs about 60% above non-compliance in 2028, widening to about 120% by 2035, meaning the longer the delay, the more the same burden is compressed into a shorter span. But on total cost including the levy, the enhanced-versus-non-compliance gap narrows from 36% in 2028 to 25% in 2035, and the enhanced-versus-base gap shrinks from 34% to 1% by 2035, with a possible reversal. The most faithful path, the enhanced target, carries the highest near-term total cost, a regressive structure.
Discussion
The current RU structure alone struggles to drive a structural fuel switch. Yet its effectiveness can be restored by setting SU price and trading rules, raising the GFI reduction targets through 2040, and building a reward system for abatement. Since the fuel-cost gap is the biggest barrier, state support must run alongside: e-fuel production infrastructure, supply stability, fuel-cost subsidies, and simpler administration. Taking the base target as the starting point and phasing into the enhanced target is the most realistic course, satisfying both economics and flexibility. The transition is unavoidable, and now is the most advantageous moment to act.
Contributed to the Korea Maritime Cooperation Center (KMC) "International Trend for Maritime Decarbonization," Vol.15 (June 2025). Yumin Han (SFOC), Hyeryoun Chi (PLANiT).
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