Overview of the IMO Net-Zero Framework

The International Maritime Organization (IMO) Net-Zero Framework (NZF) is a proposed set of legally binding international regulations aimed at reducing greenhouse gas (GHG) emissions from the global shipping industry.

The NZF was developed through multilateral negotiations, including a rare vote at MEPC 83 due to lack of consensus (e.g., the US withdrew, citing unfair burdens). It is scheduled for formal adoption at an extraordinary MEPC session (MEPC ES.2) in October 2025, with entry into force expected 16 months later (around March 2027) under the tacit acceptance procedure. Compliance begins in 2028, with annual reporting starting in 2029.

The framework applies to ships over 5,000 gross tonnage (GT) on international voyages—responsible for about 85% of shipping’s CO₂ emissions—excluding domestic-only ships, non-mechanically propelled vessels, and certain platforms like FPSOs. Responsibility lies with the “Company” (e.g., shipowner or operator under the ISM Code). Enforcement will be by port states, with a digital IMO GHG Fuel Intensity (GFI) Registry to track compliance.

Key Components of the Framework

The NZF combines a technical fuel standard with an economic pricing mechanism to incentivize the shift from fossil fuels to lower-emission alternatives.

Emissions are measured on a “well-to-wake” (WTW) basis, covering the full lifecycle from fuel production to onboard use, using grams of CO₂ equivalent per megajoule (gCO₂eq/MJ). The 2008 baseline for fossil fuels is 93.3 gCO₂eq/MJ. Fuels must be certified via an IMO-recognized sustainable scheme for accuracy and traceability.

1. Global Fuel Standard (GFS):
   • Ships must reduce their annual GHG Fuel Intensity (GFI)—emissions per unit of energy used—through phased targets.
   • Two tiers of compliance:
     • Base Target (Tier 1): A lower threshold to encourage gradual improvement (e.g., 4% reduction in 2028, rising to 30% by 2035). Non-compliance here incurs a lower penalty to generate revenue without overly burdening the industry.
     • Direct Compliance Target (Tier 2): A stricter “hard cap” (e.g., 17% reduction in 2028, rising to 43% by 2035). All ships must meet this; exceeding it creates a deficit, while under-compliance earns Surplus Units (SUs).
   • Targets tighten over time, reviewed every five years, to drive adoption of zero/near-zero GHG (ZNZ) energy sources (e.g., e-fuels like green ammonia or methanol, wind-assisted propulsion, electric power, or onboard carbon capture). ZNZ fuels are defined with a threshold (e.g., <19 gCO₂eq/MJ until 2034, tightening to <14 gCO₂eq/MJ from 2035), plus sustainability criteria.
2. Economic Mechanism and IMO Net-Zero Fund:
   • Ships in deficit buy Remedial Units (RUs) from the IMO Net-Zero Fund at tiered prices (e.g., $100/tonne CO₂eq for Tier 1 and $380/tonne for Tier 2 in 2028–2030; prices reviewed post-2030).
   • SUs from over-compliant ships can be banked (up to 2 years), transferred (sold once) to deficit ships (limited to Tier 2 deficits), or voluntarily cancelled. This creates a limited carbon trading system.
   • Revenues (estimated $10–15 billion annually) fund:
     • Rewards for ZNZ use (to close the cost gap with fossil fuels).
     • Just transition support: Innovation, R&D, infrastructure, training, and capacity building, especially for developing countries, Least Developed Countries (LDCs), and Small Island Developing States (SIDS).
     • Mitigation of climate impacts on vulnerable nations.
   • Administrative costs are covered, with guidelines for disbursement due by March 2027.

Year	Base Target Reduction (%)	Direct Compliance Target Reduction (%)
2028	4%	17%
2030	~10%	~21%
2035	30%	43%

The framework is technology-neutral but emphasizes scalable ZNZ pathways to avoid emissions leakage.

Aims and Goals

The primary aim of the NZF is to achieve net-zero GHG emissions from international shipping “by or around, i.e., close to, 2050,” aligning with the Paris Agreement’s 1.5°C pathway while supporting the UN Sustainable Development Goals. It addresses shipping’s ~3% share of global GHG emissions by preventing shifts to other sectors and ensuring a level playing field through global enforcement.Specific goals from the 2023 IMO GHG Strategy include:

• Emissions Reductions: At least 20% (striving for 30%) by 2030 and 70% (striving for 80%) by 2040, compared to 2008 levels.
• Carbon Intensity: At least 40% reduction by 2030 (CO₂ per transport work).
• ZNZ Uptake: Zero/near-zero GHG fuels/technologies to supply at least 5% (striving for 10%) of shipping energy by 2030, scaling to full decarbonization by 2050.
• Just and Equitable Transition: Support vulnerable states via revenue sharing, technology transfer, and capacity building to avoid disproportionate burdens on LDCs and SIDS. This includes addressing food security and economic impacts.
• Broader Objectives: Accelerate innovation in alternative fuels (e.g., biofuels, hydrogen-based e-fuels), promote energy efficiency, and integrate with existing measures like the EU ETS/FuelEU Maritime without double-charging.

Critics (e.g., Transport & Environment) argue the framework may only achieve 8–10% reductions by 2030, falling short of ambitions due to lenient targets, potential biofuel loopholes (e.g., ignoring indirect land-use change), and low initial penalties. However, it provides predictability for investments (estimated $1 trillion needed by 2050) and signals urgency for the industry to transition now. The IMO emphasizes ongoing refinements to strengthen ambition. For more details please visit IMO’s website at https://www.imo.org

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