The United Nations’ specialised agency for shipping, the International Maritime Organisation (IMO), has for the first time agreed on a system that will put a price tag on the global shipping industry’s greenhouse gas emissions.
The “IMO Net-Zero Framework” is the first system of its kind to include mandatory emissions-intensity limits and carbon pricing across an entire global industrial sector.
The move seeks to create a financial incentive for shipping companies to reduce their greenhouse gas (GHG) emissions through measures such as adopting more energy-efficient engines and cleaner fuels.
Why does the IMO’s framework matter?
Shipping is an essential part of the modern global economy. The supply of goods around the world simply could not be achieved at anything like the current scale with any other mode of transport.
However, most ships are powered by what is known as ‘bunker fuels.’ These fuels are typically Heavy Fuel Oil (HFO), Marine Gas Oil (MGO) and Marine Diesel Oil (MDO). These are carbon-intensive fuels used in the combustion process to drive ship engines. As a result, the shipping sector contributes about 3% of total global emissions – a significant share.
With rising atmospheric CO2 concentrations threatening to trigger more intense heat waves, droughts and floods, the sector has been under pressure to take action to reduce its contribution to climate change. You can find out more about shipping emissions here: Decarbonising the Shipping Industry – Carbonwise
The latest regulations — which were approved by the IMO’s Marine Environment Protection Committee in April 2025 — include a new fuel standard for ships and a global pricing mechanism for emissions.
The new draft framework for global shipping emissions is set to be formally adopted in October 2025 and will enter into force in 2027.
The regulations will become mandatory for large ocean-going ships over 5,000 gross tonnage, which together emit 85% of the total CO2 emissions from international shipping.
The goal of the new regulation is to achieve the climate targets set out in the “2023 IMO Strategy on the Reduction of GHG Emissions from Ships.” These include accelerating the introduction of zero and near-zero GHG fuels, technologies and energy sources, and to support a just and equitable transition, according to the IMO.
How will the new regulation work?
The new regulations for shipping involve both a ‘carrot’ and ‘stick’ approach to reducing emissions – that is, they will provide rewards for those that adopt cleaner technology or fuels, and introduce penalties for the most emissions-intensive operators.
Shipping companies will be required to reduce over time their greenhouse gas fuel intensity (GFI), which means reducing emissions per unit of energy consumed, on a ‘well-to-wake’ basis (full life-cycle of the fuel from production to combustion).
Ships emitting above the GFI thresholds will need to acquire emissions units known as “Remedial Units” (RUs) to cover their emissions deficit, while those adopting zero or near-zero GHG technologies will be eligible for financial rewards.
Under this framework, two compliance tiers have been established, which create emissions intensity targets based in a 2008 baseline of 93.3 gCO2e per megajoule (MJ) of energy consumed:
- Tier 2 (Base Target): requires a 4% GFI reduction by 2028, increasingly annually to 30% by 2035. The price of Remedial Units under Tier 2 will be $380 per tonne of CO2 equivalent.
- Tier 1 (Direct Compliance): is more stringent and requires a 17% GFI reduction by 2028, rising to 43% by 2035. The price of Remedial Units under Tier 1 will be $100 per tonne of CO2e.
To allow for compliance flexibility, shipping companies will be able to bank or transfer units under Tier 2 or purchase RUs at the above fixed prices.
This means that an operator that achieves an overcompliance with the Direct Compliance target can earn Surplus Units (SUs) which can be spent, banked for up to two years, or sold to other operators.
The framework will involve the collection of pricing contributions from shipping emissions that will be held in the IMO Net-Zero Fund. These revenues will then be disbursed to reward companies operating lower-emissions ships; and to support innovation, research, infrastructure and just transition initiatives in developing countries.
The funds will also be used to support training, technology transfer and capacity building to support the IMO GHG Strategy, and to mitigate the negative impacts on vulnerable states such as small island developing states and the least developed countries.
Aviation and maritime emissions dealt with separately
GHG emissions from aviation and shipping are international in nature and do not easily lend themselves to regulation under the national emissions accounting systems that underpin the Paris Agreement and its predecessor, the Kyoto Protocol.
For example, there would be difficulties in establishing fair responsibility for emissions resulting from a flight or sea voyage between two countries.
For this reason, countries agreed under Kyoto and the Paris Agreement to seek ways to reduce emissions from aviation and shipping through the UN’s International Civil Aviation Organisation (ICAO) and International Maritime Organisation (IMO), respectively.
The IMO has set a long-term target to reduce GHG emissions to net zero by or around 2050, with interim targets to reduce emissions by 20% by 2030, and 70% by 2040.
What can shipping companies actually do to cut emissions?
The IMO’s Net-Zero Framework is expected to accelerate a revolution in how ships are powered and operated.
Shipping operators can already make use of:
- Improved power and propeller enhancements to improve operational efficiency and reduce emissions
- Advanced hull coatings to reduce drag
- Optimised navigation systems such as voyage optimization and fleet management
- Sustainable marine fuels such as bio-LNG/LPG, biofuels, full electric power, methanol, ammonia and other synthetic fuels
- Integration of wind propulsion systems to reduce fuel consumption
The IMO’s new framework is expected to create additional financial incentives that will encourage more shipping companies to adopt these innovative approaches to reducing emissions. Most of these cleaner fuels are more expensive than traditional shipping fuel, making them uncompetitive at today’s pricing. However, a scaling up of production could help reduce costs through economies of scale.
The introduction of the IMO’s framework is not expected to impact the inclusion of shipping emissions in the EU Emissions Trading System, which applies only to vessels traversing EU member state waters. The sector was brought into the EU ETS on January 1, 2024 and obligations for shipping companies to surrender carbon allowances are gradually being phased in over a three-year period ending in 2026. To find out more about shipping in the EU ETS, read: EU Rolls Out Major Carbon Market Expansion by Including Shipping – Carbonwise
A new era for shipping
The IMO’s new framework is fully aligned with the goals of the Paris Agreement, which requires global temperature increase to be limited to below 2 degrees Celsius above pre-industrial levels and ideally no more than 1.5 degrees C. To achieve this, the world needs to reach net zero emissions by 2050.
If fully adopted by governments as expected in October 2025, the IMO’s Net-Zero Framework will create a new era for shipping. The regulations for the first time include mandatory greenhouse gas fuel intensity targets which will have financial implications for ship operators that cannot meet the targets, while at the same time channeling finance toward cleaner technologies and developing countries.
