Introduction
International shipping which is crucial for global trade, is responsible for about 3% of global greenhouse gas (GHG) emissions.
In the context of tackling the harmful effects of climate change, and to reduce greenhouse gas emissions, the International Maritime Organization (IMO) has recently taken very bold steps to arrive at net zero emissions in international shipping.
The IMO is a United Nations specialised agency, with its headquarters in London, and is the competent international organisation to regulate international shipping: namely responsible for SOLAS and MARPOL regulations.
It adopted its 2023 IMO Strategy on Reduction of GHG Emissions from Ships, the so-called IMO Net Zero Framework.
This strategy aims to achieve net-zero emissions from international shipping by around 2050 in different stages by implementing provisions:
- To reduce carbon emissions from ships in various target dates;
- To charge a system of tariffs on Co2 emissions from ships and
- To reward companies meeting its targets.
The 2023 IMO GHG Strategy: Context and Legal Foundation
The 2023 Strategy, adopted during the 80th session of the Marine Environment Protection Committee (MEPC 80), sets goals to reduce emissions by at least 20% by 2030 and 70% by 2040, compared to 2008 levels. It also aims for zero or near-zero GHG fuels to make up at least 5% of total energy use by 2030. The strategy emphasises a fair transition, capacity building, and technical cooperation, especially for Least Developed Countries (LDCs) and Small Island Developing States (SIDS).
Regulatory Framework: Amendments to MARPOL Annex VI
The Net-Zero Framework includes radical amendments to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL).
These changes are expected to be adopted this coming October 2025 and which will come into force in 2027. They will apply to ocean-going ships of over 5,000 gross tonnage (GT), which account for 85% of international shipping CO2 emissions.
The Proposed Regulatory Measures
The IMO net zero regulations for global shipping will adopt the Global Fuel Standard. This will require ships to reduce their GHG Fuel Intensity (GFI) in phases, with targets set for 2028 and 2035. Ships which exceed these targets will have to purchase Remedial Units (RUs), while those that overachieve can trade Surplus Units (SUs), tradable once between ships or usable against future deficits.
This global fuel standard mechanism is similar to, but seems to overlap with the EU's ETS, Emissions Trading Allowances and Notification.
The IMO net zero framework regulations will also create a system, imposing tariffs on ships for their CO2 emissions, in addition to phasing out greenhouse gas emissions from international shipping.
Ships surpassing the Base Target will have to acquire Tier 2 RUs at USD 380 per ton CO2-equivalent.
Ships failing the Direct Compliance Target must obtain Tier 1 RUs at USD 100 per ton CO2-equivalent.
Revenue from RU sales will fund the IMO Net-Zero Fund. This Fund will be basically set up to reward low-emission ships and to promote early compliance of zero/near-zero emission fuels, support research, innovation, infrastructure, and capacity building in Least Developed Countries (LDCs) and Small Island Developing States (SIDS).
This will also serve to cushion the adverse impacts on vulnerable States, by the adoption of the IMO Strategy to eliminate emissions by 2050.
Compliance and Enforcement Mechanisms under the IMO NET Zero Regulations
Ships will have to report their annual emissions performance, which will be audited and reviewed in accordance with IMO procedures.
In case of non-compliance with the targets, Remedial Units will have to be purchased in order to offset emissions.
The IMO framework uses a "well-to-wake" assessment
model to cover emissions across the entire fuel lifecycle. RU
prices will have to be reviewed every three years to align
with
market conditions.
Role of the IMO Net-Zero Fund
The IMO Net-Zero Trust Fund is intended to ensure a fair distribution of financial incentives, the sharing of technology developments, and to provide financial assistance to those states which will be mostly adversely affected by such decarbonisation measures.
There are calls for the IMO to provide greater clarity on how the financial incentives will be meted out in practice.
While penalties for emissions are well defined with the RU system, the International Chamber of Shipping (ICS) has emphasised that the financial incentives are critical for fuel producers to invest in green fuel infrastructure.
The ICS also recommended less discretionary terms in the regulations, and to address any legal ambiguities in order to have a more certain regulatory environment.
Legal and Commercial Implications especially for EU Ship Registers
The IMO Net-Zero Framework, however, will certainly be an added burden on EU member states which are currently grappling with the EU Emissions Trading system.
Unless there is an equitable adjustment in the EU Emissions Trading System, vis a vis the IMO Net zero framework, EU Union flag vessels will be faced with a double set of parallel tariffs, that will render EU flag registers totally un-competitive, compared to other competing non-Union Registries.
Without proper co-ordination between the EU and the IMO, we may unfortunately experience an exodus of EU registered ships, to international Ship Registers outside the EU.
The International Chamber of Shipping also expressed its concerns and called for harmonisation between the EU Emissions Trading System and the IMO Net Zero, to preserve the viability of European Maritime Registers.
It is very important for the EU, that a solution is found. Otherwise, we may see a depletion of EU Shipping fleet. To date however, no proposals have yet been made.
Strong opposition against the IMO NET Zero framework:
The United States is one of the principal opponents, against the IMO's Net Zero project.
In an August 2025 joint statement by the Secretary of State, Commerce, Energy and Transportation the Trump Administration vociferously rejected the proposed IMO amendment NET Zero regulations, as largely bureaucratic and a waste of money and resources. It stated that its focus is to avoid the increase in costs for U.S. citizens and U.S. businesses, energy providers, shipping companies and the tourism sector.
The United States threatened that it will also consider taking retaliatory measures against states supporting the IMO Net Zero framework. The U.S. had already withdrawn from negotiations in April, and actively advised other IMO members to re-consider their endorsement.
Whilst the U.S. cannot block its adoption, its lack of support will surely undermine the success of this project.
Conclusion
The IMO's decarbonisation initiative by 2050 (the Net-Zero Framework) represents a landmark development in international maritime law.
As one can appreciate, there are significant challenges ahead. It does not make sense for EU flagged ships to be faced with overlapping compliance costs. The EU Emissions Trading and the IMO Net Zero framework need to be adjusted to avert any unnecessary burdens.
Furthermore, we will have to wait and see whether the lack of U.S. support will delay the IMO Net Zero framework's adoption and effectiveness and whether there will be any counter political developments which will gain momentum against decarbonisation for reasons of economy, and growth of business.
This article was co-authored by Matteo Fugazza
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
