Delegates from governments around the world have progressed the shipping industry’s plan to get to net zero greenhouse gas emissions by in an industry world-first set of mandatory emissions limits and greenhouse gas pricing across a whole sector.
The recent session of the Maritime Environment Protection Committee at the International Maritime Organization, a UN agency based in London UK, was unusual as several Member States had declared that they rejected the regulations. A rare, formal, vote was held with the outcome of 63 countries in favour against 16% opposed, which is a 79% majority in favour. Class Society Lloyd’s Register comments that it is likely that a “second vote will be held at the extraordinary session [of the IMO] in October where a 2/3 majority of the MARPOL Annex VI parties will need to vote positively for the regulations to enter into force”.
If that vote passes, then the new measures will enter into force in March or April 2027.
Delegates to the IMO have voted-in the IMO Net Zero Framework, which will be included in a new Chapter 5 of Annex VI (Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships (which is known as “MARPOL”).
Global shipping is subject to a requirement to cut the sector’s carbon intensity (defined as carbon dioxide equivalent emissions per transport work done) by at least 40% by 2030 as compared to 2008, and to have net-zero shipping by, or about, 2050. The requirement was adopted at the IMO in July 2023 at MEPC 80.
The new measures, assuming they are formally adopted in October 2025, will become mandatory for ocean-going ship over 5,000 gross tons in 2027. These vessels emit 85% of the total carbon dioxide emissions from international shipping. There are some exceptions, e.g. for ships solely operating in the waters of their flag states, ships not propelled by mechanical means, and various others.
Global fuel standard
A new global fuel standard will be created. We go into it in a bit more detail in our other article, but, in essence, ships have to work out how much greenhouse gas pollution is emitted from all the different types of fuel that they have burned, alongside all the emissions involved in producing and transporting the fuel to the ship. And that’s then all divided by the total amount of energy used in a given reporting period.
This is the “attained” Global Fuel Intensity indicator (GFI). Once ships have calculated that GFI, they have to meet and preferably beat a reference benchmark. That benchmark is based on the average of the 2008 fleet, and, here’s the key point, the benchmark gets tougher to meet every year until it reaches about zero in about 2050.
Global economic measure
The second main part of the new measure is that ships that beat the target generate credits called “Surplus Units” that can be transferred to ships that don’t beat the target. Ship operators can transfer Surplus Units across ships in their fleet, bank Surplus Units for use in later years, or sell them to other operators. We understand that the price of Surplus Units will be determined by the market.
Alternatively, non-compliant ships can buy “Remedial Units” from the IMO Net Zero fund.
Look, there’s a fair bit more to discuss in relation to all of this in terms of Remedial Units, Surplus Units, Tier 1 and 2 Deficits etc. It’s all a bit complicated and we explain it in our other article: “Explainer: the IMO’s new global fuel standard, economic measure, and how it will likely force ships out of service“.
It’s clear that the intention here is to make greener ships cheaper to operate over time and more conventionally powered ships more expensive to operate over time, especially as ships that initially meet the targets now might not meet the target in the future. It’s likely that such a system will create incentives to operate conventionally powered ships in a less fuel-thirsty manner (maybe by slowing them down, adding gadgets like Mewis ducts etc). And its possible such a system could push older ships into the scrapyard sooner than initially planned. It will also create disincentives to buy conventionally powered ships in the future and incentives to buy greener ships.
IMO Net Zero Fund
Additionally, delegates to the IMO MEPC have authorised the creation of a “Net Zero Fund” that will collect pricing contributions from emissions. According to the IMO, these revenues will then be used to reward low emissions ships; support a variety of programs in relation to innovation, research, or infrastructure; fund training, technology transfer and capacity building; and mitigate negative impacts on vulnerable countries.
Secretary General Dominguez: “not in the way we expected – but we have an agreement”
Addressing the Committee at the end of the week-long meeting, the IMO Secretary General, Arsenio Dominguez, congratulated the dignitaries.
“Your collective efforts have yielded progress this week, resulting in a number of achievements that will shape the future of shipping. These landmark accomplishments reflect both your unwavering commitment to our shared goals and your ability to forge meaningful consensus in the face of complex challenges. I wish to most of all commend the extraordinary spirit of cooperation and commitment demonstrated throughout this week. The approval of draft amendments to MARPOL Annex VI mandating the IMO net-zero framework represents another step in our collective efforts to combat climate change, to modernize shipping and demonstrates that IMO delivers on its commitments. Perhaps not in the way we expected – but we have an agreement on the basis on which we can work”.
