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On April 11, 2025, the International Maritime Organization (IMO) Marine Environment Protection Committee (MEPC) approved a draft Net-Zero Framework aimed at achieving net-zero greenhouse gas (GHG) emissions in the shipping industry by or around 2050. If formally adopted by the IMO in October 2025, the new rules will come into force by 2027 and be included in Annex VI of the International Convention for the Prevention of Pollution from Ships.

The Net-Zero Framework sets mandatory GHG fuel intensity (GFI) reduction targets for large ships over 5,000 gross tonnage engaged in international shipping (i.e., beyond the jurisdiction of the flag state), which account for 85% of total emissions from international shipping. The GFI refers to how much GHG is emitted per unit of energy used. The GFI reduction targets are calculated on a well-to-wake basis (i.e., covering full lifecycle emissions) and applied against a 2008 baseline of 93.3 gCO2eq/MJ. The targets do not exclude or limit the use of any type of fuel.

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An in-scope ship will be required to meet two annual GFI reduction targets:

The “direct compliance target” (DC target) requires a 17% GFI reduction by 2028, increasing annually to 43% by 2035.

Until 2030, a ship that fails to meet the DC target must purchase remedial units (Tier 1 RUs) at a cost of 100 USD per ton of CO2eq to the extent its GFI is below this target (the price of post-2030 Tier 1 RUs will be defined at a later stage).

Conversely, a ship with GFI that performs better than the DC target can earn surplus units (SUs), which can be used to meet the base target (below), thereby garnering rewards for its GFI performance beyond the target. These SUs can be (i) banked to achieve future base target compliance by the same ship, (ii) transferred or sold to another ship to help it to comply with the base target, or (iii) canceled voluntarily as mitigation contributions to the IMO Net-Zero Fund. An SU may be used only once for one of these purposes, and it is valid for only two years.

The “base target” is less stringent and mandates a 4% GFI reduction by 2028, increasing each year thereafter to 30% by 2035.

Until 2030, a ship with GFI that fails to meet the base target must purchase remedial units (Tier 2 RUs) at a cost of 380 USD per ton of CO2eq to the extent its GFI is below the target (the price of post-2030 Tier RUs will be defined at a later stage). Alternatively, to comply with the base target, a ship could purchase surplus units (SUs) from another ship that exceeds the direct compliance target (above) or use its own SUs banked from previous years.

An IMO Net-Zero Fund will be established, financed by GHG emission pricing contributions from ships, that is by the Tier 1 RUs and Tier 2 RUs. The revenue will be disbursed for these purposes:

• To incentivize the uptake of low-emission fuel solutions. Specifically, ships using zero or near-zero GHG emission technologies, fuels, and/or other energy sources (ZNZs) with a GFI below 19 gCO2eq/MJ (and below 14 gCO2eq/MJ from 2035 onward) will be eligible to receive awards from the fund, with the award level still to be determined.
• To provide “sufficient revenue,” with particular attention to the needs of developing countries, in particular least developed countries (LDCs) and small island developing states (SIDS), for (i) research and development for, and global deployment of, ZNZs; (ii) just transition; (iii) technology transfer, capacity building, and training; (iv) implementation of national action plans; and (v) mitigation of negative effects, including on food security.

If adopted, the IMO Net-Zero Framework will define a new era for international shipping, setting mandatory GFI targets, with financial repercussions for ships that cannot meet these markets and financial transfers toward clean technologies and developing countries. The framework, thereby, aims to stimulate investments in cleaner fuels and technologies and reduce the carbon footprint of international shipping.

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