| IMO Net-Zero Framework:
Status of Discussions and Key Issues |

Discussions on the adoption of the consolidated amendments to MARPOL Annex VI for the introduction of the IMO Net-Zero Framework (NZF) were held during the second extraordinary session of the Marine Environment Protection Committee (MEPC ES.2) in October 2025. Although intensive deliberations tool place on the framework’s overall structure, reduction rates, market-based mechanisms, and potential industry impacts, member States were unable to reach a final consensus. As a result, the Committee decided, through a vote, to defer the decision on the adoption of the framework for one year.

This outcome demonstrates that significant differences in member States’ positions on the design of the ZNF remain unresolved, and it underscores the need for further consultations and coordination to achieve broader agreement.

The “2023 IMO Revised GHG Strategy”, adopted at MEPC 80, established the objective of achieving Net-Zero greenhouse gas (GHG) emissions from international shipping by 2050. It also confirmed the introduction of mid-term measures, incorporating both technical and economic elements, as key instruments for achieving this target. In this context, the NZF represents IMO’s flagship mid-term mechanism developed to implement the revised strategy. Its primary purpose is to accelerate the transition to low- and zero-carbon fuels by regulating the GHG intensity of marine fuels and thereby driving emission reductions across the global fleet.

The NZF is designed as a system to manage the Well-to-Wake (WtW) GHG intensity of fuels used in international shipping. The baseline is set at 93.3 gCO2eq/MJ, reflecting the WtW GHG intensity of international shipping in 2008. Based on this baseline, an annual reduction factor is applied, requiring ships to meet progressively more stringent GHG intensity limits each year.

The framework is structured around two key compliance components: the Direct Compliance Target and the Base Target. In principle, ships are expected to achieve the Direct Compliance Target primarily through the use of lower-GHG-intensity fuels or alternative energy sources. Where this is not feasible, the framework provides for alternative compliance options.

To support this approach, the NZF introduces a unit-based mechanism consisting of Remedial Units (RU) and Surplus Units (SU). Ships that exceed the Direct Compliance Target may generate SU, while those falling short are required to purchase RU to offset the deficit. This mechanism is intended to provide flexibility across the fleet and reflects the characteristics of a market-based approach that allows for diverse technical and operational compliance pathways.

Contributions generated through the purchase of RU are transferred to the IMO Net-Zero Fund. The fund is designed to provide rewards and financial support to ships that voluntarily adopt high-cost Zero or Near-Zero (ZNZ) fuels, technologies, and energy sources. By stimulating early demand and accelerating market uptake, the mechanism aims to expand the supply capacity of sustainable marine fuels and facilitate long-term fuel transition.

Despite broad recognition of the necessity of the NZF, MEPC ES.2 discussions highlighted persistent divergences among member States regarding the detailed design and practical feasibility of implementation. In particular, three key issues emerged as major points of contention.

▶ Controversy over the Introduction of a ‘De Facto Carbon Tax’
First, concerns were raised that the NZF would effectively introduce a carbon tax, as ships that fail to meet specific targets are required to pay financial contributions. Given the limited global availability of zero-carbon fuels at present, many member States expressed concern that a large portion of the fleet would inevitably become subject to these payments. This has led to criticism that the framework may, in practice, place excessive emphasis on revenue generation rather than on achieving real emissions reductions.

▶ Recognition of Bridge Fuels and Issues of Practicality during the Transition
Second, the recognition of bridge fuels such as LNG and biofuels during the early transition phase was identified as a critical issue. Several member States argued that the currently agreed annual reduction factors are overly stringent and that the fuels and technologies necessary to meet them are not yet available at sufficient scale. Under such conditions, even the use of fuels widely regarded as transitional solutions could trigger regulatory penalties, potentially imposing excessive financial burdens on the shipping industry.

▶ Concerns over Increased Regulatory Burdens from a Patchwork of Regional Regulations
Third, the increasing proliferation of regional regulations, including the EU Emissions Trading System (EU-ETS), was highlighted as a growing concern. These regional schemes already create overlapping regulatory requirements and additional costs for international shipping. Member States expressed uncertainty over whether such regional measures would be withdrawn or adjusted in a timely manner even if the IMO NZF were adopted. With the postponement of the NZF adoption at MEPC ES.2, the risk of further fragmentation and escalation of regional regulations has increased, raising concerns about prolonged regulatory complexity and burden for the industry.

Further discussions on the NZF are expected to continue in accordance with the IMO work programme. Following the one-year postponement decided in October 2025, the resumed MEPC ES.2 is scheduled to be convened consecutively after MEPC 85, which is planned for November 2026. The session is expected to focus on additional adjustments to the draft amendments and on reaching political consensus on the overall framework.

Going forward, technical and policy deliberations are likely to continue on key issues such as adjustment of annual reduction factors, the scope of bridge fuel recognition, and the pricing structure of Remedial Units. If agreement continues to be delayed, the expansion of regional and national regulations may become more pronounced, increasing regulatory overlap and administrative burdens for the shipping sector.

Accordingly, establishing a consistent and predictable global regulatory framework will remain a critical priority. Ultimately, the ability to maintain an appropriate balance between environmental ambition and practical feasibility will determine the successful adoption and effective implementation of the IMO Net-Zero Framework.