At the beginning of April 2025, the International Maritime Organisation (IMO) hosted a round of negotiations in London on measures to decarbonise the shipping sector by 2050.
The negotiations resulted in the adoption of measures, which is good news as such in view of the difficult geopolitical environment, and the retreat of the US from multilateral fora.
However, the results do not fully align with the level of ambition required to meet the environmental goals under the Paris Agreement and will require further efforts from the EU.
An unexpected outcome to difficult negotiations, with ambitious compliance targets and a pricing mechanism
Earlier this month, negotiations took place to discuss the decarbonisation of the shipping industry within the IMO’s Net-Zero Framework. These were expected to be challenging, as over the past year, two blocs of countries had proposed different approaches – one headed by the European Union (EU) and Japan, which was more ambitious with higher emissions reduction targets and a levy on all carbon emissions; and one headed by Brazil and China, which disagreed with the levy and advocated for lower emission targets. Therefore, finding common ground during the negotiations turned out to be difficult. As a result, departing from the usual practice of consensus, countries decided to cast individual votes. Despite the different approaches proposed, a compromise was reached, balancing the positions of the EU-Japan bloc and the Brazil-China one and securing a majority.
The final compromise is a mix between the two approaches. 63 countries, including China, Brazil, South Africa and European member states, voted in favour. 16 countries, led by Saudi Arabia, opposed the framework – mostly because they heavily depend on the extraction and export of oil and natural gas. 24 countries, including a group from the Pacific Islands, abstained. The United States withdrew from the negotiation and actively worked to weaken the IMO’s efforts by threatening reciprocal action against nations that agree to a global carbon tax on maritime shipping. However, the other countries did not give in to the blackmail of the Trump administration.
The new framework introduces two main regulatory instruments. The first is a Greenhouse Gas Fuel Standard (GFS), which sets limits on the lifecycle emissions of fuels. This first instrument introduces two compliance targets for ships: a baseline compliance target, which establishes the maximum allowable emissions for fuels, and a stricter direct compliance target, which aims to align the industry with more ambitious decarbonisation goals. Ships that meet the direct compliance target will be rewarded with “Surplus Units” of GHG, which can be traded or banked to offset future exceeding emissions. The compliance targets are legally binding annual emission reduction targets until 2035. In addition, the parties agreed on a legally binding reduction target of -65% emissions by 2040. These limits are embedded directly in the legal text, ensuring regulatory certainty, and calculated with a so-called “well-to-wake” methodology, accounting for emissions throughout the entire fuel lifecycle from production to end use. This outcome was far from being guaranteed, as the Brazil-China bloc had been advocating for a different calculation of emissions, the so-called “tank-to-wake” methodology, which would have resulted in incomplete and potentially biased emissions calculations.
The second instrument the parties agreed on is an emissions pricing mechanism. To encourage lower emissions, ships that comply with the baseline target but do not meet the stricter direct compliance target will be required to purchase “Remedial Units” (RUs) at a cost of 100 USD per tonne of CO₂. On the other hand, highly non-compliant ships that exceed both targets will have to pay a higher tier of RUs, priced at 380 USD per tonne through 2030. Revenues generated by the pricing mechanism will be directed into the newly proposed IMO “Net-Zero Fund”, designed to reward compliant industries and support the sector’s transition.
Remaining shortcomings: No universal emissions levy and no clear definition of “zero and net zero emissions fuels”
Although the adoption of a global decarbonisation framework is a positive step forward, there are notable shortcomings. First, the framework does not establish a universal levy that would have applied to all emissions, including those meeting the GFS target, initially proposed by Pacific Island states and supported by the EU and Japan. Without the universal levy, only a limited share of global shipping emissions, estimated between 11% and 14%, will be subject to pricing, thereby limiting available revenues and reducing the potential impact of the “Net-Zero Fund”. Some funds will still be collected thanks to the emissions pricing mechanism with the Remedial Units. This mechanism is expected to raise approximately 8 to 10 billion USD per year until 2040. However, the distribution of these revenues remains unclear. In our views, it will be important to use these funds efficiently, especially to secure a just and equitable transition for developing countries and small island states.
Second, the definition of “zero and near-zero emissions fuels” was deferred to future guidelines, without explicit specification in the final text. This lack of definition diminishes the overall ambition, given that guidelines are subject to interpretation and fall under soft law. While the adopted measures set emissions targets, they do not impose restrictions on fuel types. This flexibility may incentivise the use of first-generation biofuels and liquefied natural gas (LNG) in the near term. LNG, for example, could help ships meet baseline targets in the coming years due to its relatively low emissions compared with conventional fuels. LNG emits methane in the atmosphere, which has a significant climate impact and therefore is, by far, not the most sustainable option, at least it cannot be used to generate “Surplus Units” under the negotiated IMO framework. This is a partial win, as the most ambitious option would have been to explicitly phase out LNG and unsustainable biofuels in the first place.
The absence of a universal levy and the use of LNG and first-generation biofuels are shortcomings also in the sense that they will disincentivise countries from scaling up green e-fuels and green technologies. This means there will be little positive ripple effects, especially as the adaptation will be costly for energy providers, ships and ports.
Governments will therefore have a critical role to play in closing the cost gap between fossil and green technologies and to ensure that the benefits of the transition are equitably distributed.
Especially ports will be central to this transition: they must evolve into hubs for clean fuels, renewable onshore power, and circular economy practices that reduce the sector’s environmental footprint. Although ports do not fall directly under the IMO’s authority, it will still provide support particularly to developing states through information sharing, technology transfer, capacity building, and technical cooperation to help develop the infrastructure needed to supply “zero or near-zero emission fuels” and energy.
The EU should take a leadership role to drive further ambition
The new measures adopted in the last negotiation round have established a decarbonisation pathway through 2050, which is positive news overall, especially in view of the geopolitical context and the retreat of the US from the negotiations. The 100 billion expected from the IMO “Net-Zero Fund” come as a welcome boost to the growing streams of blue finance, and in due time just before the Monaco Blue Economy and Finance Forum which will precede the UN 3rd Ocean Conference in Nice next June.
However, several points will require further ambition. The EU should take a leadership role in the upcoming discussions on guidelines. It could push for a clear and ambitious definition of “zero and near-zero emissions fuels” and their associated rewards, while promoting transparent reporting and credible emission certification schemes.
Furthermore, the EU should work to ensure that the IMO “Net-Zero Fund” is designed to effectively support a just and equitable transition, and the upscaling of “zero and near-zero emissions fuels and technologies”. Port adaptation should also be a priority, with the EU playing a central role in driving progress. This is consistent with the mission letter of the Commissioner for Sustainable Transport and Tourism, Apostolos Tzitzikostas, which calls for a comprehensive EU Port Strategy to tackle challenges such as security, competitiveness, and the green transition.
In October 2025, the text will be adopted as an amendment to the IMO's International Convention for the Prevention of Pollution from Ships (MARPOL). Before that, another vote is likely to take place, requiring a two-thirds majority, limited to the 156 signatories of MARPOL, out of the 174 IMO member states. Member countries are expected to work on securing broader support, particularly from those who previously abstained, as winning over opponents will be significantly more difficult. The EU should take the lead in these efforts, ensuring that these newly agreed measures can be fully and ambitiously implemented by 2027.
