In April 2025, the International Maritime Organization’s Marine Environment Protection Committee (‘MEPC’) approved draft amendments to MARPOL Annex VI establishing the IMO Net-Zero Framework (‘IMO NZF’). These draft measures are scheduled for formal adoption at an extraordinary MEPC session to be held from 14 to 17 October 2025, in the IMO headquarters in London, after which they will follow MARPOL’s tacit-acceptance procedure and are expected to enter into force in 2027. The IMO NZF is widely regarded as the first global regulatory regime to combine a mandatory marine fuel-intensity standard with an economic pricing and compliance mechanism across an entire industrial sector.[1]  

The IMO NZF will form a new Chapter 5 of MARPOL Annex VI, applying to sea-going ships of 5,000 gross tonnage and above; vessels which collectively account for roughly 85% of international shipping’s CO₂ emissions.[2] At present, 108 state parties are bound by Annex VI, covering about 97% of the world’s merchant fleet by tonnage.[3] The IMO NZF aligns with the IMO’s 2023 GHG Strategy, which commits the sector to reach net-zero GHG emissions “by or around 2050”[4] with indicative checkpoints for 2030 and 2040.[5]   

At the heart of the IMO NZF lies a global Greenhouse Gas Fuel Intensity (‘GFI’) standard, based on lifecycle or “well-to-wake” accounting that measures emissions across both upstream fuel production and onboard combustion.  

In essence, what this means is that, under the IMO NZF, shipowners will be required to account for the greenhouse gas emissions (‘GHG’) generated across the entire lifecycle of marine fuels, from extraction and production through to onboard combustion, a process referred to as “well-to-wake” assessment. This encompasses both “tank-to-wake” emissions produced during fuel use onboard, and “well-to-tank” emissions arising from the upstream stages of fuel production, processing, and transport, including associated sustainability considerations.

Each ship will be required to achieve progressive reductions in fuel intensity over time, measured against two benchmarks: a Base GFI Target representing the minimum performance threshold, and a more stringent and ambitious Direct Compliance Target.  Essentially, the fuel mix of a vessel complying solely with the Base Target would result in a higher average annual GFI compared to that of a vessel also achieving the Direct Compliance Target. In calculating compliance with the GFI targets, shipowners will be required to report the full “well-to-wake” emissions of their fuels, covering both production and sourcing, as well as onboard combustion. This will create a need for a robust certification system to verify the carbon intensity and sustainability credentials of fuels. Fuel producers aiming to supply low-carbon fuels for IMO compliance, along with bunkering companies and shipowners, will need to understand and operate within this new certification framework. [1]

Ships that exceed the Direct Compliance Target will generate Surplus Units, which may be sold, banked or transferred to other vessels.[2] If a vessel fails to meet its target, compliance can be restored either by using the Surplus Units generated within its own fleet/acquired from other fleets, or by purchasing Remedial Units through contributions to the IMO-managed Net-Zero Fund. 

The IMO is presenting the Net-Zero Fund as a fund which will serve as both a compliance backstop and an incentive pool. It is being stated that payments from non-compliant ships will finance research and development, fuel-infrastructure deployment, and capacity-building initiatives, particularly for developing countries, Small Island Developing States and Least Developed Countries. Funds may also be allocated to reward operators that exceed the required emission-reduction targets, with the aim of directing financial flows toward supporting decarbonisation while promoting a fair and equitable transition across the sector.[3]

The International Chamber of Shipping (‘ICS’), representing over 80% of the world’s merchant fleet, has welcomed the IMO NZF and emphasised that “the IMO needs to formally adopt the Net-Zero Framework in October to send a clear signal to industry and provide the incentive needed to produce these cleaner fuels. Industry needs clarity, simplicity, and detail on the rewards.”[4]

In a statement to Lloyd’s List, the leaders of seven major shipowner associations, including those of Japan, Singapore and the UK, urged IMO member states to “make history in London”[5] by adopting the Net-Zero Framework, describing it as “set to propel sustainable shipping at a truly global scale.”[6]

If adopted in October, the IMO NZF will mark a major milestone in the regulatory architecture for shipping decarbonisation. Following adoption, the IMO will finalise detailed guidelines on certification, lifecycle-emission calculation, and registry rules at MEPC 84 in 2026, with data collection and reporting expected to commence in 2028.

While the IMO NZF has received broad industry support, notable regional and political complexities persist, with opposition to the measures becoming more pronounced in recent months. Within the EU, the Fit for 55legislative package encompasses the Emissions Trading System (‘EU ETS’), the FuelEU Maritime Regulation (‘Fuel EU Maritime’),[1] along with other measures.

The EU ETS has applied to maritime transport since 1 January 2024 for ships of 5,000 GT and above calling at EU or EEA ports, with surrender obligations phasing in from 40% of 2024 emissions to full coverage by 2027. Global mid-term measures under the IMO, such as the NZF, are not currently considered equivalent to the EU ETS, and the European Commission has yet to determine whether they should be treated as such. As a result, the implications for EU decision-making within the broader Fit for 55 framework remain uncertain.

Having said that, the revised EU ETS Directive includes a review clause[2] requiring the Commission to assess ETS provisions following the adoption of any IMO global market-based measure, ensuring regulatory coherence and avoiding double regulation. If the IMO adopts such a measure, the Commission must submit a report within 18 months evaluating ambition, environmental integrity, and alignment with EU law, and may propose legislative amendments to harmonise the regimes. Should no IMO measure be adopted by 2028, the Commission may propose expanding the EU ETS so that surrender obligations for voyages between EU and non-EU ports cover more than 50% of emissions.

Adding to this complexity, the FuelEU Maritime is comparable to the IMO NZF in that it sets mandatory limits on the GHG intensity of fuels used onboard, with targets that become increasingly ambitious over time. There is therefore potential duplication between the FuelEU Maritime and the IMO NZF, as a non-compliant ship could, in theory, be penalised under both regimes. The FuelEU Maritime acknowledges this overlap and also includes a review clause[3] obliging the European Commission to reassess its provisions if the IMO adopts a global fuel standard or market-based measure, with a view to aligning EU provisions with international requirements where appropriate. Further clarity will be needed from the Commission on how such overlaps will be managed, particularly as the IMO NZF is still in the process of becoming fully operational.

The ICS has urged the European Commission and other jurisdictions with regional schemes to align with the forthcoming IMO regime, noting that “those with unilateral and regional schemes, such as the EU ETS, should agree to having one clear and transparent system under the IMO. This is critical if we are to meet the time frames set out.”[4] The call reflects growing industry concern that overlapping carbon pricing frameworks could undermine regulatory certainty and slow the sector’s decarbonisation investment momentum.

The adoption of the IMO NZF will also test international consensus. At MEPC 83 in April, agreement was reached with 63 countries voting in favour, 16 against, and 24 abstaining.[1] Although the vote passed, it marked a departure from the IMO’s usual preference for consensus. Several states, including the United States, have raised concerns about the pricing element, describing it as a de facto global tax.

Adoption, as expected in October’s MEPC extraordinary session, requires approval by a two-thirds majority of parties to Annex VI of the MARPOL Convention that are present and voting at the session itself. Following approval, the IMO NZF would undergo MARPOL’s tacit-acceptance procedure and is then expected to enter into force approximately 16 months later, around early 2027. This is unless one-third or more of the parties to the MARPOL Convention, or parties representing not less than 50% of the gross tonnage of the world’s merchant fleet, object to the measures within the said timeframe. Worth noting that any individual state party may file an objection to the IMO NZF, effectively exempting itself from its application.[2]

Failure to reach agreement at IMO level risks accelerating regional fragmentation, as individual states or blocs may advance with their own carbon pricing regimes. This would expose ships to overlapping and potentially inconsistent charges depending on their trading routes, an outcome that would undermine regulatory clarity and efficiency.[1] As noted by Lloyd’s List senior reporter Declan Bush, failing to adopt the IMO NZF does not mean climate regulation will go away. Instead, it will likely mean more rules, not fewer.[2]  The forthcoming vote will therefore be pivotal in determining whether shipping decarbonisation proceeds along a unified global trajectory or splinters into a patchwork of regional frameworks.  

For further information on this topic please contact Ann Fenech, Daniel-Luc Farrugia at Fenech & Fenech Advocates by telephone (+356 21241232) or email; ann.fenech@fenechlaw.com, daniel.farrugia@fenechlaw.com.

• Global Maritime Forum, ‘A Guide to the IMO’s Net Zero Framework’ (Global Maritime Forum, 15 September 2025) <https://globalmaritimeforum.org/news/a-guide-to-the-imos-net-zero-framework/>.
• Hecla Emissions Management, ‘IMO Net-Zero Framework; Current Status and Next Step’ (Hecla Emissions Management October 2025).
• ICS, ‘ICS gives backing to IMO Net-Zero Framework to provide clarity, simplicity and detail on rewards’ (ICS, 17 July 2025) <https://www.ics-shipping.org/statement/ics-gives-backing-to-imo-net-zero-framework-to-provide-clarity-simplicity-and-detail-on-rewards/>.
• IMO, ‘IMO approves net-zero regulations for global shipping’ (IMO, 11 April 2025) <https://www.imo.org/en/MediaCentre/PressBriefings/pages/IMO-approves-netzero-regulations.aspx>.
• IMO, Note by the International Maritime Organization (IMO) to the sixty-second session of the UNFCCC Subsidiary Body for Scientific and Technological Advice (SBSTA 62) Bonn, Germany, 16-26 June 2025.
• IMO, ‘​Revised GHG reduction strategy for global shipping adopted’ (IMO, 7 July 2023) <https://www.imo.org/en/mediacentre/pressbriefings/pages/revised-ghg-reduction-strategy-for-global-shipping-adopted-.aspx>. 
• Joshua Minchin, ‘Leading shipowner associations fire warning ahead of crucial climate decision’ (Lloyd’s List, 7 October 2025) <https://www.lloydslist.com/LL1155045/Leading-shipowner-associations-fire-warning-ahead-of-crucial-climate-decision>.
• King & Spalding, ‘IMO’s Net-Zero Framework and the Global Carbon Price on Shipping’ (King & Spalding, 22 May 2025) <https://www.kslaw.com/news-and-insights/imos-net-zero-framework-and-the-global-carbon-price-on-shipping>.
• Vibhu Mishra, ‘Countries reach Historic Deal to cut Shipping Emissions’ (United Nations, 11 April 2025) <https://news.un.org/en/story/2025/04/1162176>.

[1] IMO, ‘IMO approves net-zero regulations for global shipping’ (IMO, 11 April 2025) <https://www.imo.org/en/MediaCentre/PressBriefings/pages/IMO-approves-netzero-regulations.aspx>.

[2] Vibhu Mishra, ‘Countries reach Historic Deal to cut Shipping Emissions’ (United Nations, 11 April 2025) <https://news.un.org/en/story/2025/04/1162176>.

[3] IMO (n 1).

[4]  IMO, ‘​Revised GHG reduction strategy for global shipping adopted’ (IMO, 7 July 2023) <https://www.imo.org/en/mediacentre/pressbriefings/pages/revised-ghg-reduction-strategy-for-global-shipping-adopted-.aspx>. 

[5] Global Maritime Forum, ‘A Guide to the IMO’s Net Zero Framework’ (Global Maritime Forum, 15 September 2025) <https://globalmaritimeforum.org/news/a-guide-to-the-imos-net-zero-framework/>.

[6] King & Spalding, ‘IMO’s Net-Zero Framework and the Global Carbon Price on Shipping’ (King & Spalding, 22 May 2025) <https://www.kslaw.com/news-and-insights/imos-net-zero-framework-and-the-global-carbon-price-on-shipping>.

[7] Hecla Emissions Management, ‘IMO Net-Zero Framework; Current Status and Next Step’ (Hecla Emissions Management October 2025).

[8] IMO (n 1).

[9] ICS, ‘ICS gives backing to IMO Net-Zero Framework to provide clarity, simplicity and detail on rewards’ (ICS, 17 July 2025) <https://www.ics-shipping.org/statement/ics-gives-backing-to-imo-net-zero-framework-to-provide-clarity-simplicity-and-detail-on-rewards/>.

[10] Joshua Minchin, ‘Leading shipowner associations fire warning ahead of crucial climate decision’ (Lloyd’s List, 7 October 2025) <https://www.lloydslist.com/LL1155045/Leading-shipowner-associations-fire-warning-ahead-of-crucial-climate-decision>.

[11] ibid.  

[12] Regulation (EU) 2023/1805 of the European Parliament and of the Council of 13 September 2023 on the use of renewable and low-carbon fuels in maritime transport and amending Directive 2009/16/EC.

[13] Article 3gg(1), Directive 2003/87/EC.

[14] Article 30(5), Regulation (EU) 2023/1805.

[15] ICS (n 9).

[16] IMO, Note by the International Maritime Organization (IMO) to the sixty-second session of the UNFCCC Subsidiary Body for Scientific and Technological Advice (SBSTA 62) Bonn, Germany, 16-26 June 2025.

[17] King & Spalding (n 6).

[18] Hecla Emissions Management (n 7).

[19] Joshua Minchin (n 10).

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