In 2023, the IMO’s Marine Environment Protection Committee (MEPC) took the significant step of strengthening its GHG strategy, setting a target to reach net-zero emissions from international shipping by, or around 2050.

To achieve this goal, the MEPC built upon its existing short-term GHG measures, approving the IMO Net-Zero Framework (NZF) in April 2025. This is a historic breakthrough for multilateral action on climate, marking the first mandatory emission limits and GHG pricing across an entire global sector.

Here is the full text of the draft amendments to MARPOL Annex VI, see Chapter 5 for the Net-Zero Framework.

The NZF introduces GHG fuel intensity (GFI) targets requiring ships to meet a reduction in emission intensity on a well-to-wake basis.  

These targets become increasingly strict over time, compelling the global fleet to use a growing share of lower-emission energy sources, including sustainable fuel pathways, wind assisted propulsion, electric power, and potentially onboard carbon capture and storage. 

A distinctive feature of the NZF is the two GFI trajectories, known as the ‘Base’ and ‘Direct Compliance’ GFI, each with distinct policy objectives.

• Tier 2 (Base) aims to drive fuel switching with a high penalty for non-compliance. 

• Tier 1 (Direct) aims to generate a predictable revenue stream with a penalty lower than most available options to abate. 

The NZF intends to use revenue to promote the scale up of zero and near-zero emission energy sources and ensure a just and equitable transition.

This regulation applies to all ships of 5,000 gross tonnage and above. Exclusions apply to ships solely engaged in voyages within the jurisdiction of their Flag State, ships not propelled by mechanical means, semi-submersibles, as well as platforms including FPSOs, FSUs, and drilling rigs. 

Responsibility for compliance activity rests with the “Company”, defined as the shipowner or any organization (such as a manager or bareboat charterer) that assumes operational control and accepts obligations under the IMO’s International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code). 

IMO member states have agreed on GHG fuel intensity (GFI) reduction targets for the period 2028 to 2035, using a 2008 reference value of 93.3 gCO₂eq/MJ. These targets define the trajectory for reducing emissions on a well-to-wake basis. A 2040 base target has also been set, representing a 65% reduction from the reference. Further targets beyond 2035 will be decided at MEPC before the end of 2032.

The attained annual GFI of a ship is calculated as the weighted average emission intensity of the energy consumed over the course of a year. Ships will compare this value against the Tier 1 and Tier 2 target GFIs to determine the compliance balance. If the attained GFI exceeds the Tier 2 target, the ship has a compliance deficit with both Tier 1 and Tier 2. If it falls between the Tier 1 and Tier 2 targets, the ship has a deficit but only with Tier 1. A ship that achieves a GFI below the Tier 1 target is considered over-compliant and generates a compliance surplus. 

Ships with a compliance deficit will have the option to pay for Remedial Units (RUs) collected by the IMO Net-Zero Fund. The NZF establishes two RU prices for each Tier:

The $380 and $100 prices are established only for the period from 2028 to 2030. Regulation 36(10) states that the MEPC will “determine the mechanism for reviewing and defining the price of a Tier 1 and tier 2 remedial unit for the reporting periods starting 2031 onwards.” 

Ships with an annual GFI below the Tier 1 target will be awarded Surplus Units (SUs), which can be: 

1. Transferred (sold) to ships with a Tier 2 compliance deficit, 

2. Banked for up to two future reporting periods, or 

3. Voluntarily cancelled. 

Shipping companies facing a cost gap between fossil and lower-emission alternatives can use revenues from the sale of SUs to offset the additional cost. For ships in Tier 2 deficit, SUs provide flexibility to comply through the transfer of SUs from over-compliant ships, similar to the function of pooling in FuelEU.  

Tier 1 deficits cannot be balanced with SUs and are limited to purchasing Tier 1 RUs. Member States added this restriction to ensure stable revenue generation through the Tier 1 RU. 

Cancellation of SUs provides shipping companies the option to sell low emission fuels on the voluntary market (for example via Katalist) while adhering to additionality requirements. 

The 2023 IMO GHG Strategy set a target for zero- or near-zero GHG emission energy sources (ZNZ) to supply at least 5% of energy used in international shipping by 2030. To meet this ambition, the NZF introduced a GHG threshold and a reward for ZNZ use. 

The ZNZ threshold is set at 19.0 gCO₂eq/MJ for 2028–2034, tightening to 14.0 gCO₂eq/MJ from 2035. Further definitions may be added, including sustainability and certification criteria that could limit eligibility.  

Guidelines will also establish the ZNZ reward level and distribution process. These are due by March 2027, with reviews every five years thereafter.

The NZF was agreed in principle at MEPC 83, with formal adoption considered during the October 2025 meeting of MEPC ES.2 (“Second extraordinary session”). Adoption depends on approval of a two-thirds majority of MARPOL Annex VI signatories (only considering yes or no votes, not abstentions). If adopted, the NZF is expected to enter into force in 2027 and apply from 2028.

Many critical elements of the NZF will be set through implementation guidelines. These will be negotiated and adopted by MEPC between 2025 and 2027. Among key guidelines are: 

• LCA methodology,  

• fuel certification,  

• further criteria for ZNZ eligibility,  

• ZNZ reward mechanism,  

• administration and management of a Net-Zero Fund,  

• and administration and management of the GFI Registry.  

These remaining elements will determine the effectiveness of the NZF at lowering emissions and scaling up lower-emission energy use across global shipping.