In a moment of geopolitical tension, Member States at the IMO have shown that multilateral action on climate is possible. Following years of discussions culminating in two intense weeks of negotiations, Member States agreed last week on mid-term measures (MTMs) known as the IMO Net-Zero Framework – a historic milestone for shipping decarbonization. While our analysis shows that more work is needed to reach net-zero GHG emissions by 2050, the Framework establishes a robust foundation that can be further developed to fully decarbonize the maritime sector.

As we turn to the work ahead, it’s worth pausing to reflect that this agreement is more than an incremental revision of a treaty. It represents the first legally binding rules that combine mandatory emission intensity limits and GHG pricing globally across an entire sector.

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After two weeks of intense negotiations, Member States have succeeded in reaching an agreement on a Net-Zero Framework that includes emissions intensity pricing, rewards for the use of sustainable marine fuels, and funding to support a just and equitable transition in developing states. And yet, this is not the end. The agreement marks the beginning of a process to build a stronger, more ambitious regulatory framework.

Several key elements remain open for development and refinement. For example, the penalty for non-compliance will be reviewed three years after implementation, with accompanying guidelines still to be developed – offering a clear opportunity to raise ambition levels. Guidelines will also shape how fuels with zero or near-zero GHG emissions (ZNZs) are defined and rewarded. Funding mechanisms for a just and equitable transition also remain to be defined, and the reduction factors for GHG fuel intensity beyond 2035 have yet to be determined, among many other open questions.

In addition to the Net-Zero Framework, IMO short-term measures focusing on energy efficiency offer opportunities to drive further emission reductions. Recent negotiations also included a strengthening of the Carbon Intensity Indicator (CII), with increased reduction rates for 2027–2030 and a robust work plan on how to further review the CII.

In the next section, we dive deeper into key elements of the agreed Net-Zero Framework.

The Net-Zero Framework is the fulfillment of the MTMs – a set of regulations first outlined in the 2018 IMO GHG Strategy and reinforced in the 2023 IMO GHG Strategy.

At the core of the MTMs is the Global Fuel Standard (GFS), the centerpiece of the Net-Zero Framework. The GFS sets an increasingly strict GHG fuel intensity (GFI) limit to drive down emissions. Ships that fail to meet these GFI targets must purchase Remedial Units (RUs) as a penalty, while those that go beyond the requirements can generate Surplus Units (SUs), which can be traded to compensate for non-compliance elsewhere in the global fleet. In this way, the GFS resembles the existing FuelEU Maritime regulation in its structure and goals.

However, the GFS in the Net-Zero Framework also introduces two features not found in FuelEU. First, it establishes two compliance tiers. Tier 1 sets a lower GFI limit, also known as the ‘Direct’ GFI designed to generate revenue, while Tier 2 enforces a higher limit, also known as ‘Base’ GFI aimed at penalizing non-compliance and incentivizing sustainable alternatives.

Second, the Net-Zero Framework includes a subsidy mechanism for ZNZs, supported by revenues from Tier 1 penalties. The aim is to use revenues generated in Tier 1 both to close the cost gap for sustainable fuels and to support a just and equitable transition for developing countries.

(Lost? A GFS picture is worth a thousand words – see the figure below).

• GFI reduction factors, also known as Z-factors, progressively limit the GHG intensity of energy used onboard. The current Framework defines these values through 2035, with those beyond 2035 to be determined by 1 January 2032.

• Two-tiered compliance: Tier 1 applies to GFI between the Tier 1 and Tier 2 targets, with a penalty of 100 USD/tCO₂eq (yellow region); Tier 2 applies to values above the Tier 2 limit, with a higher penalty of 380 USD/tCO₂eq (red region). These penalty levels are valid through 2030; values and methodologies beyond 2030 will be defined by 1 January 2028.

• Well-to-wake basis: GFI values are calculated on a well-to-wake basis, meaning that the framework takes a full life-cycle analysis (LCA) approach. Emissions factors and methods will be determined in further work by the IMO.

• Surplus units (SUs) are generated by ships that achieve a GFI below the Tier 1 targets. These SUs can be used to balance deficit units generated by ships with emissions higher than the Tier 2 target.

• ZNZ fuels and technologies are defined as those emitting below 19 gCO₂eq/MJ through 2034 and below 14 gCO₂eq/MJ beyond 2034. These will be eligible for rewards, with further guidance due by 1 March 2027.

• Fuel certification is included in the final text, requiring that fuels used for compliance be certified under an agreed framework. Significant technical work remains to finalize this certification system ahead of implementation.

We’ve updated the MTM Compliance Cost Calculator to reflect the values and mechanisms from the agreed Net-Zero Framework. The latest version of the calculator allows users to model compliance costs using their own set of assumptions. You can download the updated tool here.

When we look at the impact of the Net-Zero Framework on shipping’s GHG emissions using NavigaTE, we see that shipping is on a path to deliver 60% emissions reductions by 2040. While there is still a gap between this estimated impact and the IMO’s 2023 targets, this is a significant achievement. Furthermore, mechanisms built into the framework allow for increased ambition over time.

Notably, the RU penalties and GFI reduction factors are both explicitly identified for review and adjustment in the coming years. The text commits to defining the mechanism for reviewing and defining the RU values by 2028, with changes taking effect from 2031, and to determine post-2035 GFI reduction factors by 2032. These planned revisions offer a clear opportunity to adjust RU penalties and tighten GFI reduction trajectories to bring the framework into full alignment with the IMO’s 2050 net-zero goal.

A major win in the Net-Zero Framework was the inclusion of a regulation for fuel certification. This regulation outlines the procedures for how the IMO will recognize sustainable fuel certification schemes and sets clear reporting obligations. These steps are essential to ensure transparency, traceability, and environmental integrity throughout the certification process. By establishing a robust certification system, we can ensure that the GHG emission values reported to the IMO will be reliable and trustworthy.

Looking ahead, we'll be focusing on supporting the development of guidelines for fuel certification, which will provide the necessary details and procedures to make this certification process a reality.

With the agreement reached on the Net-Zero Framework, attention now turns to adoption and implementation. The finalized text has been circulated by the IMO Secretary-General for adoption at the next extraordinary session of the Marine Environment Protection Committee (MEPC/ES 2), scheduled for 13–17 October 2025.

In parallel, the development of supporting guidelines will begin. These guidelines are critical to ensuring that the Net-Zero Framework succeeds in reducing emissions. The word "guidelines" appears over 100 times in the adopted text, giving a sense of the scale of work ahead.

One of the important early opportunities will be the chance to develop the mechanisms for reviewing and defining the RU penalty from 2031 onwards. As our modeling has shown, this is a critical element to ratchet up the impact of the measures. In essence, the value of RU penalty must always be higher than the additional cost of using sustainable alternatives to fossil fuels – otherwise, operators may simply pay to pollute. Other key topics for the guidelines include the GFI reduction factors, the fuel certification framework, the definition of ZNZs, and the rules for revenue disbursement both for ZNZs and to support a just and equitable transition.

Two ISWG-GHG meetings have already been scheduled to focus on these guidelines:

• 20–24 October 2025 (immediately following MEPC/ES 2)

• 20–24 April 2026 (immediately prior to MEPC 84)

For the industry, the next step will be to digest the implications of this new framework, assess its impact, and begin developing strategies for compliance and competitiveness in the new regulatory landscape.

The Center will continue to support on both fronts – contributing to the development of the guidelines and providing independent, data-driven insights to help the industry navigate this new regulatory landscape with clarity and confidence.

As Chair Sveinung Oftedal remarked late on Thursday evening, the Net-Zero Framework is “a shining light of global cooperation” – a clear signal that international collaboration on climate action remains possible. While the agreement may need further development to meet the ambitions of the IMO’s 2023 Strategy, it nonetheless lays a strong foundation. This outcome affirms that, even in a time of growing geopolitical division, multilateralism can deliver progress on the climate.

We would like to thank our many partners, especially our Knowledge Partner, the Royal Institution of Naval Architects, along with the many Member States and observer organizations who worked with us on key aspects of the short- and mid-term measures, notably the Fuel Certification Regulation. We look forward to continued collaboration to make shipping’s decarbonization a reality.