In April 2025, IMO Member States approved the Net-Zero Framework. At MEPC/ES.2 on 14-17 October, the IMO will formally consider adopting this regulation. For this edition, we look ahead to what compliance looks like, assuming ships will be required to comply from January 2028.  

• Preparation can help companies lower the costs of complying with the IMO Net-Zero Framework.  

• There is enough clarity in the proposed MARPOL Annex VI amendments for companies to start planning now. 

• Get ready for 2028 with a compliance timeline and documentation checklist. 

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With the IMO Net-Zero Framework (IMO NZF) expected to enter into force in March 2027, understanding how the compliance process works is the first step to building an effective compliance strategy. Familiarity with this process enables companies to implement appropriate data collection systems, establish roles and responsibilities, and develop strategies that can lower emissions as well as compliance costs.

According to the current draft text for the IMO NZF, ships of 5,000 gross tonnage or above will need to comply with the Framework. Exclusions include ships operating solely in their flag State’s waters, vessels not mechanically propelled, and platforms including FPSOs, FSUs, drilling rigs, and semi-submersibles. For this edition, references to ‘ships’ should be considered as those covered by the regulation.

We can think of the IMO NZF compliance process as divided into three periods.

Figure 1 shows the key steps in the compliance cycle over the course of these three periods, including who is responsible for completing each step. In the next sections, we break down the activities in each of the three periods in greater detail.

Figure 1: Compliance cycle timeline aligned with Chapter V of the draft amendments to MARPOL Annex VI, i.e., the IMO Net-Zero Framework. The timeline shows the compliance responsibilities of three key actors: (1) the flag State, or “Administration”, which can also refer to any organization duly authorized by the flag State such as the Recognized Organization; (2) the shipping company responsible for compliance; and (3) the GFI Registry, an IMO-administered system that enables GFI-related transactions. For more on the role of the flag State, see our previous explainer on enforcement in the IMO NZF. GFI = GHG fuel intensity, SEEMP = Ship Energy Efficiency Management Plan.

GFI Registry account setup: By 1 October 2027, each ship will need to have an account for the IMO GFI Registry. This occurs only once, although new ships that enter into service will also need to set up an account. The GFI Registry is a system that enables recording of ships’ GFI-related transactions. The registry will be established and administered by the IMO.

SEEMP update and verification: After the regulation enters into force in March 2027, but before 1 January 2028, ships will need to update their Ship Energy Efficiency Management Plan (SEEMP) with the following information:  

• Methodology for collecting data required for calculating the ship’s attained annual GFI, target annual GFI, and compliance balance  

• Processes used to report data to the flag State 

The updated SEEMP will need to be verified by the flag State, at which point the flag State will issue a Confirmation of Compliance no later than 31 December 2027. The Confirmation of Compliance should be retained on board the ship.  

Companies should engage early with their flag State to understand the process and expected lead times for SEEMP verification, and plan accordingly. The IMO will develop guidelines to clarify the process for submitting GFI data from ships registered under a flag State that is not party to MARPOL Annex VI (see MEPC83 Working Paper 11, Annex 2, page 2 on IMODOCS – registration required).

Preparation for compliance approach: Companies that intend to comply with the IMO NZF by using low-emissions fuels, zero- and near-zero GHG fuels (ZNZs), or SUs will need to prepare early. For example, companies can explore whether low-emissions fuels or ZNZs will be available for bunkering at the relevant ports, or whether SUs will be available for purchase.  

Companies that intend to overcomply should also plan for the management of SUs, such as monetizing, transferring, or banking for future use. As with FuelEU, we are likely to see third-party companies providing surplus brokering services between buyers and sellers.

Starting in January 2028, companies will need to start collecting GFI-related data using the methodology described in the SEEMP. 

Table 1 summarizes the new GFI-related data that companies will need to collect in the first reporting period (2028) and submit in the first verification period (2029). The existing process of collecting and submitting fuel oil consumption data to the IMO Ship Fuel Oil Consumption Database remains the same (see IMO NZF, Appendix IX).

Table 1: GFI-related data to be collected and submitted to the flag State for verification, in accordance with IMO NZF Appendix XII Form of Statement of Compliance – Annual GHG Fuel Intensity. GFI = GHG fuel intensity, ZNZs = zero or near-zero GHG emission technologies, fuels or energy sources, WTW = well-to-wake.

The company will also need to pay an annual administration fee to the IMO GFI Registry by 30 June each year.

From 1 January 2029, companies will need to calculate attained annual GFI for the preceding calendar year. This calculation uses GHG emission factors as defined in the IMO LCA Guidelines (see our previous explainer). Sustainability aspects documented in the Fuel Lifecycle Label (FLL) will also need to be certified by a recognized Sustainable Fuels Certification Scheme/Standard (SFCS), and may accompany the bunker delivery note. 

By 31 March, ships will need to submit the GFI-related data collected in the preceding reporting period to the flag State. This is in addition to the existing process of submitting data related to fuel oil consumption and the Carbon Intensity Indicator (CII). 

By no later than 30 June, the flag State will need to report to the IMO GFI Registry upon receiving and verifying the GFI-related data.  

By no later than 31 July, after the ship’s verified data is reported to the IMO GFI Registry, the ship will need to record its selected GFI compliance approach(es) in the IMO GFI Registry.  

By 31 August, the IMO GFI Registry will need to issue a ship account statement reflecting transactions recorded. This statement should be made available to the ship and its flag State. 

By 30 September, the flag State will issue a Statement of Compliance - Annual GHG fuel intensity (IMO NZF, Appendix XIII). This is done after carrying out a series of tasks involving verification of data.  

By 31 October, the flag State will need to record the Statement of Compliance in the IMO GFI Registry ship account. The Statement of Compliance must be kept on board for at least five years and is valid for the calendar year in which it is issued and for the first nine months of the following calendar year. This document may be inspected by Port State Control.

The checklist in Table 2 offers a useful reference for companies developing their IMO NZF compliance process.

Table 2: A checklist for companies responsible for compliance under the IMO NZF. The checklist will evolve based on guideline development and increasing clarity on compliance in practice. SEEMP = Ship Energy Efficiency Management Plan, GFI = GHG fuel intensity.

To understand how the compliance process translates into operational decision-making, we look at a case study of a 10,000 TEU container ship operating on trans-Pacific ocean trade routes in 2028. We assume that the vessel’s operational profile remains the same, consuming roughly the same total energy in both scenarios.  

Compliance strategy: The ship operates using heavy fuel oil (HFO) for the main engine and marine diesel oil (MDO) for the diesel generator. The ship has chosen to comply with the IMO NZF using Tier 1 and Tier 2 RUs, which require contributions to the IMO Net-Zero Fund.  

Compliance process: The company calculates the ship’s emissions intensity for the reporting period 2028 and reports the relevant GFI data to flag State by 31 March 2029. Upon verification, the flag State reports the data to the IMO GFI Registry by 30 June 2029. 

The compliance activities must be recorded in the IMO GFI Registry by 31 July 2029. The ship’s RU contributions should be made to allow the completion of the compliance activity. The IMO GFI Registry then credits the ship’s account with RUs corresponding to the amount and tier acquired.  

Following confirmation of the payment, the IMO GFI Registry cancels the RUs, bringing the ship’s compliance balance to zero and fulfilling its GFI obligations.

Figure 2: The calculations for attained annual GFI and compliance balance are based on methodologies in the IMO NZF Regulations 33 and 36. Emissions intensities are calculated using values from the IMO 2024 LCA Guidelines (MEPC.391(81), Annex 10). This example uses HFO with sulfur content between 0.10% and 0.50%, and MDO with 0.10% sulfur or below. LCV = lower calorific value.

In this scenario, combined Tier 1 and 2 RUs cost the company 1.8 million USD. Assuming fuel costs of 787 USD/tonne of MDO (based on average price of gasoil 2025 to 2027 from CME, 2025) and 587 USD/tonne of HFO (MMMCZCS, 2024), total fuel costs are 8 million USD. The 1.8 million USD compliance cost of RUs adds 23% to fuel operation costs. 

Compliance strategy: The vessel uses a fatty acid methyl ester (FAME) biodiesel from waste cooking oil to achieve Tier 2 compliance and acquires RUs to balance its Tier 1 compliance deficit. As in Scenario 1, the vessel uses MDO for onboard electrical power generation.  

Figure 3 breaks down the quantity of FAME (shown as a 100% FAME, or B100) needed to achieve Tier 2 compliance, keeping total energy use roughly the same as in Scenario 1.

Figure 3: As in Figure 2, the calculation steps follow the methodologies in IMO NZF Regulations 33 and 36. We assume a waste cooking oil FAME biodiesel is used to meet Tier 2 compliance. However, the tank-to-wake emissions intensity values for FAME are not finalized in the IMO LCA Guidelines. Therefore, we used tank-to-wake values from FuelEU Annex II and calculated the well-to-wake emission factor based on 2024 LCA Guidelines methodology. To find the additional cost of biodiesel, we used the same HFO and MDO prices as in Scenario 1. For FAME, we used prices based on the average of the high and low forecast for 2028 from LR & UMAS, 2020. LCV = lower calorific value.

In Scenario 2, the total cost of compliance is 1.5 million USD, or 20% lower than in Scenario 1. This difference is driven by the lower relative abatement cost of biodiesel compared to Tier 2 RUs. We use a biodiesel price forecast of 1,261 USD/tonne of B100 FAME, in line with biofuel premiums in the market.

Implementation of the IMO NZF will continue to evolve as both guidelines and supporting systems are developed. Details of how the regulation works in practice – some of which are yet to be finalized – will determine the final process for a company’s operations. Despite this continuing evolution, the existing text provides enough clarity on the annual compliance cycle for shipping companies to get started with their compliance planning.  

Companies can begin to build necessary data systems and audit trails, plan for information required in the SEEMP, trial the first 2028 reporting period using existing data, clarify roles, identify gaps in data collection, and begin to shape a compliance strategy.  

As the case study shows, securing lower-emissions alternative fuels can lower compliance costs. With long lead times for newbuilds and new fuel production facilities, companies should prioritize exploring opportunities to help lower compliance costs and meet decarbonization targets. These opportunities could include dual-fuel vessels, alternative fuel pathways, energy efficiency measures, onboard technologies, and others. 

Authors: Elvi Heng and Ignatios Papoutsis (all seconded to MMMCZCS).