IMO Net-Zero Talks Resume With Carbon Pricing at Center of Debate

Governments will return to London next week for another round of negotiations over the International Maritime Organization’s Net-Zero Framework, with countries still sharply divided over the future of the landmark shipping climate agreement.

The IMO’s Intersessional Working Group on Greenhouse Gas Emissions from Ships will meet September 1-4 ahead of the Marine Environment Protection Committee’s 85th session later this year. Talks will focus on proposed changes to the framework, implementation guidelines and lifecycle greenhouse gas rules.

At the center of the debate is the framework agreed at MEPC 83, which combines progressively tighter greenhouse gas fuel-intensity requirements with an economic mechanism that puts a price on emissions and rewards ships using zero and near-zero emission fuels.

The framework was due for formal adoption last October, but governments instead adjourned the extraordinary MEPC session for one year following contentious negotiations and an aggressive U.S. campaign against the measure.

Negotiations have continued, however, with governments trying to bridge significant differences over what the final regulations should look like. Next week’s meeting will test whether enough support remains for the original framework or whether the IMO is headed toward a substantially different compromise.

Competing Visions Emerge

INTERCARGO, in a pre-brief ahead of the meeting, highlighted four competing proposals, along with additional submissions seeking changes to the framework.

Liberia has proposed the most significant overhaul, tying GHG Fuel Intensity, or GFI, requirements to the availability, affordability and scalability of commercially viable fuels. Its proposal would largely replace the IMO Fund-based mechanism with transferable Surplus Units that ships could trade, bank or borrow. Liberia and Panama have also proposed awarding Surplus Units for verified operational and technological efficiency improvements, with support for developing countries remaining voluntary.

Brazil would largely preserve the framework but soften its start, with GFI reductions of 3% in 2029 and 4% in 2030 before a steeper trajectory begins. It retains the two-tier compliance system, with Remedial Units priced at $100 and $380 per tonne of CO2 equivalent.

Tuvalu proposes a more stringent approach, with Tier 1 units priced at $300 per tonne and Tier 2 at $380, alongside a GFI trajectory reaching a 30% direct-compliance reduction and 65% base-target reduction by 2035.

Australia, Canada, South Africa and the United Kingdom would largely retain the existing framework, including the two-tier GFI system, Surplus Units, rewards for zero and near-zero fuels and the IMO Net-Zero Fund, while adding more detail on Fund governance and revenue distribution.

China, meanwhile, is seeking more technology-neutral language that would recognize shore power, wind propulsion and solar power in GFI calculations and provide greater flexibility over incentives.

Battle Over the Carbon Price

Much of the disagreement centers on the framework’s economic component.

Norway, Pacific Island states and European countries argue that weakening the pricing mechanism would reduce incentives to invest in alternative fuels and make the IMO’s emissions targets harder to achieve.

Norway has specifically rejected Liberia’s proposal to link requirements to commercial fuel availability, arguing it would weaken ambition and create regulatory uncertainty.

Liberia, meanwhile, has raised concerns about the legality, cost and administrative complexity of the proposed Fund. It argues that allowing ships to comply through payments does not necessarily guarantee emissions reductions and could disproportionately raise transportation costs for long-distance exports from developing countries, particularly bulk commodities.

Saudi Arabia and the United Arab Emirates have raised similar concerns, arguing that a uniform carbon price would have uneven effects on global trade and impose greater costs on remote, trade-dependent and developing economies.

The stakes are significant for shipping, which has pushed for a global IMO regime rather than an expanding patchwork of regional regulations.

“Laying the regulatory foundation now is critical to ensuring that these investments take shipping into the right direction,” Höegh Autoliners CEO Andreas Enger said. “We strongly support the IMO in its work towards ambitious mid-term measures that can meet the 2023 IMO GHG strategy and give the long-term certainty and credibility needed for the transition.”

Port of Rotterdam CEO Boudewijn Siemons also called for a global framework, saying shipping’s international nature makes a worldwide level playing field essential.

Billions at Stake

Governments will also work on fuel certification, verification and reporting, zero and near-zero fuel incentives and governance of the proposed IMO Net-Zero Fund.

The economic mechanism is expected to generate roughly $10 billion to $15 billion annually, making how that money is collected and distributed one of the negotiations’ most politically sensitive issues.

Brazil, the Democratic Republic of Congo, Kenya, Solomon Islands and Tuvalu have proposed rules covering revenue collection and disbursement, clean-fuel rewards, infrastructure, food security and support for a just and equitable transition. Even the mechanism’s basic structure remains unsettled, including whether it ultimately operates as a “Fund” or a lighter “Facility.”

The working group will also continue work on the IMO’s Life Cycle GHG Assessment framework, including proposals covering upstream emissions from conventional marine fuels, land-use change and renewable natural gas.

Next week’s meeting will not settle the Net-Zero Framework. The working group reports to MEPC 85, scheduled for November 30 through December 3, where governments will again face the larger question left unresolved last year: whether enough common ground remains to turn the framework into binding global regulation.

Governments will return to London next week for another round of negotiations over the International Maritime Organization’s Net-Zero Framework, with countries still sharply divided over the future of the landmark shipping climate agreO’s Intersessional Working Group on Greenhouse Gas Emissions from Ships will meet September 1-4 ahead of the Marine Environment Protection Committee’s 85th session later this year. Talks will focus on proposed changes to the framework, implementation guidelines and lifecycle greenhouse gas rules.

At the center of the debate is the framework agreed at MEPC 83, which combines progressively tighter greenhouse gas fuel-intensity requirements with an economic mechanism that puts a price on emissions and rewards ships using zero and near-zero emission fuels.The framework was due for formal adoption last October, but governments instead adjourned the extraordinary MEPC session for one year following contentious negotiations and an aggressive U.S. campaign against the measure.Negotiations have continued, however, with governments trying to bridge significant differences over what the final regulations should look like. Next week’s meeting will test whether enough support remains for the original framework or whether the IMO is headed toward a substantially different compromise.

Competing Visions Emerge

INTERCARGO, in a pre-brief ahead of the meeting, highlighted four competing proposals, along with additional submissions seeking changes to the framework.Liberia has proposed the most significant overhaul, tying GHG Fuel Intensity, or GFI, requirements to the availability, affordability and scalability of commercially viable fuels. Its proposal would largely replace the IMO Fund-based mechanism with transferable Surplus Units that ships could trade, bank or borrow. Liberia and Panama have also proposed awarding Surplus Units for verified operational and technological efficiency improvements, with support for developing countries remaining voluntary.Brazil would largely preserve the framework but soften its start, with GFI reductions of 3% in 2029 and 4% in 2030 before a steeper trajectory begins. It retains the two-tier compliance system, with Remedial Units priced at $100 and $380 per tonne of CO2 equivalent.Tuvalu proposes a more stringent approach, with Tier 1 units priced at $300 per tonne and Tier 2 at $380, alongside a GFI trajectory reaching a 30% direct-compliance reduction and 65% base-target reduction by 2035.Australia, Canada, South Africa and the United Kingdom would largely retain the existing framework, including the two-tier GFI system, Surplus Units, rewards for zero and near-zero fuels and the IMO Net-Zero Fund, while adding more detail on Fund governance and revenue distribution.China, meanwhile, is seeking more technology-neutral language that would recognize shore power, wind propulsion and solar power in GFI calculations and provide greater flexibility over incentives.

Battle Over the Carbon Price

Much of the disagreement centers on the framework’s economic component.Norway, Pacific Island states and European countries argue that weakening the pricing mechanism would reduce incentives to invest in alternative fuels and make the IMO’s emissions targets harder to achieve.Norway has specifically rejected Liberia’s proposal to link requirements to commercial fuel availability, arguing it would weaken ambition and create regulatory uncertainty.Liberia, meanwhile, has raised concerns about the legality, cost and administrative complexity of the proposed Fund. It argues that allowing ships to comply through payments does not necessarily guarantee emissions reductions and could disproportionately raise transportation costs for long-distance exports from developing countries, particularly bulk commodities.Saudi Arabia and the United Arab Emirates have raised similar concerns, arguing that a uniform carbon price would have uneven effects on global trade and impose greater costs on remote, trade-dependent and developing economies.The stakes are significant for shipping, which has pushed for a global IMO regime rather than an expanding patchwork of regional regulations.“Laying the regulatory foundation now is critical to ensuring that these investments take shipping into the right direction,” Höegh Autoliners CEO Andreas Enger said. “We strongly support the IMO in its work towards ambitious mid-term measures that can meet the 2023 IMO GHG strategy and give the long-term certainty and credibility needed for the transition.”Port of Rotterdam CEO Boudewijn Siemons also called for a global framework, saying shipping’s international nature makes a worldwide level playing field essential.

Billions at Stake

Governments will also work on fuel certification, verification and reporting, zero and near-zero fuel incentives and governance of the proposed IMO Net-Zero Fund.The economic mechanism is expected to generate roughly $10 billion to $15 billion annually, making how that money is collected and distributed one of the negotiations’ most politically sensitive issues.Brazil, the Democratic Republic of Congo, Kenya, Solomon Islands and Tuvalu have proposed rules covering revenue collection and disbursement, clean-fuel rewards, infrastructure, food security and support for a just and equitable transition. Even the mechanism’s basic structure remains unsettled, including whether it ultimately operates as a “Fund” or a lighter “Facility.”The working group will also continue work on the IMO’s Life Cycle GHG Assessment framework, including proposals covering upstream emissions from conventional marine fuels, land-use change and renewable natural gas.Next week’s meeting will not settle the Net-Zero Framework. The working group reports to MEPC 85, scheduled for November 30 through December 3, where governments will again face the larger question left unresolved last year: whether enough common ground remains to turn the framework into binding global regulation.

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