Deep Dive: Unpacking the new International Matine Organisation Net-Zero Framework

Cornerstone Climate

By Opportunity Green

International shipping is responsible for approximately 3% of annual global greenhouse gas (GHG) emissions (similar to those from a country the size of Germany or Korea), but the sector has for years sailed under the radar of international climate action. In mid-April all that changed, when an historic deal was struck at the International Maritime Organization (IMO) – the IMO Net-Zero Framework – under which States agreed binding measures, including a GHG pricing mechanism, aimed at driving decarbonisation.

In this Deep Dive (the first guest blog in the Cornerstone Climate Deep Dive series), the team of lawyers and shipping policy experts at Opportunity Green unpack what has been agreed and consider how it stacks up against states’ international decarbonisation obligations.

In summary:

• The IMO has agreed measures to cut international shipping’s GHG emissions, including a global pricing mechanism on emissions, marking an historic first.
• However, the final regulations are a political compromise unlikely to be robust enough to satisfy States’ obligations under the United Nations Convention on the Law of the Sea (UNCLOS) without States taking further unilateral or regional action.
• As climate litigation grows and develops, States that ignore their distinct and separate UNCLOS obligations and simply rely on compliance with IMO measures do so at their peril.

Introduction

As the global community intensifies its efforts to combat climate change, the maritime sector has become a focal point for international regulatory initiatives. Global waves were made in mid-April when negotiations that had taken two years, since the agreement of the IMO’s revised greenhouse gas reduction strategy in 2023 (the IMO 2023 Strategy) concluded with the agreement of the IMO Net-Zero Framework.

That agreement comes almost exactly one year after the delivery of the International Tribunal for the Law of the Sea (ITLOS) advisory opinion on climate change, as requested by the Coalition of Small Island States (COSIS) and issued in May 2024 [slides and video of the Opportunity Green & Cornerstone Climate webinar on the advisory opinion are here]. The ITLOS advisory opinion forms a key part of the legal backdrop against which the IMO Net-Zero Framework is intended to operate.

At Opportunity Green, our teams of lawyers and shipping policy experts have been heavily involved in both the IMO negotiations and in the ITLOS advisory opinion proceedings. Here, we examine the opportunity presented by the recent conclusion of the IMO negotiations on the IMO Net-Zero Framework and take stock of the state of international regulation in relation to the decarbonisation of the shipping sector.

IMO Net-Zero Framework

The IMO Net-Zero Framework operationalises IMO 2023 Strategy, aiming for net zero GHG emissions from international shipping by, or around, 2050, agreed by the IMO in July 2023.

The IMO 2023 Strategy commits to:

• Reduce emissions by ‘at least 20%, striving for 30%’ by 2030.
• Reduce emissions by ‘at least 70%, striving for 80%’ by 2040.
• Drive the uptake of alternative fuels to ‘at least 5%, striving for 10%’ by 2030.

The IMO 2023 Strategy specified that these reduction targets were intended to be achieved through agreement on a technical measure (a goal-based marine fuel standard (GFS)) and an economic measure (a GHG pricing mechanism), together forming ‘the basket of mid-term measures’.

As such, the IMO Net-Zero Framework is a regulation that was approved on the 11 April 2025 at the 83^rd meeting of the Marine Environment Protection Committee (MEPC 83). Subject to adoption at MEPC/ES.2 (14 to 17 October 2025) and acceptance in the 10-month period after this meeting, the regulation will be included in a new Chapter 5 of Annex VI (Prevention of air pollution from ships) to the International Convention for the Prevention of Pollution from Ships (MARPOL). The regulation will enter into force in 2027 (making it legally binding on Annex VI parties, of which there are 110 States and Associate Members), but the practical operation of the regulation will not begin until 2028.

The core emissions reduction measure under the IMO Net-Zero Framework is a ‘two-tier GFS’. This brings together a technical measure (on fuel; similar in purpose to FuelEU Maritime) and an economic measure (on pricing; similar in purpose to the European Emissions Trading System) under one structure. Its complex two tiers of compliance standards penalise and reward ships using more or less intensive fuels according their annual GHG Fuel Intensity (GFI).

The approved text was the subject of considerable negotiation and political compromise at MEPC83. It:

• Covers all ships over 5000GT.
• Employs a lifecycle well-to-wake methodology.
• Establishes a Net-Zero Fund used (i) to reward the use of zero or near-zero GHG emission fuels, and (ii) to promote a just and equitable transition of the shipping sector (Regulation 41).
• Establishes a two-tier system of GFI targets, a Base Target and a Direct Compliance Target (Regulation 35):
  • The Base Target is the less stringent GHG emission intensity reduction target. Ships that do not meet this target will pay higher penalties priced at $380/tonne until 2030, with future pricing reviewed by 2028 (Tier 2).
  • The Direct Compliance Target is a more ambitious reduction target. Ships that meet this target will not have to pay any penalties; ships which meet a trajectory in between the Base Target and the Direct Compliance Target will pay a penalty priced at $100/tonne (until 2030) for emissions falling between the targets (Tier 1), plus the price for emissions under Tier 2.
  • Ships that have emissions at or below the Direct Compliance Target will receive surplus units which are bankable for two subsequent years or can be sold to those ships who have not met the Base Target. Credit trading is not allowed in Tier 1 (to meet the direct compliance target). (Regulation 36).

Analysis of IMO measures

While some are hailing the fact of an agreement having been made at all as a success, analysis suggests that the measures outlined above will fall far short of driving the emissions reductions the shipping sector needs quickly enough.

Modelling from Transport & Environment suggests that not only are the compliance targets not Paris-aligned (missing this target by 50%), but that they do not enable the sector to meet the previously agreed IMO 2023 Strategy. Estimates anticipate the IMO Net-Zero Framework will drive emissions reductions of between 8-10% of 2008 emission levels, significantly less than the ‘at least 20%’ contained in the IMO 2023 GHG Strategy.

The agreed mechanism will likely prove stringent enough to encourage ships to move away from high-emission fuels such as heavy-duty fuel and diesel. However, it falls short of incentivising a shift toward significantly cleaner alternatives such as green hydrogen-derived fuels (vessels are likely to shift to biofuels instead). There is also currently some uncertainty as to whether it will prove high enough to avoid shipping companies continuing investment into liquified natural gas (LNG).

Moreover, despite the introduction of a Net-Zero Fund which could manage the disbursement of around $10-15bn every year, it is unlikely that this will meet the needs of climate vulnerable countries to adapt to the changing climate that threatens their very existence. The IMO Net-Zero Framework specifies that revenues generated by the measure should be disbursed for a limited number of purposes, including as a reward for the uptake of zero- and near-zero GHG fuels and technologies (ZNZs), and for certain objectives relevant to supporting a just and equitable transition in developing countries. The detail of how the funds will be allocated and to what priority remain to be determined in a set of pending guidelines due for finalisation by March 2027, though we await a clear workplan for the development of the guidelines.

The new Net-Zero Fund and the purposes for which revenue can be disbursed are concerning for two reasons:

1. Early analyses suggests that annual revenues may not be sufficient to secure a scalable ZNZ reward, while also supporting a just and equitable transition. There is a serious risk that priority is given to the ZNZ reward, leaving very limited funds for any other purposes. In this case, money would simply be directed back into the pockets of the very shipping companies who have made record profits (and paid incredibly low taxes, as highlighted by our recent report, Global shipping: mega profits, micro taxes).
2. There is a risk that the IMO Net Zero Framework’s revenue disbursement terms are interpreted to restrict spending to a very limited number of purposes. This will have further implications on justice and equity. For example, a need to spend revenues exclusively on activities within the maritime shipping sector would restrict some developing countries’ access to funds where there is a limited pipeline of projects meeting the criteria.

The ITLOS advisory opinion

The ITLOS advisory opinion addressed two questions posed to it by COSIS, namely:

1. What are the specific obligations of States under the UNCLOS to prevent, reduce, and control pollution of the marine environment caused by anthropogenic GHG emissions?
2. What are the specific obligations of States under UNCLOS to protect and preserve the marine environment in relation to climate change impacts?

ITLOS’ historic opinion confirmed that:

1. “Climate change represents an existential threat and raises human rights concerns”.
2. Human-caused GHG emissions fall within the definition of “pollution of the marine environment” and therefore that States are subject to a wide-ranging set of obligations under UNCLOS to address GHG emissions.

The opinion constitutes a clarification of the legal minimum measures that States must take, in contrast to the compromise position on regulatory framework agreed through the IMO multilateral process.

Under UNCLOS, States, individually or jointly, should take “all necessary measures” to prevent, reduce and control GHG emissions from any source. This is a stringent standard of due diligence, informed by the best available science and the 1.5°C temperature goal in particular. The IMO Net Zero Framework falls significantly short of this goal.

The ITLOS advisory opinion stated that States cannot necessarily discharge this obligation exclusively through participating in global efforts – States are also required to take individual actions as appropriate. Moreover, States’ international legal obligations under UNCLOS are not satisfied by complying with the Paris Agreement; UNCLOS imposes distinct and separate standards. Accordingly, to the extent the IMO agreement to address GHG emissions falls short of such standards, States have an obligation to act unilaterally or regionally to discharge their obligations under UNCLOS.

Importantly, States must also take “all necessary measures” to ensure that GHG emissions under their jurisdiction or control do not cause damage to other States and their environment, applying a precautionary approach in light of the significant potential harm caused by GHG emissions to the marine environment. These obligations are immediate, and necessary measures should be interpreted broadly, with a science-led approach. Given the projected GHG emissions reductions trajectory of the IMO Net-Zero Framework it is unlikely that these stringent obligations will be discharged.

ITLOS interpreted “jurisdiction or control” broadly, encompassing public and private actors. This includes flag states (countries to whom ships are registered), which have significant obligations to enforce and ensure compliance with rules and standards. It would also logically include port state jurisdiction (i.e. the jurisdiction a state has over vessels entering its ports).

ITLOS confirmed that States with greater capabilities must do more than States with lower capabilities, and there are extensive obligations on States to cooperate and to provide assistance to developing States. In principle, the creation of the IMO Net-Zero Fund has the potential to contribute significantly to the fulfilment of this objective, as well as existing mechanisms such as the IMO Voluntary Multi Donor Trust Fund (which supports the participation in IMO meetings of less developed countries). However, the low ambition of the IMO Net-Zero Framework means that funds are likely to be inadequate to provide the significant support needed by climate vulnerable states in particular.

Finally, the ITLOS advisory opinion confirmed that a failure to comply with the obligation to take all necessary measures to mitigate GHG emissions engages international responsibility for the State in breach, leaving open the door to potential legal remedies and compensation. On several measures, it seems unlikely that the IMO Net-Zero Framework meets States’ international legal obligations under UNCLOS as determined by the ITLOS.

Where do new IMO measures leave States?

The ITLOS advisory opinion in May 2024 was a watershed moment in the interpretation of States’ legal obligations in respect of climate change and the marine environment. It represents an active, engaged judiciary conscious of its position in the ecosystem of international climate action.

States must be alive to the potential consequences of relying on the IMO to discharge their legal obligations in relation to GHG emissions insofar as the IMO rules are not stringent enough to meet the UNCLOS standards explained by ITLOS. These consequences could include:

• Dispute proceedings under UNCLOS dispute resolution mechanisms.
• Legal actions for transboundary harm.
• Informing and increasing domestic climate litigation to raise States’ ambitions.
• Increased pressure on high-emitting States through other international forums.
• The legal foundation for pushes for more ambitious IMO reforms.

Ultimately, while the IMO Net-Zero Framework represents a significant step forward for the decarbonisation of the shipping industry, it is a political compromise unlikely to be robust enough to satisfy States’ obligations under UNCLOS without States taking further unilateral or regional action. The UNCLOS regime imposes concrete obligations, objective standards, and a dispute mechanism (something notably absent from the UNFCCC regime). As climate litigation grows and develops, States that ignore this and simply rely on the IMO do so at their peril.

Learn more about Opportunity Green’s work here.

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