The IMO Net-Zero Framework: what is it and how does it work?

Who and what does the Framework apply to?

The IMO Net-Zero Framework:

• Applies to ships of 5,000 gross tonnage and above involved in international voyages.

• Excludes domestic-only ships, military vessels, and other specified categories.

• Is enforced by port states – any ship calling at a port in a MARPOL Annex VI country must comply.

• Puts obligations on shipowners/operators to reduce their ships’ emissions intensity.

How the IMO Net-Zero Framework works

1. GHG Fuel Intensity (GFI) Targets

Every year, ships must calculate their GHG Fuel Intensity (GFI) – the GHG emissions per unit of energy used.

Ships are given two annual GFI targets:

• Base Target – lower standard.

• Direct Compliance Target – stricter standard.

Targets become more ambitious over time, currently specified up to 2035 (see table below). Future targets will be set every five years.

2. Emissions pricing – the two tiers

There are two ‘tiers’ that ships’ emissions can fall into, based on how intense they are.

Tier 1: Emissions between the base and compliance target.
→ Priced at $100/tonne CO₂eq.

Tier 2: Emissions above the base target.
→ Priced at $380/tonne CO₂eq.

The pricing for both tiers is calculated on a well-to-wake basis, where the total emissions of a ship’s entire fuel lifecycle (from production to use on board) is accounted for.

3. Compliance options

All ships will be monitored for compliance and will then be expected to take the following action:

• Compliant ships: Those whose total emissions intensity is below the direct compliance target (i.e. the least emissions intensive ships) may earn surplus units (credits) which:

• Are valid for two years.

• Can be sold once, used by the credited ship later, or cancelled voluntarily.

• Non-compliant ships: Must either:

• Buy remedial units (based on excess emissions) from a central registry.

• Use stored surplus units or buy them from compliant ships, but only for Tier 2 compliance.

All transactions and emissions data will be tracked through the IMO GFI Registry.

Key challenges and concerns

In brief, the three key concerns for the implementation of the IMO Net-Zero Framework are that:

1. It will not reduce emissions quickly enough or in line with previously agreed targets.

The IMO’s 2023 GHG Strategy aims for:

• 20-30% emission reductions by 2030.

• 70-80% by 2040.

• Net-zero around 2050.

However, current analysis from Transport & Environment suggests the Net-Zero Framework may only achieve 8-10% reductions by 2030, falling short of targets and not aligned with the 1.5°C Paris Agreement pathway.

2. There is a very limited pot of potential revenue, estimated at $10-15bn a year (nowhere near what is needed to ensure a just and equitable transition).

3. Its implementation could have highly inequitable outcomes. In particular, the trading of surplus units between ships favours well-resourced operators in wealthy countries.

Read more about the main shortcomings in the IMO Net-Zero Framework.

Is an ambitious and equitable outcome possible?

The IMO Net-Zero Framework marks a significant step forward in regulating international shipping’s emissions, introducing a global measure and acknowledging the need for climate justice.

However, without stronger targets, broader coverage, and clarity on use of funds, it may not meet the climate ambition, nor the just and equitable transition that many countries and organisations have been calling for.

For a more ambitious and equitable outcome, future negotiations must:

• Strengthen emission intensity reduction targets.

• Guarantee equitable access and significant revenue distribution to climate vulnerable states.

• Provide early support for true ZNZ solutions, such as hydrogen derived e-fuels and wind propulsion.

For more information, read our in-depth guide to the IMO Net-Zero Framework.