Delivering Tomorrow: IMO's Decarbonisation Measures

What you need to know

In April, the International Maritime Organization (IMO) provisionally endorsed a world first industry-wide carbon-pricing mechanism for the maritime sector, the Net-Zero Framework (Framework).

In October, a vote on adoption of the Framework was dramatically and unexpectedly postponed.

A new picture is emerging where the underlying momentum remains, but regulatory timelines and price reference points are hazy. The potential implications for the shipping industry remain profound.

What you need to do

In the face of the regulatory uncertainty and market developments, the approach of industry players should be:

• Data driven: accurate emissions data is key to managing both risks and opportunities so establish a single source of truth for activity and fuel data across fleets, align data definitions (eg, fuel types, LHV, density, cargo metrics) and incorporate near-real-time visibility of emissions drivers (eg, speed, weather routing, hull condition, engine load). In this way, gain visibility over abatement opportunities. Commercial software solutions are there to support this process.
• Flexible: an agile approach is essential to respond adequately to market and regulatory developments. Shipowners can, for example, undertake current state assessments to identify the portion of their fleet that will be captured by legislation, the expectations of key customers and stakeholders and commercial arrangements that come up for renewal. The information can be integrated into scenario planning, regulatory playbooks and risk controls.
• Strategic: a strategic approach that blends operational measures, retrofits, and selective newbuilds aligned to multiple fuel pathways is vital, prioritising fuel-flexible and upgrade-ready vessels and technologies to hedge technology and policy uncertainty.
• Collaborative: given dependency on new technologies for net-zero aligned emission reductions of shipping, shipping companies and stakeholders should work together to develop low-carbon pathways and enhance emission transparency. Ecosystem collaboration via coalitions (eg, Getting to Zero Coalition, First Mover Coalition) or green corridor initiatives (62 as of 30 October 2024¹) will aggregate zero or net-zero fuel demand and secure early access to alternative bunkering.

Industry Impact and Strategic Considerations

A global carbon price would have a direct impact on freight costs. Existing global and regional regulatory regimes are already adding compliance cost for charterers and cargo owners. Are these charges a fuel cost - or a function of the profile of the ship as a capital asset? The philosophical divide is most acute in longer term chartering.

Regional schemes, such as the EU Emissions Trading System (ETS) already and the impending UK ETS expanding to include maritime emissions from 1 July 2026, have more stringent requirements than those proposed by the IMO. Regional schemes may be affirmed, and new schemes emerge, rather than all such schemes being under pressure to yield to an IMO global scheme.

Owners still need to weigh the costs and benefits of retrofitting existing vessels and of investing in newbuilds designed for low-carbon operation. These equations are nuanced according to ships' trading patterns. Discerning price elasticity in freight markets has been complicated as a result of geopolitical trade uncertainty.

The compliance and penalty history of vessels will still become a factor in asset valuation and due diligence, particularly in the second-hand market. It remains to be seen how strongly IMO's existing short term measures will be enforced in practice. A patchy global compliance picture could attract more polluting assets to low or no enforcement regions.

The need for robust scenario modelling, investment in new technologies, and close engagement with supply chain partners is as pressing as ever, and extends beyond fuel and engine choices to carbon capture, carbon offsetting and to ports that must determine upon new bunkering facilities and fuel sources.

The future of the Framework can play out in a few different ways

In the lead-up to the next vote, technical work continues within the IMO, with ongoing development of guidelines to support the Framework. So does dialogue, consensus building and detailed implementation planning. Industry bodies such as Maritime Industry Australia Limited have expressed disappointment at the delay but see the opportunity to refine the Framework, eliminate areas of uncertainty and improve the eventual regime. At organisations such as the Global Centre for Maritime Decarbonisation (GCMD), pilots and studies continue at pace. GCMD acknowledges the incremental nature of such a complex transition, and the need for holistic engagement across the commercial maritime ecosystem.

Scenarios ahead include:

• Eventual adoption: after a year of negotiations, IMO member states manage to reach consensus and formally adopt the Framework at the next IMO session. A consistent, binding global regime for emissions regulation is seen to reward early movers and drives investments in low-carbon technologies. Some industry actors must confront the impact of stricter requirements sooner.
• Further delays: consensus remains elusive in 2026, leading to further regulatory fragmentation. Individual countries or regions continue to implement their own rules, including levies. A global patchwork elevates compliance risks, massively increases administrative work, and starts to distort global trade routes as operators avoid or price up sectors with stricter regimes. The incentive is generally to postpone investment or adopt a minimum-compliance approach.
• Status quo: while formal adoption is stalled, work on technical guidelines and voluntary measures continues within the IMO and among industry alliances. Some leading shipowners may set and pursue more ambitious emission reduction targets, supported by purpose-driven finance, or under customer pressure. "Free riders” undermine collective impact and climate ambitions. Uncertainty dampens sector-wide investments and slows the deployment of transformative solutions.

In summary, while eventual global adoption remains possible, persistent uncertainty increases the risk of fragmented regulation, market distortions, and delayed investments; unless strong diplomatic and technical progress bridges the current divides during 2026.

Where does this leave shipping decarbonisation currently

For shipowners, investors, freight users and fuel suppliers, strategy depends on their view of the below factors:

Local regulation

Some policymakers and regions may use the interim period to develop their own standards and incentives for low-carbon shipping. Local efforts like the EU ETS and UK Emissions Trading Scheme are exposed to the risk of carbon leakage. Also to shipowners changing their operations in response to local rules. Policy fragmentation can decrease regulatory certainty and deter investment in the shipping sector and among ports and fuel suppliers.

Customer expectations

With mandatory regulation delayed, industry stakeholders shift shipowners toward voluntary climate action. Financiers and customers may increasingly consider emissions transparency and carbon performance when approving loans or awarding contracts as mandatory climate-related disclosures under the ISSB framework take hold. Scrutiny of supply-chain scope 3 emissions is intensifying, placing mounting pressure on customers to reduce emissions across their logistics and procurement networks. This pressure must cascade to their shipping partners where 80% of world trade moves by sea. This incentivises proactive industry players to accelerate their climate strategies, adopt advanced compliance technologies, and pursue green certification as a way to differentiate their offerings and maintain access to customers and finance. In this way, competitive dynamics favour those who move quickly on decarbonisation, even in the absence of direct IMO regulation.

Transition risk and resilience

Without the adoption of the Framework, there is greater onus on customer expectations and voluntary action as key drivers. Shipowners relying solely on baseline compliance expose themselves to heightened reputational and climate transition risks, especially as supply chains and multinational customers demand lower-carbon transport and the global economy is transitioning toward net zero. Anticipating increased market demands and regulation, partnering with like-minded stakeholders, and embedding climate criteria within business models are measures shipowners can take to become more resilient against those risks. Shipping companies that can demonstrate credible action are better positioned to stay afloat amidst policy uncertainty and supply chain disruption, while laggers may encounter escalating pressure from customers, financiers, and civil society. Failing to address emissions proactively is increasingly precipitating climate litigation across the supply chain, underscoring the strategic imperative for shipping companies to decarbonise.

Conclusion

The IMO’s decarbonisation measures - while uncertain whether they will enter into force - represent a watershed moment for the shipping industry. Regardless of whether the Framework will be adopted, IMO's efforts signal a shift towards a more carbon-conscious future with significant implications for contracts, fleet strategy, and investment. The current regulatory uncertainty is challenging, but it does provide a window for industry stakeholders to prepare, adapt, and influence the final shape of the regulatory and market forces around shipping decarbonisation.

Other authors: Rob Heslenfeld, Executive – Risk Advisory; Ash Pandey, Executive – Risk Advisory and Sophie Tawfik, Specialist – Risk Advisory.

Want to know more?

For further details about the developments around the decarbonisation of shipping, please refer to one of our previous articles:

• A global carbon levy – at a price (2 May 2025)
• UK ETS Maritime Expansion Consultation: Top 10 takeaways for the Maritime Industry (20 December 2024)
• Sail away, sail away – the international strategy for reducing greenhouse gas emissions in the shipping industry (8 August 2023)