Home - Blank Rome LLP

Register to receive insights and analyses on breaking news and trends across varying industries.
<a class="link-primary mt-4" href="/subscribe">Subscribe</a>

Philadelphia, PA

New York, NY

Wilmington, DE

Cincinnati, OH

Princeton, NJ

Los Angeles, CA

Houston, TX

Tampa, FL

Shanghai

South Florida

Pittsburgh, PA

Washington, D.C.

Chicago, IL

Orange County, CA

Dallas, TX

Boston, MA

Introduction: A New Era for Maritime Decarbonization

core/heading

The International Maritime Organization’s (“IMO”) Marine Environment Protection Committee approved a sweeping package of draft regulations known as the “IMO Net-Zero Shipping Framework” (the “Framework”) in April 2025. This Framework will be voted on in October 2025 and, if adopted, will enter into force by March 2027. It marks an ambitious and comprehensive global effort to align the maritime sector with international climate goals. However, the Framework has also sparked significant debate among IMO member states, most notably the United States, which has voiced strong opposition to the proposed measures. This article provides an overview of the proposed regulations and broader industry implications, while also highlighting the United States’ position and the Framework’s potential impact on the future of maritime decarbonization.

core/paragraph

The IMO Net-Zero Framework: Scope and Ambition

The Framework is the centerpiece of the IMO’s mid-term greenhouse gas (“GHG”) reduction measures, intended to be formalized as a new Chapter 5 of MARPOL Annex VI. Its primary objective is to achieve net-zero GHG emissions from international shipping by 2050, in line with the 2023 IMO Strategy on GHG Emissions. The Framework applies to all vessels of 5,000 gross tons and above on international voyages, with limited exceptions for vessels operating solely within national waters, non-mechanically propelled vessels, and certain offshore platforms.

The draft regulations are built on two main pillars:

Technical Element: A GHG fuel standard that mandates progressive reductions in the GHG fuel intensity (“GFI”) of marine fuels, measured from production to use or on a well-to-wake (“WtW”) basis.

core/list-item

Economic Element: A global GHG emissions pricing mechanism, requiring vessels that do not meet the GFI targets to purchase “Remedial Units” (“RUs”), with revenues paid into the IMO Net-Zero Fund by the shipowner.

core/list

This dual approach is designed, in theory, to both drive the uptake of zero and near-zero (“ZNZ”) GHG fuels and technologies and create a level playing field for the global fleet.

Key Regulatory Mechanisms and Compliance Pathways

If adopted, each vessel would need to calculate its annual GFI of all fuels used on a WtW basis. The target GFI is structured into two tiers—a Base Target (Tier 2) and a more stringent Direct Compliance Target (Tier 1)—that vessels would need to meet. Both targets get progressively more stringent annually.&nbsp;

At the close of each reporting year, vessels would need to assess their GFI compliance. Vessels that meet or exceed the Direct Compliance Target would earn Surplus Units (“SUs”), which may be banked for up to two years, traded with other vessels, or voluntarily canceled as a climate mitigation measure. Conversely, vessels that fall short would need to offset their deficit by acquiring SUs from other vessels (pooled compliance), using previously banked SUs, or purchasing RUs from the IMO at benchmark prices. For the 2028–2030 period, RU prices would be set at $100 per ton of CO₂eq (CO2&nbsp;equivalent) for Tier 1 and $380 per ton for Tier 2.

Reporting Requirements.

Vessels would have to report their annual GFI and compliance approach to their flag Administration or Recognized Organization (“RO”) within three months of the end of the reporting period (the start of the first reporting period would be January 1, 2028). Further details regarding data verification and the designated party responsible for submitting information to the IMO GFI Registry will likely be outlined in the IMO’s forthcoming implementation guidance. If the Framework is adopted, each vessel is expected to have an account in the Registry by October 2027.

The GHG intensity of fuels would have to be certified by Sustainable Fuels Certification Schemes (“SFCS”), approved by IMO, with relevant sustainability metrics documented on Fuel Lifecycle Labels. IMO is expected to publish a list of recognized SFCSs by March 2027. The IMO is developing comprehensive implementation guidelines, which will include Life Cycle Assessment (“LCA”) methodology to ensure that upstream emissions, land and water use, social impacts, and food security are factored into fuel assessments. Final implementation guidelines are expected by May 2026 and will be critical for determining the compliance value of biofuels, liquefied natural gas (“LNG”), and emerging ZNZ fuels. 

The IMO Net-Zero Fund: Revenue and Disbursement

The fees collected from under-compliant vessels would go into the IMO Net-Zero Fund, paid directly by shipowners, which would be used for:

Rewards for ZNZ Fuel Use. Vessels using fuels or technologies with GFI below required standards would be eligible for financial rewards. The methodology and quantum of these rewards are to be finalized by March 2027 and reviewed every five years.

Supporting a Just and Equitable Transition. A significant portion of the IMO Net-Zero Fund would be allocated to support decarbonization efforts in developing countries, particularly least-developed countries and small island developing states, including training, research, technology transfer, and investments in green fuel production and bunkering infrastructure.

United States Position on the IMO Net-Zero Framework 

The United States, under the Trump administration, has taken a firm stance against the Framework, characterizing it as a global carbon tax that would disproportionately burden American interests.&nbsp;

On August 11, 2025, the United States lodged a submission to the IMO’s Marine Environment Protection Committee listing “unacceptable risks” and urging members to vote against the adoption of the Framework. The document characterizes the package as an inflammatory global tax that would saddle consumers with higher prices, penalize proven transitional fuels such as LNG, and generate a vast fund “without guidelines, guardrails or anti-money laundering controls.”

Secretary of State Marco Rubio and the Secretaries of Commerce, Energy, and Transportation also issued a <a href="https://www.state.gov/releases/office-of-the-spokesperson/2025/08/joint-statement-on-protecting-american-consumers-and-shipping-industries-by-defeating-the-international-maritime-organizations-net-zero-framework-aka-global-carbon-tax/" target="_blank" rel="noreferrer noopener">Joint Statement</a>, released on August 12, 2025, indicating that the United States will consider all available measures, including threatening retaliation and tariffs against countries supporting the measure, to protect American maritime and economic interests should the Framework be adopted.

With the adoption vote approaching and requiring significant support from IMO member states, it remains uncertain whether the Framework will ultimately be adopted and which countries will align themselves with the United States’ position. To date, Iran, Iraq, Bahrain, Kuwait, Saudi Arabia, the UAE, Venezuela, and Yemen have argued against adopting the Framework, but it is unclear if other IMO Member States will follow suit.

Challenges, Uncertainties, and Next Steps

While the Framework, including its draft regulations, is a significant accomplishment, several uncertainties remain:

Finalization of Implementation Guidelines. The economic viability of various fuels, especially biofuels and LNG, hinges on the final WtW GHG conversion factors, which are not expected until the second quarter of 2026.

Reward Mechanism for ZNZ Fuels. The methodology and quantum of rewards for ZNZ fuel use are yet to be determined, complicating investment decisions for shipowners and fuel suppliers.

Market Dynamics. At the heart of the U.S. government’s position is a pragmatic concern—there is currently not enough green fuel or infrastructure to meet the IMO timeline. ZNZ fuels, such as green methanol, ammonia, and hydrogen are just out of pilot phase. Retrofitting global bunkering infrastructure will take years and trillions of dollars. Meanwhile, critics argue the current Framework rewards only fuels with near-zero lifecycle emissions, a category that excludes most transitional fuel options, such as LNG, thereby forcing the industry either to pay punitive fees or bet on fuels that do not yet exist at scale.

Adoption of the Framework. To be adopted, the Framework must be approved by a two-thirds majority of IMO Member States, representing 50 percent of world tonnage. As such, major flag States will play a critical role.

Conclusion: Preparing for a Decarbonized Future

The Framework represents a significant step for the maritime industry. It would establish a global carbon price, mandate aggressive GHG intensity reductions, and create powerful incentives for the adoption of ZNZ emission fuels and technologies. However, the Framework’s ambitious goals are accompanied by significant challenges, including technical uncertainties, evolving market dynamics, and pronounced political division. The outcome of the upcoming adoption vote in October 2025 and the resolution of outstanding implementation details will determine the Framework’s effectiveness and global reach.&nbsp;

For industry stakeholders, if the Framework regulations are adopted, the coming years will demand proactive investment in compliance strategies, fuel supply chains, and new technologies, as well as close engagement with regulatory authorities and ongoing policy developments. Robust reporting and verification processes are also central to this Framework, with the IMO GFI Registry serving as the central platform for compliance tracking, surplus unit trading, and reward disbursement.&nbsp;

If the Framework is not adopted, the maritime industry can almost certainly expect fragmented domestic regulations, investor uncertainty, and potential trade retaliation. Shipowners weighing muti-billion-dollar newbuild decisions need clarity on future carbon liabilities and prolonged uncertainty could freeze orders or lock in carbon-intensive tonnage. Meanwhile, tariff threats could escalate beyond shipping and ripple across other sectors, from steel to agriculture, all dependent on shipping to move cargo.&nbsp;

The maritime industry’s ability to adapt to these complex and evolving requirements (if adopted), seize opportunities for innovation, and collaboration across the value chain will determine its success in navigating the transition to a decarbonized future.

This article is one in a series of articles written for Blank Rome’s <a href="/news-and-events/mainbrace-september-2025/" id="25836">MAINBRACE: September 2025</a> edition.

IMO Net-Zero Shipping Framework: A Crossroads for Global Shipping Regulations

Offices

Stay Connected

Slide Menu

Slide Search

IMO Net-Zero Shipping Framework: A Crossroads for Global Shipping Regulations

Offices

Stay Connected