At the recent MEPC 83 meeting held from 7 to 11 April 2025 at the IMO’s headquarters in London, Member Nations approved by a majority vote for a two-tiered carbon pricing mechanism and fuel standard, by adopting a draft amendment to Annex VI of the MARPOL Convention. This breaks the deadlock on discussions about climate rules and is seen as a breakthrough establishing a compromise framework on which final guidelines can be built and eventually voted on for adoption at the next MEPC meeting in October this year. If adopted, it will make shipping the first industry of any to have a global carbon price agreed with internationally mandated emissions reduction targets.
Despite strong objections from Pacific Island states and the withdrawal of the United States from the negotiations, consensus was ultimately achieved through a compromise known as the “J9 Bridge” proposal. Led by Singapore and originally based on the IMSF&F plan backed by China, Brazil, and others, this proposal gained majority support and now forms the foundation of the IMO’s mid-term climate strategy.
At the heart of the J9 Bridge proposal is a two-tiered compliance system that will come into force in 2028. From that year onwards, vessels of 5,000 gross tonnage and above will be required to measure their greenhouse gas fuel intensity (GFI) against a benchmark compared to 2008 levels of 93.3 gCO₂eq per megajoule (EU’s FuelEU Maritime baseline is 91.16 gCO₂eq/MJ - average 2020) and will need to meet two levels of mandatory emissions reduction targets.
The first level, known as the “Base Target”, sets relatively moderate reduction goals—starting at 4% in 2028, increasing to 8% in 2030, and reaching 30% by 2035. The second level, the “Direct Compliance Target” (DCT), imposes more ambitious reductions—17% in 2028, 21% in 2030, and 43% in 2035.
Vessels that do not meet the Base Target must purchase Tier 2 Remedial Units (RUs) at a rate of $380/tonne CO₂eq to offset the amount by which they exceed the threshold.
Vessels that meet the Base Target but fall short of the more ambitious & stricter Direct Compliance Target, results in additional penalties, through the purchase of Tier 1 Remedial Units (RUs) at a lower rate of $100/tonne CO₂eq on the difference of any emissions between the Base Target reduction target and secondary DCT reduction target.
Tier 1 & 2 RU prices are set until 2030 – thereafter values will be decided upon.
Vessels that meet or exceed the second level Direct Compliance Target will pay no fees and generate Surplus Units (SU’s), which may be transferred to other vessels in carbon deficit within the same fleet (for DCT compliance) or banked for two years for use in future reporting periods or sell them through an IMO GHG fuel intensity registry.
The framework also includes incentives for early adopters of zero or near-zero greenhouse gas technologies (ZNZs), defined as fuels with GHG intensity below 19 gCO₂eq/MJ through 2035. Revenues generated through the compliance system will help support the deployment of these technologies, fund training for seafarers, and address potential negative impacts, particularly in developing countries.
Industry observers expect a split in compliance strategies. Operators that invest early in cleaner technologies and fuels may benefit from cost savings, surplus credits, and IMO subsidies. Those that aim only to meet the base target may find themselves paying approximately $100 per tonne of CO₂ in fines—translating into an estimated $300 per tonne added to traditional fuel costs. This route may be more attractive for small or mid-sized fleets with older vessels, according to shipping media outlet Xinde Marine.
For shipping companies already subject to the EU regulatory framework, the IMO system will complement—but not replace—existing obligations. Under the EU Emissions Trading System (EU ETS), shipowners must purchase EU Allowances (EUAs) to cover 100% of intra-EU emissions and 50% of emissions from voyages between EU and non-EU ports. Current EUA prices stand around mid-€60’s per tonne, with projections suggesting a rise to €105 by 2027 and over €120 by 2030.
Meanwhile, the EU’s FuelEU Maritime regulation introduces stricter Well-to-Wake GHG intensity limits for marine fuels beginning at 2% in 2025 to 6% by 2030 and 14.5% by 2035, with the goal of achieving an 80% reduction by 2050 compared to 2020 levels. Both EU ETS and FuelEU Maritime are set to be reviewed by 2028 to assess their alignment with the new IMO framework and to minimise regulatory overlap.
The United States’ stance remains uncertain following its exit from the MEPC 83 negotiations. However, U.S.-flagged ships calling at IMO ports will still be required to comply with the Net-Zero Framework from 2028 onwards.
One of the most contentious aspects of the negotiations was the issue of revenue distribution from the new IMO compliance system. Pacific Island nations pushed for a fixed share of funds to be allocated directly to them, a demand that failed to gain widespread support from larger economies. Instead, the IMO will establish a Net-Zero Fund, managed by the IMO Secretary-General, which could generate tens of billions of dollars annually.
The fund’s revenues will be channeled into three main areas: rewards for the use of ZNZ technologies, support for developing countries (including training, technology transfer, and infrastructure), and administrative costs. However, the exact mechanisms for distributing these funds remain vague, leaving space for further debate and uncertainty.
The proposed amendment is still pending a vote in October, but it is expected to receive final approval given the relatively strong support demonstrated at MEPC 83. However, environmental NGOs view the outcome and the proposed penalty levels as insufficient to drive meaningful decarbonisation in the global shipping sector. The fines are notably lower than the non-compliance penalties imposed under the EU ETS and FuelEU Maritime for international shipping.
This underscores the continued importance for the shipping sector to navigate the EU’s decarbonisation measures and minimise compliance costs under both the EU ETS and FuelEU Maritime, as these rules apply to their fleet. The recent milestone — including the adoption of a globally sector-wide GHG intensity target — sends a strong signal that the shipping industry acknowledges the need for decarbonisation, and that early movers will be rewarded under such schemes. While the IMO outcome reflects a compromised approach to carbon pricing, it is likely to be strengthened over time, especially as the EU sets a leading example through its more ambitious shipping decarbonisation regulations.
ClearBlue will continue to keep clients informed as the framework evolves.
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