- The International Maritime Organization has approved a framework requiring ships to pay for carbon emissions, starting 2028.
- The framework sets emission reduction targets benchmarked against 2008 levels, with penalties up to $380 per tonne of CO₂ for high emitters.
- The industry is considering shifting from fossil-based marine fuels to cleaner alternatives such as green methanol and ammonia, though infrastructure and cost hurdles persist.
For the first time, cargo ships transporting goods around the world will be required to pay for their carbon emissions. The move follows an agreement by member states of the International Maritime Organization (IMO), the United Nations agency that regulates global shipping.
Shipping plays a critical role in global trade, transporting nearly 11 billion tonnes of goods each year – about 80% of world trade by volume. However, it also responsible for around 3% of the global greenhouse gas (GHG) emissions. These emissions have escalated by 20% in the past decade, prompting calls for urgent decarbonisation across industries.
During a meeting held at the IMO headquarters in London from April 7 to 11, a majority of member states — 63 countries, including India — approved a proposal to introduce carbon pricing for international shipping from 2028. Sixteen countries, mostly oil-producing nations, opposed the move, while 24 abstained.
The newly agreed IMO Net-Zero Framework introduces two performance standards for ships above 5,000 gross tonnage, a measure of a ship’s total internal volume, not its weight. These standards include a base target and a more ambitious direct compliance target. Both targets are benchmarked against the 2008 average of 93.3 grams of CO₂ per megajoule of fuel energy used by ships, measured on a “well-to-wake” basis, which accounts for the entire lifecycle of the fuel, from production to its final use in a ship’s engine.
From 2028, shipping vessels will be required to cut emissions by 4%, reaching a 30% reduction by 2035. The direct compliance target asks for a further reduction of 17% by 2028 and 43% by 2035. Based on these goals, an emission pricing mechanism has been introduced. Ships exceeding the direct compliance target will pay $100 per tonne of CO₂, while the highest-emitting ships will pay $380 per tonne.
There is also a provision for rewarding ships which emit less than their target. These ships will earn ‘surplus units,’ which they can use in future compliance years or transfer to other vessels.
“The IMO Net-Zero Framework is the first in the world to combine mandatory emissions limits and Greenhouse Gas (GHG) pricing across an entire industry sector,” the IMO said in a statement. IMO Secretary-General Arsenio Dominguez cited it as an example of collective efforts to combat climate change and modernise shipping.
Experts have described the deal as significant for decarbonising one of the world’s most polluting sectors. “It will provide ever greater focus on finding better solutions to shipping’s GHG emissions,” said Stephen Turnock, professor at the University of Southampton, in his email response.
Sandeep Maurya, ex-marine engineer and founder of Nautillect, a ship optimisation platform, said, “The two-tier system has been designed to reward zero- or low-carbon fuels and penalise high-carbon fuels.”
However, environmental groups criticised the deal by saying that it fell short of IMO’s own 2023 climate goal of reducing the carbon intensity.
“…IMO member states squandered a golden opportunity for the global shipping sector to show the world how it can turn the tide on catastrophic climate heating, putting their own goals – eliminating the sector’s GHG emissions without leaving any countries behind – out of reach,” Delaine McCullough, President of the Clean Shipping Coalition, a group of civil society organisations with observer status at IMO, said in a press release.
A net zero fund for clean shipping
As per the agreement, the IMO will establish a Net Zero Fund to receive and manage GHG emissions pricing contributions. The carbon levy on shipping vessels is estimated to generate around $10 billion annually and will support innovation, research, infrastructure, and energy transition initiatives in developing countries. It will also help mitigate the negative impacts on vulnerable nations such as Small Island Developing States (SIDS) and Least Developed Countries (LDCs).
However, this has been a point of contention. A coalition of more than 60 countries from the Pacific, Caribbean, Africa, and Central America had pushed for a larger share of the funds to go toward broader climate finance goals beyond the shipping industry. The group has been advocating for a high, flat fee on commercial vessels to drive the industry toward a 1.5°C-aligned future. Estimates suggest the measure could generate around $60 billion annually. These countries refused to support the agreement that would do “do too little, too late to cut shipping emissions and protect their islands.” The countries expect further negotiations before formal adoption of the framework expected in the next IMO meeting this October.
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Sailing toward accountability
The IMO has been working for over a decade to clean up the sector. In 2011, the IMO adopted regulations to make the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) mandatory — both came into force in 2013. The EEDI promotes energy-efficient equipment and engines for new ships, while the SEEMP offers a framework to improve energy efficiency in all ships already in operation.
In 2018, the IMO released its initial strategy to reduce GHG emissions from international shipping by at least 50% by 2050, compared to 2008 levels. This was revised in July 2023 with a more ambitious target: net zero emissions by or around 2050.
Starting January 2023, shipping companies have adopted several technical and operational measures, such as slow steaming (reducing ship speed), hull and propeller optimisation, weather routing, trim optimisation, etc. and are also exploring bio-fuels, said Maurya.
However, these efforts have not been enough, and the industry has seen a sharp rise in its overall emissions.
When asked how the recent developments around carbon pricing could influence change in the industry, associate researcher at the International Council on Clean Transportation (ICCT) Ketan Gore said, “The proposed carbon price range of $100 to $380 per tonne of CO₂-equivalent emissions only applies to emissions above the compliance thresholds. Depending on the price of alternative low-emission fuels and how ships choose to comply with the regulation, these prices are not high enough (on their own) to drive a significant shift toward zero-emission fuels in the immediate future, especially if fossil fuel prices remain low.” ICCT is a global think-tank and Gore works with its India team.
He gives the example of the European Union, which imposed a carbon tax on the shipping industry in 2024. “It charges ships approximately $100 per tonne of CO₂-equivalent emissions and we have not seen a significant increase in the use of alternative fuels,” he added.
Search for cleaner shipping fuels
For decades, global shipping has relied on fossil fuels like heavy fuel oil (HFO), a tar-like residue from oil refining, because of its low cost and wide availability. Other fuels, such as marine diesel oil (MDO) and marine gas oil (MGO), have been used for similar reasons. However, all of these are highly carbon-intensive and major contributors to global greenhouse gas emissions. Now, with the industry set to pay for its pollution from 2028, a critical question emerges: what will replace the existing fuel and how ready is the sector to scale up cleaner alternatives?
Several low- and zero-carbon fuels, including methanol, ammonia, hydrogen, biofuels, and liquefied natural gas (LNG), are under consideration, experts pointed out in conversation with Mongabay India. However, each option comes with its own set of challenges. LNG emits less carbon per unit of energy than traditional marine fuels, but emits methane, a far more potent greenhouse gas in the short term. The IMO is expected to introduce stricter rules in the 2030s that would penalise LNG more heavily.
Biofuels, such as hydrotreated vegetable oils (HVO), are seen as transitional options as Faïg Abbasov, shipping programme director at Transport & Environment, warned that the momentum for alternative fuels might end up favouring “forest-destroying first-generation biofuels” for the next decade. Gore from ICCT added that the IMO’s framework must include strong safeguards against cheap, high-emission biofuels made from food crops like soy or palm oil.
On hydrogen, expert opinion is divided. Gore and Sandeep Maurya argued that hydrogen is unlikely to be used directly in international shipping due to its low volumetric energy density, which makes it difficult to store and use efficiently at sea. “Green hydrogen is ruled out for marine use,” said Maurya. “It simply cannot be stored and used efficiently at sea.”
However, Stephen Turnock offers a different perspective: “Our research comparing the alternatives shows that liquid hydrogen is the most cost-effective solution.” While acknowledging concerns over the larger storage volume hydrogen requires, he pointed out that many ship types can accommodate this without sacrificing cargo space. This is because ships are typically equipped with oversized fuel tanks, allowing them to purchase fuel from the cheapest suppliers—often giving them a range far beyond their longest voyages. These tanks, he noted, can often be repurposed for hydrogen storage.
Turnock also highlighted that given the long lifespan of ships, those built from 2030 onwards must be effectively zero-carbon to meet IMO targets. Retrofitting vessels with technologies like air lubrication and wind assist will be key in the short term.
About other alternative fuels, Gore said that hydrogen derivatives, such as green ammonia and green methanol, are being explored. However, these fuels must be produced using renewable energy to qualify as truly sustainable. They face barriers, including high production costs, safety concerns, limited availability, and potential emissions like nitrous oxide (N₂O) from ammonia-fuelled engines.
“We neither have the production capacity nor the supply chains ready for zero-carbon fuels,” said Maurya. “When we talk about them today, we primarily mean green methanol and green ammonia. While global efforts are underway to develop these supply chains, large-scale adoption won’t happen overnight.”
IMO experts are currently working on assigning emission intensity values to different fuels — from fossil-based options to biofuels and green hydrogen. These ratings will determine whether a ship earns financial credits for exceeding emission targets or pays penalties for underperforming.
Banner image: Shipping containers at the Port of Tokyo. The International Maritime Organization (IMO) has approved a framework that will require ships to pay for carbon emissions starting in 2028. Image by Syced via Wikimedia Commons (CC0).
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