Net-Zero Framework For International Shipping Postponed For One Year: International Maritime Organization Bows To U.S. Opposition

The International Maritime Organization (IMO) Marine Environmental Protection Committee (MEPC) declined to formally adopt a mandatory greenhouse gas (GHG) reduction scheme for the shipping industry - known as the Net-Zero Framework (NZF) – at its extraordinary session held last week (October 14-17). The NZF had been in the works for several years and had gained wide consensus before IMO's recent decision. The decision creates considerable uncertainty in the sector, coming amid intense U.S. opposition that appears unlikely to wane, and the MEPC continues to pursue adoption of the NZF.

Key Takeaways

• The MEPC deferred a decision to make the NZF legally binding until October 2026
• The U.S. vehemently opposed adoption of the NZF, threatening to impose trade, port, and other restrictions on countries supporting the measure
• The MEPC will continue work to define fundamental elements of the NZF and achieve consensus on its adoption
• European Union (EU) measures regulating shipping GHG emissions will remain in place, and other countries may consider similar measures
• The IMO decision creates considerable regulatory uncertainty for stakeholders across the shipping supply chain, and they should prepare to engage policymakers on several fronts

Background

The NZF would establish a legally binding regulatory framework to achieve net-zero GHG emissions "by or around, i.e. close to, 2050," as articulated in the 2023 IMO Strategy on Reduction of GHG Emissions from Ships, agreed by the MEPC in July 2023. If adopted, the NZF would be included as a new chapter 5 in Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL).

The NZF combines a global fuel standard and GHG emissions pricing mechanism applicable to ships over 5,000 gross tonnage. The scheme endorsed by the MEPC in April creates two tiers of GHG fuel intensity (GFI) targets, a Base Target (BT) and a more stringent Direct Compliance Target (DCT). In simplified terms, ships that fail to meet the targets generate "compliance deficits" and would be required to acquire Remedial Units (RUs), while ships that exceed the DCT could generate bankable Surplus Units (SUs). RUs would be acquired by making "pricing contributions" to a yet-to-be-established IMO Net-Zero Fund. Ships that use "Zero or Near-Zero GHG emission technologies, fuels and/or energy sources" (ZNZs) would be eligible to receive "Rewards" (annual compensation) from the IMO Net-Zero Fund.

Recent IMO Actions

The MEPC approved the text of the NZF at its 83rd meeting in April (MEPC 83) and had targeted formal approval needed to make it legally binding at its extraordinary session held last week (October 14-17). However, support for the NZF weakened in the intervening months amid U.S. threats of trade and other retaliation measures against countries supporting the measure. The MEPC ultimately adopted a resolution to adjourn the ES until October 2026 without approving the NZF.

In a statement issued after the extraordinary session, the MEPC affirmed its intention to continue work on developing NZF implementation guidelines to further define fundamental aspects of the scheme and achieve consensus on adopting the measure. Work to develop these guidelines is already beginning at this week's meeting of the Intersessional Working Group on the Reduction of Greenhouse Gas Emissions from Ships.

The U.S. first signaled its "unequivocal" opposition to the NZF on April 9, 2025, when it announced its withdrawal from MEPC 83, urging other governments to "reconsider" their support for the agreement and warning it could consider "reciprocal measures." The U.S. escalated these threats in a joint statement issued August 12, 2025, by the U.S. Departments of State, Transportation, Energy, and Commerce, and ultimately detailed retaliatory measures it planned to consider in a policy statement issued on the eve of last week's MEPC ES, including targeted port access and visa restrictions, sanctions, penalties, and port fees. The U.S. has made clear its intent to "levy these remedies against nations that sponsor this European-led neocolonial export of global climate regulations."

IMO adoption of the NZF would have triggered a process to consider changes to European Union (EU) measures regulating shipping GHGs - the Emissions Trading System (ETS) (Directive (EU) 2023/959) and FuelEU Maritime regulation (Regulation (EU) 2023/1805). The decision to postpone consideration of the NZF means these measures remain intact and, more broadly, that the shipping industry will continue to face a patchwork of regional and/or country-specific regulations governing GHG emissions and maritime fuel.

What's Next

Going forward, ship owners, charterers, and other supply-chain stakeholders, including fuel suppliers and ship builders, should monitor developments closely and engage on multiple fronts, including:

• IMO/MEPC efforts to achieve consensus on the NZF, which could require negotiating significant changes, likely with significant U.S. input;
• IMO/MEPC efforts to better define key elements of the NZF through implementation guidelines to be developed by IMO bodies in the coming months;
• U.S. efforts to gain leverage over NZF negotiations through a variety of trade or punitive measures; and
• Efforts in other regions and countries, including the EU, to develop and/implement measures to regulate GHG emissions from ships that visit their ports.

Finally, companies in other sectors should note that the Trump administration's approach to the NZF mirrors its broader pattern of leveraging international environmental disputes to advance domestic industrial priorities and leverage bilateral trade. As such, companies affected by other international schemes, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), should consider how the Trump administration's approach to the NZF may inform its approach to these schemes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.