Attempt to weaken the IMO Net-Zero Framework

Background  

Japan’s submission to the forthcoming negotiations at the International Maritime Organization (IMO) proposes removing the IMO Net-Zero Fund (NZF) and replacing it with greater reliance on Surplus Units and direct industry contributions to IMO-approved projects.

This risks shifting control of maritime revenues from collective governance to private actors, weakening finance for a just and equitable transition in climate vulnerable developing countries, and creating opportunities for companies to direct payments back into their own supply chains. By also weakening incentives for overcompliance and zero- and near-zero emission technologies, the proposal could undermine both the NZF’s emissions-reduction objectives and the IMO’s commitment to leave no one behind.

The NZF is intended to cut shipping emissions while supporting a just and equitable transition, including in climate vulnerable developing countries. How its revenues are governed and distributed will therefore be critical to determining whether the framework delivers on both objectives. Japan’s proposal would fundamentally change this architecture at a time when the IMO is working to finalise the Framework, making the outcome important for the future of shipping decarbonisation, climate finance and developing countries’ ability to participate in the transition.

What’s covered in the briefing? 

• The IMO Net-Zero Framework as approved by Member States in April 2025.
• Japan’s proposal to MEPC 85: a global carbon market.
• Transfer of decision-making power from Member States to the private sector.
• Undermining the Surplus Unit market and absolute emissions reductions.

Recommendations

To ensure climate vulnerable developing countries are not left behind in the transition away from fossil fuels, a collective finance mechanism is needed in the shipping sector to fund public goods and direct resources according to equity and need. While voluntary contributions from the private sector are a welcome and much needed addition in international climate finance, they are not an adequate substitute for the predictable mandatory payments into an IMO Net-Zero Fund under, due to the nature of profit-seeking investments. Therefore, during the intersessional period and at MEPC 85 in December 2026, Member States should aim to:

• Retain the mandatory economic element as an integral part of the NZF.
• Reserve decision-making on the equitable distribution of revenues to Member States.
• Protect the integrity of the Surplus Unit market.
• Preserve the collective architecture of the approved NZF.
  
  

Download briefing