Why we need the economic element in the IMO Net-Zero Framework

Background  

The Net-Zero Framework (NZF) is a draft framework under the International Maritime Organization (IMO) to reduce the greenhouse gas (GHG) emissions from international shipping to net zero by or around 2050. The NZF includes a technical and economic element that sets a limit on the permitted GHG intensity of fuels used by ships, pricing emissions that exceed these thresholds. The revenues generated go into a fund to support an accelerated, just and equitable transition.

This pricing mechanism is known as the ‘economic element’ of the NZF and is critical both to its successful implementation and to its ability to support developing countries to participate equitably in the transition.

The global shipping sector is responsible for 3% of greenhouse gas emissions worldwide. In 2023, IMO Member States agreed on the IMO GHG Strategy to reduce these emissions. The draft NZF is the package of medium-term measures to achieve these concrete emissions reductions. It was approved in early 2025 and expected to be adopted in October 2025, but a last-minute objection from a coalition of opponents led by the USA resulted in a one-year delay in the vote on its adoption. A number of countries are using this delay to advocate for removing the economic element from the Framework.

The scale of the problem 

The current draft of the NZF would raise around US$10bn per year. These funds would accelerate the shipping energy transition by supporting the uptake of zero- and near-zero fuels (ZNZs). They would also support developing countries to mitigate any negative impacts from the framework’s regulations, such as increases in the prices of imported essential goods, and level the playing field so that developing countries can participate meaningfully in the shipping energy transition, such as through financing infrastructure upgrades.

Without the economic element:

• The NZF lacks a compliance mechanism, so shipowners would have no incentive to follow its regulations, making emissions reductions unlikely.
• There would be no mechanism for the NZF to support either investment in ZNZs or to support a just and equitable transition, meaning that developing countries would continue to bear the brunt of a crisis they have done little to cause.

What’s covered in the briefing? 

This briefing:

• Explains in detail how the economic element of the NZF functions and how revenues would be spent.
• Outlines why it is critical to the successful, just and equitable implementation of the NZF.
• Proposes how best to support its retention in the Framework.

Our recommendations

The briefing encourages states to support the retention of the economic element in the NZF and to adopt the Framework at MEPC ES.2 in November this year, using the tacit acceptance procedure.

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