by: Matthias Olafsson

In April 2025, the International Maritime Organization (IMO) took a significant step towards decarbonizing global shipping by approving a new legal framework to tackle greenhouse gas (GHG) emissions. This decision aligns with the IMO’s 2023 GHG Strategy, aiming for net-zero emissions by 2050. What makes this framework particularly groundbreaking is its combination of mandatory emissions limits with an international carbon pricing mechanism—creating a market-based compliance regime for the entire shipping industry.

This framework will apply to all ocean-going vessels over 5,000 gross tonnage, covering roughly 85% of international shipping emissions. By 2027, ships will be required to meet a lifecycle-based greenhouse gas fuel intensity (GFI) standard, with compliance measured through a well-to-wake approach that considers emissions across the entire fuel lifecycle.

At its core, the IMO framework introduces a two-tiered penalty system: ships that fail to meet the “Direct Compliance Target” will face a penalty of $100 per tonne of CO₂ equivalent (Tier 1), while those exceeding the “Base Target” will incur a steeper penalty of $380 per tonne (Tier 2). However, ships that outperform the targets will generate tradable surplus units (SUs), representing emissions reductions, which can be banked or transferred to other vessels. This creates both an economic incentive to decarbonize early and a financial penalty for non-compliance.

The framework’s implementation will have a significant impact on fuel choices for ship operators. With strict GHG reduction targets, transitional fuels like LNG or first-generation biofuels will be less viable, driving demand for low-emission, electrolytically produced fuels like green methanol, ammonia, and e-LNG. These fuels offer both regulatory certainty and commercial opportunity, as they can reduce emissions below the direct compliance target, avoiding penalties while generating high-value surplus units.

For example, switching to eMethanol, which has a lifecycle emission intensity of 22 gCO₂e/MJ, allows ships to avoid the €100 penalty and generate surplus units worth up to €380 per tonne of CO₂e. This can lead to significant financial benefits, with ships potentially earning millions of euros in surplus credits annually.

To ensure compliance, all ships must register with the IMO GFI Registry by 1 October 2027 and submit verified GFI data annually. Verification will be carried out by authorized organizations, and the data will be used to track emissions, trading activity, and compliance status. The revenue generated from penalties and trading will flow into the IMO Net-Zero Fund, which will be used to reward the use of zero and near-zero GHG fuels and support a just transition in vulnerable regions.

While the framework represents a major step toward global decarbonization, some critical components remain under development, including definitions for zero and near-zero GHG fuels and trading rules for surplus units. These will be finalized by 2026, but the direction is clear: the shipping industry must transition to cleaner fuels, and those who act early will reap the rewards.

For ship operators and fuel producers, the message is simple: the race to comply with the IMO’s new regulations has begun. Transitioning to low-emission fuels like green methanol not only offers regulatory compliance but also a significant commercial advantage. The future of global shipping is green, and those who invest in it now will lead the way.