Executive Overview
The International Maritime Organization (IMO) has postponed the adoption of its Net-Zero Framework (NZF) by one year, reflecting persistent geopolitical and economic divisions over how to govern shipping’s decarbonization.
The decision, reached during the second Extraordinary Session of the Marine Environment Protection Committee (MEPC/ ES.2) in October 2025, followed the failure of member states to agree on a global greenhouse-gas (GHG) pricing mechanism, the NZF’s central policy instrument. Officially, the IMO framed the adjournment as a procedural extension to allow further “technical and procedural work.” In practice, the deadlock exposed deep structural disagreements over how the revenues of a global carbon levy should be designed, distributed, and managed across regions.
The United States, supported by Saudi Arabia and a group of energy-exporting economies, opposed the immediate adoption of a mandatory global levy. The U.S. delegation cautioned that a uniform carbon price could distort trade flows, elevate consumer costs, and penalize fuel suppliers, while Saudi Arabia emphasized that such a measure would disproportionately affect energy producers and overlook regional disparities in transition readiness. This alignment effectively formed a blocking coalition, halting consensus on the NZF’s economic architecture and exposing the broader tension between decarbonization objectives and energy-security interests within the IMO process.
The framework will now be reconsidered at the next MEPC session in October 2026, delaying the earliest feasible entryinto-force date to 1 March 2028, according to DNV’s regulatory analysis. This shift reflects not only procedural timelines under the IMO’s tacit-acceptance system but also a strategic recalibration of the industry’s decarbonization trajectory.
In the interim, the IMO’s 2023 Greenhouse Gas Strategy remains in force, committing the sector to achieve net-zero GHG emissions by or around 2050. However, in the absence of a globally harmonized carbon-pricing mechanism, the risk of regulatory fragmentation is increasing. Regional frameworks such as the EU ETS, FuelEU Maritime, and emerging Asian carbon-pricing initiatives are advancing independently, creating a divergent regulatory landscape that complicates longterm compliance and investment planning
From a market perspective, the delay aligns with the structural realities of the energy transition. The alternative-fuels supply chain remains underdeveloped, shipyards face capacity constraints in delivering dual-fuel and high-efficiency vessels, and the ship-financing ecosystem continues to underserve small and medium-sized owners. Meanwhile, freight markets are absorbing ongoing shocks from geopolitical disruptions, tariff-driven trade shifts, and heightened bunker price volatility, all of which trigger constrained investment appetite for next-generation propulsion technologies.
This week’s Allied QuantumSea Research review provides an updated assessment of these developments, analysing the implications of the IMO decision for regulatory timelines, fuel-intensity benchmarks, and regional compliance strategies under the evolving Net-Zero Framework.
The Decision in Context
The Net-Zero Framework (NZF) is designed to function as the operational arm of the IMO’s decarbonization strategy. It combines two principal mechanisms: a Greenhouse Gas Fuel-Intensity Standard and a pricing and crediting system that rewards vessels performing below emission benchmarks and penalizes those exceeding them.
During the MEPC/ES.2 session, member states agreed that additional technical preparation was required before formal adoption, establishing a new target of October 2026 for approval and March 2028 for entry into force.
In the interim, existing efficiency and data-collection regulations remain in effect. The Energy Efficiency Existing Ship Index (EEXI), Carbon Intensity Indicator (CII), and Data Collection System (DCS) continue to govern operational performance and fuel-consumption reporting across the global fleet.
According to DNV, these mechanisms form the technical foundation for the forthcoming NZF. The classification society emphasizes that verified and consistent data under the DCS will be critical for establishing credible baselines once pricing and compliance obligations are introduced.
The U.S.–Saudi Position
The October 2025 session was influenced by alignment between the United States and Saudi Arabia, which opposed the introduction of a binding global carbon levy. The U.S. delegation argued that the measure was incompatible with its domestic policy framework. At the same time, Saudi Arabia supported a motion to defer consideration of the framework to the next regular session. Meeting records and industry news indicate that this position was instrumental in securing the adjournment. The decision kept the Net-Zero Framework on the IMO’s agenda but delayed its adoption by one year.
The U.S.–Saudi stance reflected shared economic priorities, not a change in their decarbonization goals. Both governments maintain public commitments to emissions reduction. Washington, through port electrification and infrastructure programs, and Riyadh, through its Vision 2030 energy transition plan, while seeking to preserve flexibility in how these objectives are implemented.
Regional Decarbonization Push Continues Without IMO Consensus
While global adoption of the IMO’s Net-Zero Framework has been deferred, regional and national initiatives are moving ahead independently. The European Union integrated maritime transport into its Emissions Trading System (ETS) in January 2024, introducing a carbon price signal for voyages involving EU ports. The scheme, which will be fully phased in by 2026, functions independently of the IMO’s regulatory timeline.
Across Asia, governments are advancing complementary decarbonisation programs. Japan, South Korea, and China are each investing in vessel-efficiency standards and expanding alternative fuel infrastructure, including port electrification and the establishment of green shipping corridors.
In the United States, federal policy continues to reject a national carbon price but channels significant infrastructure funding toward maritime decarbonisation through the Port Infrastructure Development Program (PIDP), which supports shore power systems and port electrification. Meanwhile, in Saudi Arabia, policy efforts are centred on developing hydrogen and carbon capture technologies under the Vision 2030 strategy, positioning the country as a future supplier of low-carbon energy to global markets.
Operational and Commercial Implications
The one-year postponement does not alter obligations already in force under IMO efficiency and data-reporting regulations. Compliance with the Energy Efficiency Existing Ship Index (EEXI), the Carbon Intensity Indicator (CII), and the Data Collection System (DCS) remains mandatory. Shipping companies must continue to maintain accurate fuel-consumption and emissions records, as these data provide the verified basis for future NZF compliance assessments. Financial institutions and charterers are already using these datasets under the Poseidon Principles and the Sea Cargo Charter, both of which link lending and chartering decisions to independently verified emissions performance.
In commercial practice, vessels equipped with dual-fuel or methanol-ready capability are attracting growing charter interest, particularly on routes subject to regional carbon pricing. Shipowners and charterers view such tonnage as a practical hedge against future emissions-cost exposure. Meanwhile, the Los Angeles–Long Beach–Shanghai Green Shipping Corridor, launched in 2022, has reached its Phase 1 milestone of full shore-power readiness across all three ports. The Port of Shanghai has already bunkered more than 47,000 tons of green methanol, while the California ports are preparing for methanol pilot operations. This demonstrates that measurable emissions reductions can be achieved through coordinated regional initiatives even before a global pricing mechanism takes effect.
Near-Term Outlook
Between 2025 and 2026, IMO working groups will finalise the technical documentation defining the operation of the NetZero Framework (NZF). These documents will set out the methods for calculating fuel-intensity, verifying emissions data, and applying financial incentives or penalties under the framework. Regional measures are expected to continue shaping operational costs and trade patterns in the meantime. In the United States, the California Air Resources Board (CARB) regulations on shore-power connection are already affecting vessel scheduling and port-call planning by requiring most container, reefer, and cruise vessels to plug into shore power while at berth. Green-shipping corridors, such as the Los Angeles–Shanghai route, are serving as pilot platforms for data verification and low-emission operations, providing experience that could later support alignment with the IMO system.
The path ahead
The decision at MEPC/ES.2 constitutes a twelve-month postponement of the IMO’s Net-Zero Framework (NZF) rather than a change in policy direction. While the 2050 net-zero target remains intact, the delay is already influencing fleetmanagement behaviour. The most likely scenario is that owners will continue to limit vessel scrapping until regulatory and market conditions under the NZF become clearer. Current data already show exceptionally low demolition activity, indicating that the average scrapping age of the global fleet has not materially declined. Many operators appear to be extending vessel lifespans to preserve optionality ahead of future technical and financial compliance requirements.
During this interim period, the industry’s focus is shifting from policy debate to operational readiness. Maintaining verified DCS reporting, investing in fuel-flexible tonnage, and preparing for future carbon-cost mechanisms will define competitiveness once the framework takes effect in March 2028. Ultimately, the pace of transition will depend on the availability of low-carbon fuels, the scope for vessel retrofitting, and wider access to green finance, which together will determine how quickly the sector can translate policy targets into measurable emissions reductions.
Data Source: Allied