The summer is over and with negotiations due to resume at the IMO next week, here is a short summary of what the autumn has to hold for shipping’s stalled attempt at a global carbon framework: the timeline, the sticking points, the competing proposals and their backers.
Shipping has spent the past 18 months circling the same unresolved question: will the industry finally have a single, global framework for pricing and reducing its carbon emissions, or will it end up navigating a patchwork of regional schemes instead? The IMO‘s Net-Zero Framework (NZF) was meant to settle that question. Instead, it has become one of the most contested pieces of international shipping regulation in years and, with talks due to resume next week, it is worth looking at where things currently stand.
What the Net-Zero Framework sets out to do
The NZF pairs two mechanisms. A global fuel standard requires ships to progressively reduce their annual GHG Fuel Intensity (GFI): how much greenhouse gas is emitted per unit of energy used, calculated on a well-to-wake basis, covering the fuel’s full lifecycle from production through to combustion onboard, not just funnel emissions. A global economic measure sits alongside it, built around two separate reduction targets: a less stringent Base Target and a stricter Direct Compliance Target. Where a ship’s GFI falls against these two lines determines what it owes or earns. The Base and the Direct Compliance Targets become tougher over time, and this drives the progressive decarbonisation of the global fleet.
A ship that meets the Base Target but still falls short of the tougher Direct Compliance Target sits in a Tier 1 deficit and must buy Tier 1 Remedial Units (RU), priced at $100 per tonne of CO2-equivalent, to cover the gap. A ship that misses the Base Target altogether sits in a Tier 2 deficit, the more serious shortfall, and faces RUs priced considerably higher, at $380 per tonne, unless it can instead buy Surplus Units (SU) from an over-complying ship to close the gap down to Base Target level, then top up with cheaper Tier 1 RUs for the remainder. That pricing gap is deliberate: it is designed to make buying a low-carbon fuel, or another ship’s surplus, cheaper than simply paying the penalty outright.
Ships that beat the Direct Compliance Target generate SUs, proportional to how far below target they operate. These can be spent by the ship itself in future years, banked for up to two years, or sold to a ship sitting in deficit. Ships running on genuinely zero or near-zero GHG fuels, with an initial GFI below 19 gCO2eq/MJ, become eligible for separate compensation payments funded by RU revenue, on top of anything they earn from SU. Revenue collected through RUs is intended to flow, in part, into a new IMO Net-Zero Fund supporting developing countries through what the framework calls a “just and equitable transition.” The rules would apply to ocean-going ships over 5,000 gross tonnage, a threshold that already covers more than 85% of global shipping emissions.
How we got here
The NZF was approved in principle at MEPC 83 in April 2025, following years of negotiation under the IMO’s 2023 GHG Strategy. It was scheduled for formal adoption as a legally binding amendment to MARPOL Annex VI at an extraordinary MEPC session in October 2025.
That session did not go as planned. Delegates spent several days unable to reach consensus or even agree to call a vote, amid what observers have described as unusually intense political pressure from the current US administration, which has consistently opposed the framework, and a block of other countries, primarily oil and gas producing states. Singapore ultimately moved to delay adoption; Saudi Arabia called for a vote on that motion. It passed 57 votes to 49, with 21 abstentions, and the session was adjourned for twelve months. That vote meant that the earliest possible entry of the NZF coming into force moved from 2027 to 2028 and left the shipping industry facing another year of regulatory uncertainty.
Work didn’t stop, however. MEPC 84, held in London in late April and early May 2026, was the first chance for the committee to revisit the NZF since the October adjournment. Nearly 100 delegations spoke. Positions remained divided, particularly on the design of the Net-Zero Fund, but the committee agreed to keep working towards a version of the framework that could achieve consensus, rather than abandoning it. IMO Secretary-General Arsenio Dominguez summed up the mood afterwards: “We are back on track, but we have to rebuild trust.”
That intersessional work continues now. Two working-group sessions were scheduled off the back of MEPC 84, one running 1–4 September 2026 and the other in late November, specifically tasked with narrowing NZF disagreements ahead of MEPC 85 (30 November–3 December). The adjourned extraordinary session itself is expected to reconvene shortly after, contingent on how much ground gets covered at MEPC 85. September’s session, in other words, is not the adoption vote, but it is one of the last real opportunities to shape the text before that vote happens.
The key issues still unresolved
The Net-Zero Fund is the least developed piece of the framework. Its governance, and how revenue would actually be disbursed, remain largely unsettled, which is a significant problem, since securing political support from the Global South depends heavily on it being credible.
There is active pressure to reopen the text agreed at MEPC 83. New proposals have been circulated ahead of September which, campaigners argue, would weaken the framework’s incentives for zero-emission fuel investment and reduce the funding available for the Net-Zero Fund. Opportunity Green, among others, has urged member states to resist what it characterises as watered-down alternatives to the original compromise.
The underlying market argument hasn’t gone away. The core objection from the US and aligned states isn’t just political, it is practical. There isn’t enough green fuel or bunkering infrastructure yet to meet the timeline the NZF implies. Green methanol, ammonia and hydrogen are only just emerging from pilot phase, and retrofitting global bunkering infrastructure at the pace the framework assumes would require years and trillions of dollars, an argument that echoes almost exactly what the World Bank’s recent East Asia and Pacific report found, and what we have covered repeatedly at MCI: vessel technology is arriving faster than the fuel supply chains needed to run it.
Technical guidelines are still being finalised regardless of the political delay. Life-cycle assessment emission factors, well-to-tank values for fossil fuel pathways, and the registry that would track compliance are all progressing intersessionally, meaning the scaffolding for implementation is being built even while the adoption question remains open.
The alternative proposals and the countries behind them
Much of what’s being negotiated next week isn’t the original MEPC 83 text, it’s a set of alternative proposals from member states seeking to rewrite parts of it. The proposals are worth looking at in detail, because they represent genuinely different philosophies about how shipping should decarbonise, not just variants on the same approach.
ACSA-UK is the status-quo option. Submitted jointly by Australia, Canada, South Africa and the UK (giving the proposal its acronym), this is the closest thing on the table to “adopt as agreed.” It leaves the NZF’s emissions intensity target and core architecture largely unchanged from the MEPC 83 text, simply adjusting implementation dates to reflect the delay since October 2025 and the Net-Zero Fund would still be part of the system. It preserves the framework’s ambition, but by doing so it also preserves the underlying issues over cost, complexity and burden-sharing that made agreement difficult in the first place.
Brazil, the same architecture, softer start. Brazil’s proposal keeps the NZF’s basic structure intact but changes its pace. Rather than front-loading the strongest compliance pressure, it proposes a gentler initial phase followed by more demanding requirements later, which is an attempt to buy the industry more lead time without abandoning the reduction trajectory altogether. This approach would give shipowners, fuel suppliers and ports more time to prepare, but on the other hand may not give a sufficiently strong the near-term demand signal that low carbon fuel developers require.
Argentina, Liberia and Panama have submitted the most far-reaching rewrite. Liberia and Panama between them flag over 30% of the world’s fleet by gross tonnage, which gives this proposal significant practical weight regardless of its two co-sponsors’ formal voting power. The proposal removes GHG pricing (remedial unit payments) entirely, keeps the architecture for trading SUs, and replaces the NZF’s fixed emissions-reduction trajectory with one recalculated every five years based on the cost, availability and market share of low-emission fuels, with an affordability ceiling capped at roughly 15% above current market fuel prices. It also drops the requirement for mandatory payments into the Net-Zero Fund.
In effect, the proposal inverts the NZF’s underlying logic: rather than regulation creating demand that pulls alternative fuels into the market, compliance requirements would only tighten once alternative fuels are already available and commercially viable. Notably, both Liberia and Panama had previously supported a shipping emissions levy considerably more ambitious than the framework they’re now opposing, which is a reversal of position that has raised questions around what has driven the change of stance.
Japan has proposed a narrower, more procedurally fraught alternative. Japan’s submission proposes removing the requirement for ships to pay into the Net-Zero Fund, which is probably the most contentious part of the NZF. The proposal would also allow non-compliant ships to use SUs or make direct, voluntary contributions to IMO-approved or self-selected green projects rather than paying into a centralised pool. It would also reduce the GFI reduction targets for 2028-2025 to match the level of fleet replacement, removes the 2040 targets and recommends that future goals be periodically reviewed based on actual fuel availability and scalability.
Generally, the Japan proposal is considered to be a more moderate position than that of Argentina-Liberia-Panama, and one that has been described as an intermediate stance rather than an attempt to remove pricing altogether. However, it faces a separate, procedural problem: draft MARPOL amendments normally require six months’ advance circulation before a MEPC session, and Japan’s proposal missed that window for MEPC 85, meaning it cannot be formally adopted there under normal rules even if it gained support. This is a risk campaigners warn that could itself become a source of further delay into 2027.
Tuvalu’s proposal is the toughest set of amendments and is worth looking at in detail. Tuvalu’s proposal keeps the NZF’s core GFI reduction targets unchanged but delays the start of reductions by one year to start at 6% in 2029, instead of 4% in 2028. The direct compliance target would be set at 100% from 2029 through 2035, a level no vessel could realistically achieve and ensuring that every tonne of emissions carries a price. This would transform the framework into what is, in reality, a carbon levy. Tuvalu also proposes raising the Tier 1 remedial unit price to $300 per metric tonne of CO2-equivalent ($300/mtCO2e), triple the $100/mtCO2e figure agreed in principle at MEPC 83. The Tier 2 remedial unit price, applicable to emissions exceeding the base target, would remain at $380/mtCO2e.
In addition, the proposal would abolish the SU mechanism in full. Ships that outperform required GFI targets would no longer receive SUs to sell to non-compliant vessels. Instead, any deficit would be settled exclusively through direct payments into the IMO Net-Zero Fund, which because of the increases in remedial unit prices and that every tonne of carbon emissions will carry a cost will raise significantly more than the $10-15 billion estimated under the current NZF proposals. Tuvalu’s proposal sends the strongest signal to low carbon fuel developers that they will have a market, and the market will be ready soon. But it will also raise shipping costs.
In Summary
Broadly, the coalition lines mirror the divide already covered above: Pacific Island states, Australia, Canada, South Africa and the UK are pushing to maintain or strengthen the reduction trajectory; Liberia and Panama are arguing from a market-readiness position that regulation should follow fuel availability rather than lead it; and Brazil and Japan occupy a middle ground, trying to preserve the framework’s direction of travel while easing near-term pressure on compliance.
The key positions in brief
The European Union has consistently favoured a strong global measure and has pushed for a levy on well-to-wake emissions, with revenue earmarked to support fuel uptake, a position that also explains its interest in keeping the EU ETS as a credible fallback if the NZF stalls further.
Pacific Island states, Australia, Canada, South Africa and the UK are pushing to maintain or strengthen the NZF’s reduction trajectory as agreed at MEPC 83, using regulatory and economic signals to accelerate zero- and near-zero-fuel uptake.
Liberia, Panama and Argentina are arguing from the opposite direction, that the regulatory trajectory should follow fuel availability and affordability rather than lead it.
The United States, under the current administration, has gone furthest of all. Its own submission calls for ending consideration of the NZF altogether, arguing the proliferation of rival proposals is itself evidence of a lack of consensus.
Industry bodies including the International Chamber of Shipping have broadly supported adoption of the NZF as agreed at MEPC 83, arguing that continued delay simply extends regulatory uncertainty for an industry that has already begun investing in alternative fuels and needs a stable long-term price signal to keep doing so.
What to watch for
While there won’t be a vote at the September’s session, it will show whether the intersessional work done since MEPC 84 has closed any gaps, particularly on the Net-Zero Fund, or whether the same fault lines that prevented adoption in October 2025 are still in place as we head towards the more consequential MEPC 85 in late November. Or, will there be signs of the development of a compromise? Given how closely the NZF’s central tension mirrors the EU ETS review and FuelEU’s first-year experience, the outcome here will say as much about the pace of the global energy transition as it will about shipping regulation specifically. It will also send a signal to low carbon fuel developers, energy efficiency and carbon capture companies as to when and how strong their markets are going to be.
