Charting a Course: Global Shipping is on its Way to get its First Carbon Price

Two weeks ago, we looked ahead to a pivotal moment for climate policy: the 83rd session of the Marine Environment Protection Committee (MEPC) at the International Maritime Organization (IMO). That meeting, widely seen as a “make-or-break” point for shipping decarbonization, has now concluded and delivered a first-of-its-kind agreement. The outcome is a new regulatory framework to slash greenhouse gas emissions from global shipping, combining both a carbon pricing mechanism and a fuel standard. The deal marks a significant turning point for an industry responsible for 3% of global emissions and over 80% of world trade. Here’s what was decided and where concerns remain.

A two-part approach: technical standards and carbon pricing

The new IMO regulation, backed by 63 countries (with 16 against and 24 abstentions), targets large ocean-going vessels over 5,000 gross tonnage, which are responsible for 85% of international shipping emissions. While formal adoption is scheduled for October 2025, the measures are set to take effect in 2028. At the heart of the agreement lies a hybrid model: a technical standard limiting fuel-related emissions, and an economic instrument that prices excess carbon emissions.

Technical: fuel intensity limits

Ships will face declining greenhouse gas fuel intensity (GFI) targets, using a well-to-wake methodology that measures emissions from production to combustion. Two compliance pathways exist: a base target and a more ambitious direct compliance target, which allows ships to earn and transfer so-called surplus units. Under the stricter trajectory, ships must cut their GFI by 17% by 2028, rising to 21% by 2030, compared to 2008. The looser trajectory ranges from 4% to 8% over the same period. To offset excess emissions, ships can transfer surplus units from other vessels, use banked surplus units from earlier performance, or purchase “remedial units” through the IMO Net-Zero Fund.

Economic: carbon pricing and the IMO Net-Zero Fund

Ships failing to meet GFI targets must compensate via the IMO’s new Net-Zero Fund, paying $100 or $380 per tonne of CO₂ above the allowed threshold, depending on the degree of non-compliance. These contributions will fund rewards to low-emission ships and support for innovation, capacity building, and vulnerable states.

A compromise with consequences

Despite its historic nature, the regulation reflects the limitations of consensus-based diplomacy. It was not helped by the chaos brought about by the United States, which withdrew from negotiations and has since warned of retaliatory measures against countries imposing carbon levies on U.S. shipping. Still, the agreement covers 108 Parties representing 97% of global shipping by tonnage, while the U.S. accounts for less than 1%. At the IMO, Washington's leverage appears weaker than usual.

For many, the final compromise fell short of ambition. Island nations and environmental groups had advocated for a straightforward $150 per tonne carbon levy. Instead, the tiered penalty system ranges from $100 to $380, depending on the degree of non-compliance. However, if we compare this to the EU’s Emissions Trading System (ETS), which stood at €62 per tonne last Friday, the lower IMO rate is relatively stringent.

Still, critics argue that the complexity and leniency of the system create perverse incentives. Some warn that it may favor first-generation biofuels or liquefied natural gas (LNG), which pose long-term climate and environmental risks. Companies like Maersk have voiced concerns that the regulation may delay the adoption of truly green fuels, such as green methanol or ammonia, at the expense of LNG. On the other hand, LNG proponents argue it offers a practical and scalable transition option, citing existing infrastructure and cost advantages.

A first step, not the final destination

For all its flaws, the IMO’s agreement marks a critical shift: it is the first global carbon pricing regime for an entire industry sector. In that sense, it sets an institutional precedent and creates a foundation for more ambitious climate action in the future.

At Ortelius, we believe these developments matter — even when they’re imperfect. They shape the landscape in which businesses operate and signal future policy direction. If you're navigating the evolving climate rules affecting logistics, trade, or energy systems, we’re here to help you stay ahead of the curve. Let’s talk!

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Posted by Luca Campion on 18 Apr 2025

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About the author

Luca Campion

Luca Campion graduated with great distinction in June 2019 with a Master's degree in Business Engineering from Hasselt University, specializing in Technology in Business. During his master's studies, he gained valuable consultancy experience through an internship. After graduating, he remained affiliated with Hasselt University, working as a doctoral researcher in the Environmental Economics research group. In both his master's thesis and his doctoral research, Luca focused on integrating techno-economic and life cycle analysis, particularly in the context of biochar, a biobased technology for carbon dioxide removal. In February 2024, Luca joined the strategic team at Econopolis as a Climate Consultant.