Published on Thursday, May 8 2025
Authors : Sandeep Sayal - Vice President, Industry & Market Analytics

“Sail away, sail away, sail away”

Enya – Orinoco Flow

As global attention shifts from climate ambition to energy affordability and security, the maritime sector is quietly preparing for a major course adjustment. The International Maritime Organization (IMO) has approved a landmark Net-Zero Framework to steer international shipping – responsible for roughly 3% of global emissions – onto a pathway to net-zero by 2050. This marks the first-ever global carbon pricing mechanism aimed specifically at the marine sector, targeting vessels that fail to meet emissions thresholds.

The Framework supports the climate goals outlined in the 2023 IMO Strategy on the Reduction of GHG Emissions from Ships. It aims to accelerate the adoption of zero and near-zero GHG fuels, technologies, and energy sources, while ensuring a just and equitable transition. Key targets include:

	•	By 2030:
		–	Cut annual GHG emissions from international shipping by at least 20%, with a stretch goal of 30%, compared to 2008 levels.
		–	Ensure that at least 5%, ideally 10%, of the sector’s energy comes from zero or near-zero emission fuels and technologies.
	•	By 2040:
		–	Reduce GHG emissions by at least 70%, aiming for 80%, relative to 2008 levels.

Adopted in April 2025, the Net-Zero Framework marks a pivotal step in the shipping industry’s commitment to decarbonization. At its core are mandatory emissions limits and a pricing mechanism designed to accelerate the shift towards cleaner fuels. The regulations specifically target ocean-going vessels over 5,000 gross tonnage, which account for roughly 85% of the sector’s CO₂ emissions. Formal adoption is scheduled for October 2025, with implementation guidelines and amendments expected in 2026, paving the way for full regulatory enforcement in 2027.

Key Elements of the IMO Net-Zero Framework:

	•	Ships will be required to comply with a global fuel standard that progressively reduces greenhouse gas (GHG) intensity. This metric reflects the full lifecycle emissions of marine fuels – from production to combustion – capturing the entire well-to-wake carbon footprint.
	•	Beginning in 2028, vessels exceeding their designated emissions threshold will face a fee of $380 per metric ton of CO₂ equivalent. An additional charge of $100 per metric ton of CO₂ equivalent will apply to emissions that surpass a tighter benchmark.
	•	The framework introduces a market-based emissions pricing system. Ships emitting above the allowed GHG intensity must purchase remedial units to offset their overage. At the same time, more efficient vessels can earn and trade excess units, encouraging a market-driven path to decarbonization.
	•	A dedicated IMO Net-Zero Fund will be established to reinvest revenues from emissions pricing. The funds collected will support the development of low-emission technologies, accelerate innovation, and provide financial assistance to developing countries in meeting their climate obligations. To stay compliant, ships can transfer or use banked surplus units to balance out excess emissions. The IMO projects that this fund will generate billions annually to drive the transition toward cleaner fuels and vessels across the global fleet.

While the IMO’s actions represent meaningful progress in the fight against climate change, critics argue the targets may fall short of what’s needed. Some industry observers caution that shipping companies might opt to pay emissions fees rather than absorb the higher costs of transitioning to alternative fuels, potentially undermining the intended impact. This has prompted calls for more ambitious targets and stricter standards to drive genuine decarbonization.

Others point out that global fuel standards could be further tightened to more effectively steer the maritime sector toward low-emission alternatives. Questions also persist around the robustness of enforcement mechanisms and the fair allocation of funds generated by emissions pricing.

Although the framework focuses on reducing GHG intensity rather than mandating specific fuels, it implicitly encourages the adoption of cleaner options such as methanol, ammonia, and hydrogen. Still, readiness across these alternatives remains uneven, with significant gaps in infrastructure, safety standards, and commercial scalability.

Shift Toward Alternative Fuels:

As the shipping industry works to decarbonize, operators are actively exploring alternative zero-carbon fuels to “green” their operations. Key contenders include methanol, ammonia, and hydrogen, each offering potential benefits but also presenting distinct technical and commercial hurdles.

Methanol is gaining traction due to its cleaner-burning profile and potential to be produced from renewable sources. Leading the way, Maersk and CMA CGM currently have the largest number of methanol-powered vessels either in operation or on order. Other carriers are also exploring methanol integration, attracted by its relative maturity and existing bunkering infrastructure in some ports.

Ammonia is viewed as a promising zero-carbon fuel, particularly for long-distance shipping, but it remains in early adoption stages. Companies like BHP Group and Yara have placed orders for ammonia-ready vessels, while ongoing trials continue to address safety challenges such as toxicity and its lower energy density.

Hydrogen holds great long-term promise due to its clean combustion, but practical barriers – especially related to storage, infrastructure, and energy density – currently limit its use. Early adopters include Norled AS, which launched the hydrogen-powered ferry MF Hydra, and Explora Journeys (MSC Group), which is investing in hydrogen-ready cruise vessels.

While liquefied natural gas (LNG) is being used as a transitional marine fuel, concerns over methane slip and lifecycle emissions are growing. The IMO has noted that current carbon intensity standards are not enough to phase down LNG, and a reassessment of its environmental impact is underway as part of broader regulatory reviews.

As specific company actions will be explored in detail in the next blog, it is clear that many shipping companies are actively embracing decarbonization strategies tailored to their fleets and pursuing various pathways to reduce their carbon footprints.

Impact on Traditional Marine Fuels:

The accelerating shift toward alternative marine fuels could soon generate ripple effects across the traditional refining sector. The move away from marine fuels such as high and lower sulfur fuel oils and marine gas oils is expected to reduce demand for these heavier fractions. As methanol, hydrogen, and ammonia gain traction, refiners will face increasing pressure to reconfigure operations, identify alternative outlets, or develop upgrading strategies for residual streams and middle distillates.

These shifting fuel dynamics underscore the urgency for refiners to anticipate structural shifts in product slates and proactively adapt downstream processing strategies.

Charting the Course Ahead:

In conclusion, the IMO’s Net-Zero Framework represents a critical turning point in the marine sector’s journey toward decarbonization. Although shipping companies face considerable challenges in adapting to the new regulations and adopting alternative fuels, this framework provides a more defined roadmap for decarbonization. To successfully implement these strategies, companies will need to invest in ongoing research, infrastructure development, and extensive training for both shore and vessel personnel to manage these emerging fuels safely and efficiently.

Turner, Mason & Company understands the interconnected impacts between marine fuel decarbonization and traditional refining economics. Our refining models, deep sector insights, and strategic advisory services can help clients navigate how to manage, transform, or repurpose future declining fuel oil and gasoil streams in a lower-carbon future.

Whether you’re in shipping, refining, or fuel supply, we are here to guide you through these new regulations and help position your company to navigate market complexities for continued profitable growth.  Please reach out to us with any questions or specific consulting engagement needs at contact@turnermason.com or 214-754-0898.