Shipowners favor simpler enforcement under IMO Net-Zero Framework

The findings come ahead of the 23rd meeting of the Intersessional Working Group on Reduction of Greenhouse Gas Emissions from Ships (ISWG-GHG 23), scheduled for 23–27 November, and the 85th session of the Marine Environment Protection Committee (MEPC 85), taking place from 30 November to 3 December 2026.

Alternative compliance proposals raise concerns

The GMF briefing examines three approaches to enforcing the proposed emissions requirements:

• Remedial units (RU): Shipowners make compliance payments into a centrally managed fund or facility, with revenues supporting cleaner fuels and a just and equitable transition.
• Direct contributions (DC): Shipowners direct compliance payments toward projects they select, subject to approval and oversight.
• Voluntary units (VU): Part of the compliance payment is treated as an investment through which shipowners may receive financial returns.

Remedial units formed part of the Net-Zero Framework approved at MEPC 83, while direct contributions and voluntary units represent more recent alternatives being discussed as potential ways to address political concerns over the framework’s economic provisions and management of revenues.

However, GMF warns that allowing companies to recover part of their compliance payments through investments could reduce the financial incentive to adopt cleaner fuels.

As stated, all 15 companies consulted favored keeping non-compliance penalties meaningful and comparatively simple. Most participants were shipowners from the container, dry bulk and tanker sectors, although charterers, fuel producers and infrastructure companies were also represented.

The analysis further explains that shipowners assess the cost of switching fuels against the cost of continuing with conventional fuel arrangements. If part of a non-compliance payment can eventually be recovered through investment returns, the effective financial consequence of non-compliance is reduced.

The consulted companies also raised concerns that the alternative mechanisms could increase administrative complexity and introduce uncertainty into compliance planning.

Investment returns unlikely to reduce freight costs

Another major finding concerns the potential impact of the proposed mechanisms on freight rates. GMF reports that shipowners generally make fuel-related and freight-pricing decisions over periods ranging from three months to one year. Meanwhile, investment returns under a voluntary unit mechanism could arrive considerably later, with uncertain timing and financial value.

As a result, the companies consulted did not expect such returns to translate into lower freight rates.

The briefing indicates that compliance payments would remain visible in companies’ fuel-cost calculations and be passed through to customers, while possible future investment returns would be treated as additional financial benefits rather than reliable support for operational decisions.

GMF argues that this distinction is important because uncertain investment returns cannot provide the predictable financial support needed to justify fuel switching or reduce transport costs.

By comparison, a sufficiently predictable reward mechanism under the original Net-Zero Framework could potentially be incorporated into fuel-cost calculations and freight pricing.

Shipowners highlight governance and oversight risks

Furthermore, the briefing also identifies governance as a major concern associated with allowing individual companies to direct compliance revenues toward selected projects.

Although the companies consulted expressed reservations about the efficiency and management of a centralized IMO fund, they were also concerned about the potential for misuse under company-directed investment arrangements.

According to GMF, preventing such risks would require extensive oversight of project selection, financial returns and the environmental impacts of individual investments. This could create an administrative burden comparable to, or greater than, the oversight required for a centrally managed fund.

Rather than supervising a single facility, regulatory authorities could be required to examine numerous companies and projects individually, increasing the complexity of implementation.

The briefing therefore questions whether alternative mechanisms would deliver the administrative simplicity and efficiency sought by their proponents.

Fuel investment and equitable transition

Beyond regulatory compliance, GMF warns that the proposed mechanisms could undermine investment in alternative marine fuels and limit financial support for developing economies.

According to the companies consulted, the main challenge for fuel producers is not simply accessing funding, but securing reliable purchase commitments, known as offtake agreements, that can support financing and the development of production capacity.

The report suggests that allowing individual shipowners to direct compliance revenues toward projects of their choosing could fragment investment and reduce the economies of scale needed to make zero- and near-zero-emission fuels more competitive.

Instead, concentrating financing in fewer production projects during the early stages of the transition could help establish commercially viable fuel supply chains.

Beyond fuel production, GMF raises concerns about how such investment arrangements could affect the equitable distribution of transition financing.

The findings suggest that giving shipowners greater control over compliance revenues would not necessarily accelerate alternative-fuel production or support the IMO’s objective of ensuring a just and equitable transition.