Energy Musings - October 6, 2025

We are approaching the IMO's next vote on its plan to decarbonize the world's shipping industry. It will impose the first ever carbon tax on shipping. More parties are pushing back.

Shipping’s Decarbonization Plan Is Challenged

In April, as the International Maritime Organization’s (IMO) Marine Environment Protection Committee meeting ended with the approval of a carbon levy on shipping fuels, the agreement was hailed as a landmark decision for climate change policy. The agreement was to be circulated for six months before a second vote would be scheduled during the 2^nd Extraordinary Session of the Marine Environment Protection Committee, October 13-17.

As the meeting approaches, the pushback against the plan from shipping companies and maritime societies has been intensifying. The latest to criticize the proposed plan includes the leading Greek shipowner and the head of the American Bureau of Shipping, a classification society.

George Procopiou is the latest shipowner to question the IMO’s Net-Zero Framework proposal. He is no ordinary shipowner, as his group of companies controls 136 vessels. If you add in the 84 ships he has on order or under construction, he becomes Greece’s largest shipowner.

Two of Procopiou’s companies, Dynacom and Dynagas, co-signed a letter in opposition to the draft of the Net-Zero Framework. They joined Frontline, Bahri, Angelicoussis, GasLog, Hanwha, Seapeak, and Stolt Tankers in opposing the draft plan. The letter calls for amendments to the plan before it is approved. In particular, it says there needs to be realistic trajectories in the plan. Additionally, it raises questions about whether the proposed plan effectively supports the decarbonization of the shipping industry and whether it will ensure a level playing field for all shipowners.

Christopher J. Wiernicki is the chairman and CEO of the American Bureau of Shipping, one of the world’s leading ship classification societies. ABS was established in 1862. Its mission is to “promote the security of life, property, and the natural environment,” which is achieved by its standards for the “design, construction, and operational maintenance of marine and offshore assets.”

Wiernicki commented on the plan, stating, “Quite frankly, achieving net zero for shipping by 2050 looks like a wildcard.” That is a telling indictment of the plan and its rush for a goal that fails to recognize the realities of the fuel choices being pushed on shipowners without considering the challenges of having an infrastructure in place globally to fuel the fleet in any realistic timeframe. This will cause significant damage to the global sea trade, which accounts for 80% of the world’s trade.

He believes the IMO needs a time out so it can consider whether its Net-Zero Framework can be adjusted to “marry ambition with reality.” In his view, “LNG and biofuels are mission-critical to any success and should not be overlooked, over-penalized, or discarded.” Failing to consider these fuels will create havoc within the global shipping industry, and the costs to be imposed on shipowners will be devastating.

One estimate is that shipowners will need to invest $1 trillion by 2050 to achieve the IMO’s framework plan. ABS has estimated that under the IMO plan, a vessel trading in the European Union will see its daily operating expenses triple from $15,000 to $45,000 between 2028 and 2035. Moreover, the plan models LNG, despite its fuel-bridging ability, as over-penalized in the early 2030s, reducing its potential role in mitigating carbon emissions by the global shipping industry.

The ABS report identifies three fuels that must be assessed for their technological readiness, their potential for commercialization at scale, and their ability to reduce vessel carbon footprints. The pathways include light gas, heavy gas and alcohol, and bio/synthetic fuels. Progressing through these stages will require time, so they cannot be rushed.

The IMO Net Zero Framework is designed to achieve net-zero greenhouse gas (GHG) emissions from international shipping by 2050. It applies to all vessels of 5,000 gross tons or more on international voyages, with a few exceptions, including vessels operating solely within national waters, non-mechanically propelled vessels, and specific offshore platforms.

The draft regulations are based on two measures. One is the Technical Element, which mandates progressive reductions in the GHG fuel intensity (GFI) of marine fuels, measured from production to use or on a well-to-wake basis. The second measure is the Economic Element, which prices GHG emissions. The two elements are designed, in theory, to drive the uptake of zero and near-zero-GHG fuels and technologies.

Each vessel would calculate its annual GFI of all fuels used. The ship must achieve two tiers of GFI – a Base Target (Tier 2) and a more stringent Direct Compliance Target (Tier 1). Both tiers become progressively more rigorous. The system becomes complicated because vessels must comply with both GFI standards. If they do, they earn Surplus Units (SUs), which can be banked for up to two years, traded with other vessels, or voluntarily canceled as a climate mitigation measure.

Vessels that fall short of the GFI standards would need to offset their deficit by using previously banked SUs or securing them from other vessels, or purchasing Remedial Units (RUs) at IMO established prices. For 2028-2030, RUs would cost $100 per ton of CO2 equivalent emitted for Tier 1 and $380 per ton for Tier 2 standards.

Ships plying the world’s oceans hauling goods everywhere.

The pushback on the IMO Framework plan was led by the United States, but was supported by 15 other nations. In fact, the U.S. representatives left the IMO meeting in London in protest over the plan and urged other countries to reject it. In August, the U.S. announced that it would reject the IMO plan in the upcoming October vote and warned other countries that they could be subject to U.S. tariffs if they voted in favor of the plan. The U.S. also welcomed international-flag vessels to switch to the U.S.-flag registry, thereby exempting them from the IMO plan and its potentially costly fees.

At the April IMO meeting, to pass the measure, 50% of the member states “present and voting” needed to vote in favor. There were 79 members voting; therefore, 40 favorable votes were required for the plan to pass. The vote was 63 in favor, including China, Brazil, and the European Union, and 16 opposed, including the U.S. and Saudi Arabia. The October vote will have a higher threshold for approval. There are 108 Member States, and passage requires a two-thirds approval. Therefore, it will take 72 favorable votes. Of the 69 countries voting in favor of the IMO Framework plan in April, 57 are voting Member States. That leaves the approval 15 votes short.

As more people and governments involved in the maritime industry are pushing back on the plan, at least until amendments are made and the rush is slowed, passage is in doubt. The U.S. government has argued that the Framework plan would impose unfair costs on American citizens and businesses. Additionally, it worries that the proposed fuel standards would disproportionately benefit countries like China. Chinese ships are about to be required to pay U.S. port fees, which were instituted under U.S. trading rules, raising the cost of their operations and potentially increasing the cost of their cargoes.

There is little doubt that the global shipping industry is on the verge of further upheaval and uncertainty. This is yet another geopolitical issue that warrants consideration by governments, businesses, and individuals.