The EU is showing how regional maritime rules can support a global framework at the IMO

In April 2025, governments at the International Maritime Organization (IMO) agreed on a historic global regulation, the Net-Zero Framework (NZF). It was designed to set global shipping on a course to net-zero by 2050 in a just and equitable way.

Global shipping is responsible for around 3% of global emissions annually, roughly as much as the economies of Germany or Japan.

If the current draft of the NZF were adopted, it would be a historic milestone in two key ways. Firstly, it would set common global targets for the world’s fleet to reduce carbon intensity of marine fuels. Secondly and more significantly, it could set the world’s first meaningful carbon pricing for a global industry. By collecting fees on any emissions that exceed agreed targets, it would raise $10-15 billion a year, providing financial support for clean fuels and for the sector's transition in developing countries. Think investments in clean ports, zero-emission ships, and renewable energy production. If a ship reduces emissions enough to meet the targets, it would not have to pay at all.

While T&E analysis has previously shown that the NZF in itself is not strong enough to reduce shipping emissions at the pace countries agreed to, the agreement set an important global standard for a sector so far exempt from most climate rules.

The IMO’s failure to adopt the NZF as planned in October 2025 was a major upset not only for the industry, lacking the much-needed investment clarity and certainty, but also the world’s most vulnerable states who lack finance for their energy transition, while often facing the worst impacts from climate change.

One of the leading arguments put forward by the NZF opponents, largely oil-producing states led by the US and Saudi Arabia, was that there are regional carbon pricing measures already in place, and adding a global regulation on top would burden the shipping industry twice-over.

The EU’s carbon market, the EU ETS, which covers the EU’s share of shipping emissions on its trade routes, was identified by these countries as a barrier to agreement at IMO.

The IMO is expected to discuss adoption of the NZF again in December 2026. But while the blockers are still failing to propose any meaningful compromise, the EU has since proposed important changes to the EU ETS for shipping, addressing the concerns and paving the way for global and regional regulation to co-exist and reinforce each other.

There are three key signals sent out by the EU that should not go unnoticed by any government deciding on the future of the IMO NZF this year.

1. There will be no double pricing of emissions. The EU is clear that if the IMO establishes a carbon pricing scheme such as the NZF, a ship sailing internationally will not have to pay double for the same emissions under the EU ETS. T&E analysis shows that this overlap is already small, with only around 15% of relevant emissions covered by both ETS and NZF.

The NZF would become more strict over time, gradually increasing its coverage. As it does, the ETS would need to adjust - at least until 2040, after which global targets are yet to be agreed upon.

2. Alignment, not backsliding. Given that the NZF is insufficient to meet the IMO’s own climate targets, coordinated regional efforts are needed to fill the gaps. Currently, the EU reports emissions from all routes to and from its ports, but charges only 50% of the emissions. The newly proposed “ETS as a service” would allow EU trade partners to raise revenues on their own 50% shares through the EU’s existing system, without the administrative burden of setting up their own ETS from scratch.

3. The ETS should support an equitable transition. Whereas all funds would previously be spent only in European projects, around €100 million per year is now due to be set aside to fund shipping decarbonisation in SIDS and LDCs. In addition, countries linked through “ETS as a service” could also receive subsidies for green investments, further encouraging bilateral cooperation.

How would the two schemes interact in reality? Let’s take a ship in 2030, sailing from Tema, Ghana to Algeciras, Spain, emitting a total of 1080 tonnes of CO₂ equivalent.

Under the EU ETS, the vessel would be charged for 41% of its emissions. The NZF, due to its limited pricing mechanisms, charges no more than 23%. Due to their different scopes, only 9% of the total is liable under both policies. This is the source of the alleged concerns, and the share of emissions that would now be exempted under the revised EU ETS.

Yet, to benefit from aligned rules, governments need to agree on a global deal first.

As the IMO meets for what many expect to be a decisive round of discussions this November and December, some countries are aiming to weaken or delay the agreement, in order to protect their oil interests. Despite their efforts and many proposals to reduce targets, create loopholes, or prioritise unsustainable options like LNG and crop biofuels, the NZF is still on the table.

Now, the EU is opening a path for its regional rules to co-exist with a global framework and involving others in the benefits. With the Commission having provided more clarity on how the ETS could co-exist with a global system, align with other regional measures and even provide some support to SIDS and LDCs, there is now even less justification for governments to use it as an excuse for weak action at a global level.

Failing to adopt a robust framework would keep global shipping in its costly state of limbo, reliant on unreliable fossil fuels, while leaving the poorest countries even more vulnerable. Crucially, such an outcome would not exempt governments from their own climate obligations, at the IMO or otherwise.