New reforms introduced by the International Maritime Organization (IMO) look to reduce greenhouse gas (GHG) emissions in the shipping industry. At the 83rd Meeting of the Marine Environment Protection Committee (MEPC), the MEPC approved draft reforms to reduce emissions and air pollution from shipping.1
These reforms are to be added into an annexure VI of the International Convention for the Prevention of Pollution from Ships (MARPOL). Ratified in 2005, the MARPOL treaty outlines international regulations for reducing toxic emissions and ozone depleting substances2 created by ships that weigh over 5,000 tonnes. Such ships account for 85 per cent of total emissions from the global shipping industry.3
The new reforms intend to meet the targets set in the 2023 IMO strategy and reduce the detrimental effects of shipping emissions on the Earth’s climate. Following formal adoption, the MEPC envisions a 40% decrease in international carbon dioxide emissions in the shipping industry as well as the uptake of zero or near-zero (ZNZ) emission technologies.
Overview of reforms
- Global fuel standard
The MEPC has set GHG reduction targets from 2028 until 2035, with penalties for vessels that fall short of these targets.4 Ships must gradually limit their greenhouse gas fuel intensity which is calculated using a “well-to-wake” approach. The measures involve both a base target and a direct compliance target. These are percentage reductions which are applied to a value of 93.3g CO2eq/MJ (representing the average fuel intensity of a ship in 2008).
The following table sets out the reductions that the IMO hopes to enforce:
| Year | Reduction of Base Target (as a % applied to the 2008 level) | Reduction for Direct Compliance Target (as a % applied to the 2008 level) |
| 2028 | 4.0% | 17.0% |
| 2029 | 6.0% | 19.0% |
| 2030 | 8.0% | 21.0% |
| 2031 | 12.4% | 25.4% |
| 2032 | 16.8% | 29.8% |
| 2033 | 21.2% | 34.2% |
| 2034 | 25.6% | 38.6% |
| 2035 | 30.0% |
43.0% |
- New deficit categorisations
A ship will either be in “direct compliance” if it meets the above targets or in a “compliance deficit” if it fails to meet these thresholds.5 If a ship only meets the base target this is classified as a Tier 1 deficit.6 Where a ship has not met either target this is a Tier 2 deficit.
Where vessels are in a deficit, they may purchase remedial units from the IMO Net-Zero fund. For the 2028-2030 reporting period, Tier 1 units are priced at US$100 per tonne of excess emissions while Tier 2 units are priced at US$380 per tonne of excess emissions.7 After this period, the IMO will reassess the pricing of remedial measures.
To rectify their larger deficit, vessels that are in a Tier 2 compliance deficit also have the option of transferring surplus units from other ships or using surplus units that they have already banked.8 Likewise, ships that are in direct compliance with the targets may sell their surplus to other ships.
- Economic measures including:
-
- Financial rewards: The draft amendments to the annexure also include financial rewards for those who utilise ZNZ emissions technologies. Though not finalised, promising fuels to aid decarbonisation include biofuels made from advanced biomass, blue fuels utilising hydrogen and electrolysis, e-fuels and grid electricity in the form of shore power.9 The guidelines of this rewards scheme are to be developed soon by the IMO.10
- IMO Net-Zero fund: This fund will hold the contributions paid by ships which have a compliance deficit. The revenue will then be used to reward ships using ZNZ technologies. The revenue will also be used to fund research, ensure the smooth implementation of regulations, address any negative impacts on the states and cover any administrative costs that arise.11
- Designated protection of special areas
The IMO declared the North-East Atlantic to be a new Emission Control Area (ECA).12 These ECAs are sea areas that are particularly sensitive to pollution or noxious emissions, thereby warranting extra protection from the IMO.13 Similarly, the IMO also identified Particularly Sensitive Sea Areas (PSSAs) to preserve and protect specific marine environments from international shipping activities. There are currently 16 PSSAs with areas around Peru to be added to the list following the meeting of the MEPC.14
- Carbon Intensity (CII) reduction factors
The MEPC has outlined newly defined CII reduction factors for 2027 to 2030 including new methods of attaining an Energy Efficiency Design Index reference line and an Attained Energy Efficiency Existing Ship Index. These calculations allow for assessment of the ship’s performance in accordance with technical and operational carbon intensity requirements.15 The Committee has also accepted amendments to the 2024 guidelines on developing a Ship Energy Efficiency Management Plan (SEEMP) which will allow the MEPC to develop further measures to reduce CII. This SEEMP and further CII requirements will be reviewed in Phase 2 of the review measures between 2026 and 2028.16
Enactment in Australia
Traditionally, Australia has adopted MARPOL obligations through the enactment of the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 and the Navigation Act 2012.17 These federal statutes are also supported by seven Marine Orders and Regulations. There are currently no state statutes giving effect to Annexure VI.18
Australia has been an active member of the IMO and it is expected that the new reforms will be swiftly adopted via statute or regulations.
Key considerations for the shipping industry
Although approved, these reforms will be formally adopted in October 2025 in the next meeting of the MEPC and will only come into effect in 2027. This gives time for shipping businesses to source appropriate fuels and technologies to meet the incoming standards. The new obligations and price mechanisms have also introduced a financial incentive which will encourage these shipping businesses to adopt ZNZ technologies.
New technologies decarbonising the shipping industry
Ships are utilising new technologies such as ocean sensors, high-tech sails and onboard CO2 capture to decarbonise a traditionally hard-to-abate shipping industry.19 San Francisco startup Sofar Ocean has been producing “Spotters”- small yellow buoys which measure wind, weather and wave data.20 By analysing this data, Sofar’s service can help shipping vessels take a course which minimises the ship’s carbon emissions and fuel costs.21
Berge Bulk and other shipping carriers have also installed rigid sails on ships.22 These sails capture lift from the wind to propel the ship forward, reducing the amount of fuel burnt to maintain speed.23 An LA startup, Calcarea, is testing technology which takes CO2 emitted from a ship’s smokestack and feeds it through limestone reactors to transform the CO2 into bicarbonate, a common marine salt.24 The bicarbonate can then be disposed of at sea.25
The increased pressure on shipping companies to reduce carbon emissions will also see a corresponding demand for alternative fuels. Ship owners will need to upgrade their operating technology to accommodate alternative fuels and hire appropriate labour to do so.
What’s next
The adoption of these new reforms by the IMO will lead to significant new investment, innovation and research into the decarbonisation of the shipping industry. The reforms provide promising signals of a future of sustainable shipping and will encourage shipping businesses to integrate new technologies into their fleets which reduce shipping emissions and protect the marine environment.
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1International Maritime Organisation, ‘IMO Approves net-zero regulations for global shipping’ (Press Briefing, 11 April 2025) (‘IMO Approves Net-zero Regulations’).
2International Maritime Organization, ‘International Convention for the Prevention of Pollution from Ships (MARPOL)’ (Webpage) <https://www.imo.org/en/about/Conventions/Pages/International-Convention-for-the-Prevention-of-Pollution-from-Ships-(MARPOL).aspx>.
3Vibhu Mishra, ‘Countries Reach Historic Deal to cut Shipping Emissions’, United Nations (Webpage) <https://news.un.org/en/story/2025/04/1162176#:~:text=A%20turning%20point%20for%20the,push%20toward%20cleaner%20maritime%20transport.&text=A%20cargo%20ship%20moored%20at%20a%20port%20in%20Europe.>.
4Global Maritime Forum,’ IMO Reaches Agreement but More Needed to Unlock Future Fuels,’ (Webpage)< https://globalmaritimeforum.org/news/imo-reaches-agreement-but-more-needed-to-unlock-future-fuels/>.
5International Maritime Organisation, Draft Revised MARPOL Annex VI, UN IMO, Marine Environmental Protection Committee, 83rd mtg, Circular Letter No.5005 (11th April 2025) reg 35-36 (‘Draft Revised MARPOL Annex VI’).
6Ibid reg 36.
7Draft Revised MARPOL Annex VI (n 6) reg 36.
8IMO Improves Net-zero Regulations (n 1).
9Ricardo Energy and Environment, Study on the readiness and availability of Low and Zero Carbon Ship Technology and Marine Fuels (Summary Report, No 2022-19, 31 March 2023) 4.
10Draft Revised MARPOL Annex VI (n 6) reg 39.
11Draft Revised MARPOL Annex VI (n 6) reg 40-41.
12Draft Revised MARPOL Annex VI (n 6) 1.
13International Maritime Organisation, List of Special Areas, Emission Control Areas and Particularly Sensitive Areas, UN IMO, MEPC.1/Circ.778/Rev.4 (30th October 2023) [2]-[4] (‘List of Special Areas’).
14List of Special Areas (n 12) [7].
15Draft Revised MARPOL Annex VI (n 6) reg 21-28.
16International Maritime Organisation, ‘Marine Environment Protection Committee (MEPC 83), 7 to 11 April 2025’ (Webpage) <https://www.imo.org/en/MediaCentre/MeetingSummaries/Pages/MEPC-83rd-session.aspx>.
17Protection of the Sea (Prevention of Pollution From Ships) Act 1983 (Cth); Navigation Act 2012 (Cth).
18See Ibid.
19Todd Woody, ‘The New Technologies Buoying Efforts to Cut Ship Emissions’, Bloomberg (online, 14 April 2025) <https://www.bloomberg.com/news/features/2025-04-14/how-shipping-companies-are-cutting-their-carbon-footprint?cmpid=BBD041425_GREENDAILY&utm_medium=email&utm_source=newsletter&utm_term=250414&utm_campaign=greendaily>.
20Ibid.
21Ibid.
22Ibid.
23Ibid.
24Ibid.
25Ibid.
