The proposed global greenhouse gas pricing system for international shipping remains under negotiation following the latest discussions at the International Maritime Organization (IMO).
Nearly 1,200 delegates participated in the ISWG-GHG 22 meeting in London from 1 to 4 September 2026. The discussions concluded without the compromise text required to settle the remaining issues. According to a UCL-based assessment, 38 states expressed support for carbon pricing and the associated revenue mechanism, while 17 opposed it. Opposition continues to be led primarily by the United States, Saudi Arabia and other fossil-fuel-aligned states.
The next working group meeting is scheduled for 23 to 27 November, followed by MEPC 85 from 30 November to 3 December. The extraordinary session adjourned in 2025 is expected to resume on 4 December 2026, subject to confirmation by MEPC 85. Adoption will require the support of two-thirds of the parties to MARPOL Annex VI present and voting.
The current framework provides for two levels of remedial-unit pricing. A Tier 1 price of USD 100 per tonne of CO₂ equivalent would apply to ships that meet the base target but fall short of the direct compliance target. A higher Tier 2 price of USD 380 per tonne would apply to emissions above the base target. These prices are currently fixed only for the initial period up to 2030.
The framework would apply to international ships above 5,000 gross tonnage, which are responsible for approximately 85% of international shipping’s CO₂ emissions.
A central element is the greenhouse gas fuel intensity standard, under which annual emissions would be assessed on a well-to-wake basis and measured in grams of CO₂ equivalent per megajoule of energy used. The base reduction would begin at 4% in 2028, compared with the 2008 reference value of 93.3 gCO₂e/MJ, and increase progressively to 30% by 2035. The direct compliance target for 2028 represents a 17% reduction.
Ships performing below the applicable fuel-intensity threshold could generate surplus units. These could potentially be banked, transferred or used through fleet-pooling arrangements, allowing operators to manage compliance across multiple vessels.
The proposed IMO Net-Zero Fund could generate an estimated USD 10 billion to USD 15 billion annually. The final amount would depend on fuel adoption, compliance deficits and the structure eventually agreed.
The funds could support cleaner fuels, infrastructure, research, training and assistance with the transition. However, the structure remains disputed. While many states support a central fund or similar facility, the United States opposes an IMO-administered mechanism.
China has proposed offsetting compliance payments and rewards within a single transaction. This could reduce the volume of gross payments passing through the central system and simplify settlement and working-capital requirements. Japan has proposed alternatives based on owner-directed contributions, although these received more limited support during the September discussions.
The pricing structure could materially affect decisions concerning alternative fuels, vessel upgrades and newbuilds. It may strengthen the financial case for lower-emission fuels, efficiency improvements, wind-assisted propulsion, batteries, shore power and potentially carbon capture. Even small adjustments to the reduction thresholds could significantly alter annual compliance costs across larger fleets.
A model presented by Ship Universe illustrates the possible financial exposure. For a reference vessel consuming 20,000 tonnes of fuel annually, the current scenario produced a Tier 1 deficit of 9,752 tonnes of CO₂ equivalent and a Tier 2 deficit of 3,001 tonnes. At the proposed prices, this resulted in an estimated annual remedial-unit cost of USD 2.12 million, comprising approximately USD 975,000 under Tier 1 and USD 1.14 million under Tier 2.
Under the modeled improved-fuel scenario, the remedial-unit cost fell to zero, with 1,961 tonnes of surplus units generated. The estimated compliance value of the improvement was USD 2.12 million annually, equal to approximately USD 106 per tonne of baseline fuel or USD 2.63 per gigajoule. This calculation excludes the cost of alternative fuels, retrofits, certification, administration and regional measures such as the EU Emissions Trading System and FuelEU Maritime.
Several important elements remain unresolved, including the final carbon prices, the structure of the revenue mechanism, the early emissions-reduction pathway and the rules governing surplus-unit trading.
Fuel certification is also expected to receive further attention in November. The methodology used to calculate lifecycle emissions will determine the fuel-intensity value attributed to each fuel. This will increase the importance of certification, emissions monitoring, lifecycle data, bunker documentation and compliance systems.
If adopted, the earliest estimated entry into force is 1 March 2028. However, the framework is not yet final, and its targets, prices and implementation arrangements may still change before or after the December negotiations.