Why does this matter?  Shipping is a major emitter of greenhouse gases, responsible for 3% of global emissions. Yet, the industry is not covered by the Paris Agreement, posing a significant regulatory gap. In 2023, IMO member states agreed to a goal of achieving net-zero emissions by 2050, with interim targets of reducing emissions by 30% by 2030 and 80% by 2040 compared with a 2008 baseline.

However, the initial agreement did not specify how net zero would be achieved and negotiations on concrete measures have been slow-moving. The latest framework represents a breakthrough with the newly agreed policies slated to shape the trajectory of global shipping going forward.

The new emissions intensity targets have been reduced to 4% in 2028, which will rise to 30% in 2035. And an upper target of17% by 2028 increased  to 43% in 2035. To meet these targets ships are expected to switch to less polluting fuels.

Ships unable to sufficiently reduce their emissions will pay a penalty. If failing to meet the lower targets, ships can purchase “remedial units”  at $380 per unit, which funds the newly established “net-zero fund”. Or, in a carbon credit-style exchange, ships could purchase surplus units from others that have excelled in reducing carbon intensity.

The second tier of penalty applies to ships that meet the lower targets but fail to reach the more stringent upper aims. These ship owners would pay $100 per unit into the net-zero fund. Overall, these agreed costs and targets fall roughly in the middle of targets proposed by member countries.

Two companies in the Ocean 14 Capital portfolio are uniquely positioned to support the IMO’s shift towards cleaner fuels and carbon pricing,  Sofar Ocean, for example, provides crucial ocean data that optimises vessel performance. The company’s high-accuracy weather forecasts and performance models help ships reduce fuel consumption and emissions by providing optimised routing.

Given the IMO’s new rules, Sofar Ocean’s solutions can support the maritime industry’s efforts to meet emission reduction targets, improving fuel efficiency and lowering overall emissions.

Meanwhile, Goodcarbon enables businesses to build long-term carbon credit portfolios through nature-based assets. Its platform supports projects like reforestation and land conservation, which contribute to offsetting carbon emissions. Though they have focused on land-based projects, Goodcarbon is well positioned to become a key player for the maritime industry.

With the IMO’s focus on carbon pricing, Goodcarbon’s solutions offer a vital tool for companies in the shipping industry to meet emissions targets while supporting the transition to a net-zero future.

Although the deal at the IMO represents a significant shift in global maritime regulations, the framework is not without controversy. Some emerging economies and oil-producing nations, such as Saudi Arabia, opposed the carbon pricing measures, arguing they would place a financial burden on global trade and raise commodity prices.

The US also withdrew partway through the negotiations, calling the carbon pricing system “blatantly unfair.” Despite the opposition, the deal was passed through a majority vote, with the framework aiming to raise funds for climate action, including supporting the adoption of low-carbon fuels.

Some critique has been cited by the UCL and the NGO coalition Transport and Environment. which found that the framework would be insufficient to meet the new targets, given that 90% of emissions will escape penalties under the IMO’s rules. The UCL research group sees this agreement as “weak” and a watering down of previous targets from the IMO.

The IMO’s historic agreement takes a crucial step toward reducing shipping emissions, setting clear targets and penalties for non-compliance. Yet, many critics argue that the deal lacks the urgency and ambition required to align with global climate goals, especially as it faces resistance from key stakeholders. Success of the agreement will depend on stronger actions and broader collaboration in the coming years.