IMO mid-term measures: fuel transition strategy and cost
Three-scenario cost analysis of fuel transition pathways under the IMO Net-Zero Framework mid-term measures.
In 2025, at the 83rd MEPC, the IMO approved mid-term measures for shipping GHG reduction — the IMO Net-Zero Framework. This is not simply the addition of one more rule. It signals a paradigm shift away from "energy-efficiency-centric" regulation toward a regime built on absolute GHG emissions reduction and carbon pricing.
The Core Structure of the Regulation
At the heart of the measures is a price-based regulatory regime that evaluates fuel emissions intensity using GHG Fuel Intensity (GFI) and applies differentiated carbon charges to emissions exceeding the standard.
When set GFI thresholds are exceeded, a dual-rate pricing system applies:
- Tier 1 non-compliance band: USD 100/tCO₂eq levy
- Tier 2 non-compliance band: an additional USD 380/tCO₂eq levy
Operators using fuels exceeding the carbon-reduction targets effectively buy fuel and emissions allowances at the same time.
Analytical Scenarios
This brief analyses, under the mid-term measures, which fuel transition pathways could realistically emerge in the industry, using three scenarios:
- Non-compliance scenario — current fuel mix maintained
- Baseline target scenario — IMO baseline GFI targets met
- Stringent target scenario — meeting more aggressive reduction targets
Policy Implications
This brief does not make a technical judgement on "which fuel is best." Instead, it examines whether the mid-term measures can induce meaningful transition pathways and provides a basis for judging where policy intervention — rather than market choice — is required.
The findings suggest governments and industry should consider:
- Financial incentives to support fuel-transition costs
- Mechanisms to internalise carbon pricing in fuel prices
- Tightening of interim targets to accelerate transition