NZF: shipping institutions stress need for continued climate-alignment efforts

Against increased political headwinds, the best option for the shipping industry to reach or come close to net-zero emissions by 2050 is still the one on the table at the International Maritime Organization (IMO), according to researchers from the UK’s University College London (UCL).

A brief prepared by UCL’s Shipping and Oceans Research Group for the Getting to Zero Coalition finds that IMO’s Net-Zero Framework (NZF), in its current form, remains the ’most effective’ of three potential scenarios that may be debated in upcoming meetings at minimising risks to the 2023-agreed IMO goal of reducing emissions to around net zero by 2050.

The two alternative scenarios to the NZF agreement as it stands, that are laid out in UCL’s Uncertainty at the IMO: Three scenarios and their consequences for shipping’s transition brief, include compromises. In one compromise scenario, the two-tiered greenhouse gas fuel intensity architecture is replaced by a single-tier global fuel standard. In a further compromise scenario, the net-zero framework plan is stripped entirely of compliance costs, the so-called ’economic element’ of the NZF that works to ensure compliance by way of financial consequences for non-compliance.

The brief concludes that both alternative scenarios would, as UCL Shipping and Oceans Research Group Professor of energy and transport Tristan Smith put it, risk "further deadlock, and further extension to delay at IMO, and the increased likelihood of a patchwork of regional regulation".

At the top of the list of problematic aspects linked to any compromise scenario sits the reality that they would require IMO to reopen negotiations on the already-agreed Marpol amendment text. 

As a deliberative body that works on consensus, reopening negotiations would take time, risk further division and could stymie progress altogether.

"The NZF, ’as is’ had the support of 88% of Marpol signatories at the point of agreement. The report finds little evidence that reopening the framework text would produce a broader consensus, and a significant risk it would reignite political deadlock," UCL found.

Among the specific shortcomings of either of the net-zero pathways UCL defined as compromise approaches are a lack of demand signals or revenues taken in by compliance costs, which would be used to support take-up of the scalable zero-emissions fuels that shipping needs to reach its emissions targets. The compromise scenarios would, the brief says, result in increased costs for lower-income countries but without effective capacity built in to support those countries’ maritime economies in their transition away from polluting fossil fuels.

Moving away from the current net-zero framework would also be more likely to result in a fragmented landscape of regional regulations and heighten investment risks.

"NZF ‘as is’ is likely to significantly reduce the need to extend EU and other regional regulation. Compromising ambition or architecture increases the need for countries or regions to show leadership, producing a complex and less investable patchwork of regulation rather than a global level playing field," the report found.

"The postponement of the NZF adoption has widened the range of plausible transition pathways for shipping at a time when long-term investment decisions cannot easily be deferred."

Adoption of IMO’s plan to systematically reduce emissions to net zero, known as the Net-Zero Framework, was delayed by a year at the October 2025 extraordinary meeting of the Marine Environment Protection Committee (MEPC). Allegations of behind-the-scenes diplomatic pressure tactics during the MEPC meeting surfaced in news reports. Back-channel negotiations were also referenced, including a mention by the chair of the MEPC, as ’corridor diplomacy’, during proceedings. And in public, procedural wrangling markedly slowed the discussions at shipping’s international regulator until talks were abruptly suspended. The United States delegation, under the direction of the Trump administration, and the Saudi delegation led many of the interventions to slow the process of adopting the NZF framework, which was approved by IMO’s MEPC in April 2025.

Poseidon Principles chair says shipping’s banks need ’credible frameworks’ to navigate evolving regulations

The chairman of the shipping banks’ emissions tracking scheme, the Poseidon Principles’ Paul Taylor, wrote an open letter to existing Poseidon Principles member organisations and those who will be able to join under the scheme’s expanded membership options, which are designed to include private equity, hedge funds and capital markets underwriters. 

In his letter, Mr Taylor, who is global head of maritime industries at French multinational banking giant Société Générale, acknowledged the uncertainty faced by those in the shipping sector, but called for financial institutions to retain climate alignment efforts. 

"It is a tough time for the shipping sector. Geopolitical uncertainty, value-chain security concerns, and shifting policy timelines have made it harder for many organisations to prioritise decarbonisation. Delays to regulation, such as the postponement of the International Maritime Organization’s Net-Zero Framework, have added to the sense of uncertainty across the industry," Mr Taylor said.

Despite these ’headwinds’, Mr Taylor said the importance of transparency and climate alignment remains.

"If anything, they reinforce the need for credible frameworks that help maritime financial institutions and their clients stay on course while the regulatory landscape evolves," he said, noting "the postponement of global IMO regulation does not affect the relevance or impact of transparency-focused reporting frameworks like the Poseidon Principles."

Currently, 36 Poseidon Principles signatories, including banks and export credit agencies, report alignment of their portfolios against IMO’s decarbonisation trajectories consistent with net-zero ambitions around 2050, representing some 75% of shipping’s financiers globally.