IMO Net-Zero Fund: Paving the Way to Decarbonized Shipping

The International Maritime Organization (IMO) is taking a historic step toward decarbonizing global shipping. The IMO Net-Zero Fund (NZF), expected to mobilize $10–15 billion per year starting around 2028, is designed to help the sector achieve net-zero greenhouse gas (GHG) emissions by 2050.

What is the IMO Net-Zero Fund?

The NZF framework, approved at MEPC 83 in April 2025, integrates fuel intensity targets, carbon pricing, and a dedicated funding mechanism to support the transition to low-carbon shipping technologies. Ships above 5,000 gross tonnage, responsible for 85% of sector emissions, are included under this framework.

A carbon price of $100 per tonne of CO₂e is proposed for these vessels, which will finance support for developing nations adopting green shipping technologies and infrastructure.

Key Objectives of the Fund:

• Enable developing countries to transition to low-carbon fuels and technologies.
• Encourage research and development in green fuels, propulsion systems, and energy-efficient shipping technologies.
• Support a just transition for countries managing economic and workforce impacts.

Adoption Process

The fund requires adoption during an extraordinary MEPC session, with a two-thirds majority of Annex VI contracting parties. Preliminary voting in April 2025 indicated:

• 63 in favor
• 16 against
• 24 abstentions

After formal adoption, a tacit acceptance period of 10+ months allows objections. Any objections must meet one of two conditions to block implementation:

1. ≥1/3 of participating countries
2. Representing >50% of global shipping tonnage

Challenges to Adoption

While the NZF is a critical step toward decarbonization, several impediments exist:

• Economic Concerns: Higher operational costs, especially for developing nations.
• Technological Limitations: Low-carbon fuels and retrofitting solutions are not yet fully scalable.
• Geopolitical Tensions: Opposition from the U.S. and some Middle Eastern nations citing economic disadvantages.
• Dependence on Funding: Developing countries may resist adoption without guaranteed access to the fund.

Global Positions

Supporters: EU, China, Brazil, and several developing nations anticipating fund access.
Opponents: U.S., Saudi Arabia, UAE, Qatar, and some developing countries lacking technological capacity.

India’s Position:
India supports the NZF but emphasizes transparent and structured allocation:

• 50% for green fuel adoption
• 30% for R&D
• 20% for just transition policies

India is also implementing domestic initiatives, including green ports, vessels, and hydrogen hubs, complementing global decarbonization efforts.

Commercial and Strategic Implications

The NZF is not just an environmental tool; it carries commercial and strategic interests:

• Commercial Gains: Benefits green fuel suppliers, shipbuilders, ports, and carbon market participants.
• Strategic Gains: Donor countries may influence technology adoption, strengthen global leadership, and promote climate objectives.

How the Fund Will Work

• Funding Source: Primarily shipping companies operating vessels >5,000 GT.
• Collection Mechanism: Contributions may be collected by flag states and remitted to the IMO.
• Voluntary Contributions: Developed countries can supplement the fund to assist developing nations.
• Projected Revenue: Fully applied, the fund could generate up to $85 billion annually.

Beneficiaries:

• Developing countries (low-carbon infrastructure, technology adoption)
• R&D projects (30% allocation for green shipping technologies)
• Just transition support (20% allocation)
• Commercial suppliers and ports investing in green infrastructure

Why It Matters

The IMO Net-Zero Fund represents a landmark effort to decarbonize one of the most critical global industries. By linking carbon pricing, innovation, and targeted financial support, it not only drives environmental change but also opens new avenues for green technology, global partnerships, and sustainable shipping.