Any guesses on why the International Maritime Organization’s (IMO) pitch for shipping’s first global carbon pricing system ran aground earlier this month?
Money, you say?
Bingo. But the projected annual US$15 billion bill facing container shipping lines and other carriers under the IMO’s Net Zero Framework (NZF) is only one line item in the decarbonization cost projections for maritime freight movement.
Cargo ships are seen lined up outside the Port of Los Angeles, Feb. 23, 2021, in Los Angeles, (AP Photo/Mark J. Terrill, File).
And money is only one shipping industry red flag.
As noted previously in the Substack Shipping News, the estimated annual cost to decarbonize maritime shipping ranges between US$8 billion and US$28 billion.
Make that US$90 billion if you factor in the investment in bunkering and the other energy transition infrastructure needed.
Overall, the bill for reaching the IMO’s 2050 zero-emission shipping destination is estimated at US$1.6 trillion.
But that is just a ballpark, big-picture number.
A small example of the impact on everyday operating costs was provided during an October 8 review of the main findings in DNV’s Energy Transition Outlook 2025.
Eirik Ovrum, the report’s lead author and the principal maritime environmental technology consultant for the maritime industry risk-management company, noted that the IMO’s NZF “will effectively double fuel costs by around 2036.”
That raises another NZF red flag issue: what lower-carbon fuel and what technology required to turn that fuel into efficient and financially viable propulsion power will be commercially available to shipping fleets embarked on ambitious decarbonization initiatives?
The answer today is not enough of either. That explains in part why the adoption of heavy marine oil (HMO) alternatives remains minimal.
According to DNV data, 2,851 ships out of a global fleet of 120,936 have dual-fuel technology. That is just over 2%. And only 8.9% of total gross tonnage today is powered by alternative fuels.
The HMO alternative for most of those dual-fuel ships (1,539) is liquefied natural gas (LNG).
The good news for NZF fans and decarbonization advocates is that 51% of new ship orders include dual-fuel technology.
Most of those are containerships.
But the IMO is not big on LNG.
DNV’s Maritime CEO Knut Ørbeck-Nilssen has taken the organization to task for erecting roadblocks that “make the pathway less attractive” for shipping to incorporate LNG in its decarbonization toolbox, even though approximately 600 ships sailing today have dual-fuel LNG engines, and another 700 on order will have that technology.
Lower carbon propulsion fuel availability is a major concern for ocean carriers.
Ørbeck-Nilssen has estimated that to hit its 2030 20% emissions reduction target, the maritime shipping sector will need between one-quarter and one-third of the projected global supply of low-GHG fuels.
More low-GHG propulsion fuel technology is being installed in containerships and other ocean-going vessels, but the percentage of dual-fuel ships in the world’s commercial fleet remains tiny | DNV
During DNV’s October 8 session, Ovrum speculated that ocean carriers could only source enough biodiesel to hit that 2030 goal if “road transportation stopped using biodiesel and gave it all to shipping.”
And that is just the fuel-use and availability side of the energy transition equation. Other challenges include the complexities and costs of refitting ships with dual-fuel technologies, allocating space aboard vessels for less energy-dense fuels, and incorporating costly and complex onboard carbon capture systems.
But another red flag raised following the U.S.A.’s NZF rejection in August is this: should a UN agency be entrusted with instituting and policing the initiative and collecting and disbursing the levies raised?
“There are disagreements in some areas. And you know, we have those member states that have agreed to the compromise approach … on the understanding that there is further work to do. We have … concerns that we need to take note of and then act upon. But it doesn’t mean that we’re divided.”
– Arsenio Dominguez, secretary-general, International Maritime Organization
IMO Secretary-General Arsenio Dominguez thinks so.
At DNV’s September 16 launch of its Energy Transition Outlook 2025 report, Dominguez was confident that member states at the Extraordinary Session of the IMO’s Marine Environment Protection Committee in London would approve the initiative.
During his discussion with Ørbeck-Nilssen, he downplayed doubts about the approval.
Dominguez told the audience that “there is a consensus to move forward” with the framework.
“There are disagreements in some areas. And you know, we have member states that have agreed to the compromise approach … on the understanding that there is further work to do. We have … concerns that we need to take note of and then act upon. But it doesn’t mean that we’re divided. So, I’m still confident that we will continue to move forward [in] October.”
Dominguez got the month right, but not the year.
Countries opted to delay the NZF adoption vote to October 2026, which could push its implementation down the road to 2030.
In the meantime, America’s NZF opposition is another example of its distrust of the UN.
Maritime industry analysts and financiers also question whether the IMO is the right organization for the job.
John Lightbourn, a commercial shipping financier and the founder of U.S.-based Cavalier Shipping, suggested that the NZF implementation delay “could ultimately lead to a more resilient decarbonization framework — perhaps an acknowledgment that the IMO and, in turn, the UN, might not be the right body to oversee such a measure.”
He added that waning U.S. financial support for the UN raises questions about where funds collected under the NZF would end up and “whether financial pressures could arise to such a level that IMO will feel compelled to divert funds collected under the NZF to cover shortfalls in the UN’s operating budget.”
Shipping consultant Darren Shelton agreed that delaying NZF implementation might be better in the long run.
In a LinkedIn post, the Moran Shipping Agencies sales director wrote that “the postponement, while frustrating, may be the only responsible choice.”
He maintained that it would provide “a pause long enough to ask whether the IMO’s traditional structure can still manage a borderless industry shaped by private enterprise and accelerating technology.”
Shelton added that “progress in shipping has always depended on realism … Ports, fuels, and safety rules evolve through collaboration between practitioners, not speeches by politicians.”
This article originally appeared in The Substack Shipping News.
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