The Impact of IMO’s Net Zero Framework on the Bunker Market

British consultancy Maritime Strategies International (MSI) has given an early indication of the impact that the International Maritime Organization’s recently agreed Net Zero Framework will have on the bunker market.

By extending the annual fuel consumption estimates calculated for 2024 through to 2035, and applying MSI’s forecasts for bunker prices, it is possible to project the future fuel costs for conventionally-fuelled ships alongside the projected IMO penalties. By this approach, the IMO’s penalties would be equivalent to an 82% premium on top of the fleet bunker costs by 2035 – almost $100bn for the 30,000 ships tracked in MSI’s database.

From another perspective, this also highlights the opportunity for the shipping bunker market – an annual pot directed towards drop-in biofuels and low carbon alternatives that could rise to $100bn per year within the next decade.

Global Price on Carbon Emissions

Shipping is set to become the only sector in the world with the first-ever global price on carbon emissions following last months’s 83rd gathering of the Marine Environment Protection Committee at the IMO’s London headquarters.

Simply put, from 2028, shipowners who do not meet certain emission targets will have to pay a penalty, buy carbon credits or use credits purchased earlier.

While it won’t fully close the current price gap between green and fossil fuels, this first-of-its-kind regulatory framework will bring them closer in an effort to accelerate a transition to cleaner fuels.

Penalties for Non-Compliance

Ships missing the IMO emission tougher target would initially have to pay $100 annually for every tonne of CO₂ emissions that exceeds this goal.

Those falling below the weaker target would have to pay up to $380 for every tonne of emissions above this level.

Ships could pay that money to the IMO or buy credits from vessels that meet both targets by running on lower-carbon fuels.

Utilizing Revenues for Decarbonization

The IMO can use these revenues to compensate ships using low-carbon fuels, while investing in decarbonising the maritime sector, and addressing any negative impacts of the measures on food security.