Shipping industry groups and governments enter a critical round of talks at the International Maritime Organisation (IMO) this week facing deepening divisions over how to cut emissions, with no clear consensus on the design or cost of decarbonisation.
The 84th meeting of the IMO's Marine Environment Protection Committee (MEPC), being held in London, follows a previous meeting in October that ended without agreement on a global emissions framework. IMO secretary=general Arsenio Dominguez later described the outcome as a "small setback", while stressing that the sector's decarbonisation efforts remain on track.
At the centre of the dispute is the proposed net-zero framework (NZF), which includes a carbon pricing mechanism intended to accelerate the shift to low-emission fuels. Supporters see the framework as a necessary investment signal, while critics warn it would impose costs the sector is not yet equipped to absorb.
A coalition spanning shipowners, shipping companies and ship registries — including Liberia, Panama and the Marshall Islands, which together account for a large share of the global fleet — has called for alternative approaches to be considered. The group has warned that support for the NZF "in its current form" has eroded.
It is pushing for a more flexible, technology-neutral framework that would allow continued use of transitional fuels such as LNG and biofuels, while avoiding penalty-based mechanisms that could raise costs for operators and consumers.
In contrast, a separate coalition of ports, logistics firms and clean fuel developers has urged governments to adopt the NZF, arguing that further delays would undermine investment in alternative fuels and slow the energy transition.
The divergence highlights a deeper split within the shipping ecosystem. Shipowners and flag states are prioritising cost, fuel availability and operational feasibility at a time of heightened disruption in energy markets caused by the Iran war, while fuel suppliers and infrastructure developers are seeking regulatory certainty to underpin long-term investments.
EU countries are expected to continue backing a carbon levy. The US has opposed such measures, which contributed to the postponement of a decision at last year's IMO meeting.
Dominguez has also pointed to the current geopolitical environment — including disruptions to energy markets and shipping routes — as reinforcing the need to balance energy security, affordability and sustainability, a dynamic increasingly shaping the sector's approach to decarbonisation.
Industry sources aligned with developing countries within the IMO told Argus that proposals based on carbon pricing or penalty mechanisms risk distorting trade flows and placing a disproportionate burden on emerging economies. They instead favour a more "pragmatic" and technology-neutral approach that reflects differing levels of fuel availability, infrastructure and economic capacity.
The sources added that support from major flag states is procedurally significant, noting that backing from countries representing a large share of the global fleet will be critical to reaching any agreement.
The result is a negotiation that is as much about cost allocation and regulatory design as it is about climate ambition.
With no final decision expected at this week's meeting, discussions are likely to extend through the year, leaving shipowners, fuel producers and investors facing continued uncertainty over the future regulatory framework.
Shipping accounts for around 3pc of global emissions and carries roughly 80pc of world trade, underscoring the importance of the IMO process for global energy markets and supply chains.
