Sliced: Pricing the Carbon of Marine Shipping

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The era of free atmospheric pollution must come to an end. This sentiment is no longer radical. On the contrary, it is a widely held view among environmental advocates, climate economists, and even many industry leaders. The consensus is clear – we must put a price on every ton of carbon we emit.

Yet turning that principle into global policy has proven vexingly elusive, especially in sectors as complex and globalized as maritime shipping. That’s what makes last week’s breakthrough by the International Maritime Organization (IMO) so significant. For the first time, one of the world’s most carbon-intensive industries has agreed to both cap and price its emissions – a long-awaited step that could reshape the economics of global trade and climate action.

On April 11, 2025, the IMO approved draft amendments to MARPOL Annex VI, the international treaty governing air pollution from ships. This marked the establishment of the first global framework to mandate both emissions reductions and carbon pricing for the maritime industry. Given that shipping emits approximately 858 million tonnes of CO2 per year, accounting for roughly 3% of total global emissions, the move is a turning point in the global effort to decarbonize transport and trade.

At the heart of the framework is a two-tier carbon pricing mechanism that assigns a cost to exceeding emissions thresholds. Starting in 2028, ships will pay between $100 and $380 per tonne of CO2, depending on whether they meet greenhouse gas fuel intensity (GFI) targets. Vessels are evaluated against two benchmarks – a Base Target, which requires a 4% reduction in emissions intensity in 2028, rising to 30% by 2035; and a more stringent Direct Compliance Target, which demands a 17% reduction by 2028 and 43% by 2035. Ships that exceed these limits can offset their emissions by purchasing “remedial units” from cleaner ships or by contributing to the newly established IMO Net-Zero Fund.

In parallel, the new amendments introduce mandatory fuel standards designed to reduce lifecycle (well-to-wake) emissions. Ships must transition to cleaner fuels such as green hydrogen, ammonia, or sustainable biofuels to meet the IMO’s long-term goals. These include a 40% reduction in carbon intensity by 2030 (relative to 2008 levels), 70% by 2040, and net-zero emissions by 2050. The transition to these fuels will demand significant investments in new technologies, retrofitting existing vessels, and building out fueling infrastructure.

The IMO Net-Zero Fund is expected to raise $10–13 billion annually from emissions fees. The fund will support incentives for low-emission vessels, research and development of green fuels, and climate resilience projects in vulnerable economies. A key focus will be assisting Small Island Developing States (SIDS) and Least Developed Countries (LDCs), many of which are disproportionately impacted by climate change and rely heavily on maritime trade for their economies.

Implementation will roll out in phases, but it’s important to note that nothing is yet set in stone.

The rules still need to pass the potentially massive obstacle of formal adoption, which is scheduled for a session of the IMO’s Marine Environment Protection Committee (MEPC) in October 2025. If adopted, detailed implementation guidelines will be finalized in spring 2026, and the rules will come into force in 2027, applying to ships over 5,000 gross tonnage — a group responsible for about 85% of maritime emissions.

Still, the deal is not without controversy. The United States withdrew from negotiations, labeling the carbon pricing framework “blatantly unfair” and citing concerns over trade disruptions. Meanwhile, climate analysts warn that the measures may deliver only an 8% emissions cut by 2030, far short of the IMO’s stated 20% goal. Critics, particularly Pacific island nations, have argued the framework relies too heavily on emissions trading and not enough on direct taxation, which they view as a more effective and equitable approach.

Despite these criticisms, the IMO’s carbon pricing agreement marks a historic milestone. It sets a precedent for regulating emissions in one of the most complex and internationalized sectors of the global economy. While much work remains to strengthen the framework and ensure it delivers the emissions cuts the planet needs, the shipping industry has finally set sail toward a cleaner, more accountable future.

We’re proud to share that our CEO, Sean Penrith, will be a panelist at Impact Investments at Scale – A Key Conversation during FAIS 2025, taking place 27–28 May in London.

As the world faces a pressing need to bridge the multibillion-dollar global nature finance gap, this panel will explore how institutional capital can be mobilized to support projects that are climate-resilient, socially inclusive, and economically viable. The discussion will dive into scalable impact models, the benefits of investing this way, how to measure and maximize impact, and the critical importance of community engagement.

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