Last week, the International Maritime Organization (IMO) took a landmark step toward decarbonising the global shipping sector by endorsing a draft Net-Zero Framework that introduces the world’s first industry-wide carbon pricing mechanism. Though not a full-scale carbon tax, this new system still marks a turning point, sending a strong market signal in favour of low-emission marine fuels like green methanol. At Birra, we see this as validation of our mission to decarbonise shipping with scalable, cost-competitive green fuels.

What was agreed at MEPC 83

The declining baseline and credit system agreed to by the Marine Environment Protection Committee (MEPC) sets a tiered fee structure that will charge vessels a Remedial Unit (RU) fee by comparing its emissions intensity with the 2008 baseline (93.3 gCO₂e/MJ):

Tier 1 Base Target:

Fee: $US 380/tCO₂e emitted above a base target.
Starts: 4% below baseline in 2028
Grows to: 30% below baseline by 2035.

Tier 2 Compliance Target:

Fee: $US 100/tCO₂e emitted between the base and compliance target
Starts: 17% below baseline in 2028
Grows to: 43% below baseline by 2035.

Reduction targets beyond 2035 will be agreed by 2032, with fees potentially adjusted from 2030.

Vessels with emissions intensities below the compliance target will generate Surplus Units (SU) that can be traded as a revenue source. Additionally, Zero or Near-Zero (ZNZ) fuels with an emission intensity of less than 19 gCO₂e/MJ (and 14 gCO₂e/MJ from 2035), will be awarded a yet to be determined amount from the RU amounts collected. Analysts expect the reward to initially be lower than a RU (i.e. less than $US 100/tCO₂e).

With all ships over 5,000 gross tonnage, approximately 500 Twenty-foot Equivalent Unit (TEU) —responsible for 85% of international maritime emissions—included, this will apply to virtually all container ships. Given the current backlog of clean ship orders, expect to see a rapid boost in orders.

Our take: Why this benefits green methanol

This policy represents far more than a carbon penalty. It creates a new economic ecosystem for clean fuels, where lower emissions intensity directly translates to cost advantages and revenue.

At Birra, we conducted scenario modelling of fuel prices for a 10,000 TEU vessel using data from Global Center for Maritime Decarbonisation[1] and DNV’s Alternative Fuel Insights platform[2]. We also assumed sale of SUs at $US 100/tCO₂e and a ZNZ fuel reward of $US 50/tCO₂e. Under these conditions, our green methanol is cost-competitive with fossil fuels from the scheme’s launch in 2028.

Fuel Oil, being the benchmark, is penalised from scheme inception, inflating 61% by 2035. Biofuels and LNG have similar overall performance inflating 30-35%, until the Tier 2 RU is triggered for the latter, likely in the early 2030s. Biofuel carbon intensity is very sensitive to feedstock and land use changes, however would likely take 10 years to trigger a Tier 2 RU.

Thus, some have argued the Net-Zero Framework may lead to perverse land use changes and food crop competition because cheaper biofuels are not sufficiently penalised. We disagree. Greener fuels do generate significant revenue from the scheme, however this is unfortunately dwarfed by current high production costs – this is where innovation must happen. Our single-step production allows for green methanol to undercut fossil fuels by 2028.

By 2035, biomethanol produced using existing technology reduces to approximately twice that of heavy fuel oil on an energy equivalent basis. Green ammonia is more than 2.5x, despite receiving a slightly higher revenue stream from the scheme. Thus, we believe the Framework favours investment in methanol infrastructure, without even considering environmental, safety and regulatory barriers to ammonia.

As a side note, the European emissions control area has been expanded, which will further push toward green fuels that can comply with strict sulfur dioxide and particulate matter limits.

Looking Ahead

With final ratification expected at MEPC 84 in October 2025, the industry is moving rapidly toward implementation. The IMO's Net-Zero Framework is set to be codified in MARPOL Annex VI which is already ratified by countries covering 97% of the world’s shipping tonnage. Whilst the United States walked away from the MEPC 83 negotiations, it remains a signatory to MARPOL Annex VI, meaning the Framework will still apply to US-flagged vessels, unless loopholes emerge. As the framework evolves, Birra’s green methanol is ideally positioned—not just to comply, but to lead the transition to zero-carbon shipping.

[1] https://gcformd.cldy.asia/calculator/

[2] https://afi.dnv.com/statistics/

IMO Carbon Pricing

Progress Update March 2025