Cyprus shipping caught between investment decisions and unfinished IMO rules

Cyprus shipping faces another period of uncertainty after four days of negotiations at the International Maritime Organisation (IMO) ended without an agreed new text for the global rules intended to steer international shipping towards net zero. The 22nd session of the IMO working group, held in London from September 1 to 4, brought together nearly 1,200 participants, both in person and online, as governments attempted to narrow remaining differences over the organisation’s Net-Zero Framework. The meeting did not abandon the framework. However, it also failed to resolve the concerns that have prevented its final adoption, leaving some of the most commercially important details for another negotiating round in November. According to the IMO, discussions focused on proposals submitted to MEPC 84 and 85, previous working-group sessions and ISWG-GHG 22 itself, all aimed at addressing concerns surrounding the proposed amendments to MARPOL Annex VI. Following the talks, working-group chairman Sveinung Oftedal observed what the IMO described as a “genuine willingness” among participants to make further progress and work towards presenting a text to MEPC 85 capable of reflecting greater convergence. Delegations were consequently invited to continue consultations between meetings and submit concrete proposals addressing the remaining concerns, with the IMO seeking what it described as “timely adoption and effective implementation”. The September meeting forms part of a much longer attempt to turn the IMO’s climate ambitions into binding global shipping rules. Under the 2023 IMO GHG Strategy, international shipping is expected to reach net-zero greenhouse gas emissions by or around 2050. The strategy also calls for total annual greenhouse gas emissions from international shipping to fall by at least 20 per cent by 2030, while striving for 30 per cent, compared with 2008 levels. By 2040, the reduction should reach at least 70 per cent, while striving for 80 per cent. At the same time, zero or near-zero greenhouse gas emission technologies, fuels and energy sources should represent at least 5 per cent of shipping’s energy use by 2030, with the IMO striving for 10 per cent. Turning those ambitions into rules has proved considerably more difficult. The IMO Net-Zero Framework was approved by MEPC 83 in April 2025 as a proposed new Chapter 5 of MARPOL Annex VI. It contains two closely connected elements. The first is a global marine fuel standard requiring ships progressively to reduce the greenhouse gas intensity of the energy they use. The second is a global GHG emissions pricing mechanism, intended to create a financial cost for ships that fail to meet the required levels while rewarding cleaner alternatives. The rules are intended to apply to oceangoing ships above 5,000 gross tonnage, a group responsible for more than 85 per cent of global shipping emissions, according to the IMO. However, the framework has yet to complete the process required for it to become legally binding. It had been scheduled for adoption during the second extraordinary session of the Marine Environment Protection Committee in October 2025. Instead, the IMO adjourned that session for a year, allowing member states more time to work towards consensus. The process continued at MEPC 84 earlier this year, when member states agreed to hold two additional intersessional meetings, the first in September and the second in November, in an attempt to address outstanding concerns before MEPC 85. The September round has now ended without that work being completed. Moreover, the disagreement is not limited to the broad political architecture of the framework. Detailed rules still have to explain how the system will work in practice. Previous IMO working-group discussions have covered guidelines for fuel certification, zero and near-zero emission fuels and their rewards, operation of the IMO Net-Zero Fund, calculation of ships’ GHG Fuel Intensity, compliance options and the planned IMO GFI Registry. Those details matter directly to shipowners because they will determine not simply whether a vessel complies, but also how particular fuels and technologies are treated financially under the system. At ISWG-GHG 22, however, the group managed only a preliminary exchange of views on the guidelines needed for uniform and effective implementation. With time running out, all documents submitted under the item were deferred to ISWG-GHG 23, scheduled for November 23 to 27. Another important piece of the regulatory puzzle was also postponed. The group was unable to consider documents concerning the IMO’s Life Cycle GHG Assessment framework, again because of time constraints. These will now be considered in November alongside the expected report from the fourth meeting of the GESAMP-LCA Working Group. The life-cycle rules are particularly significant for investment decisions because the IMO intends emissions to be considered on a well-to-wake basis. That means the greenhouse gas impact of a fuel is not limited to what comes out of a ship’s exhaust. Emissions associated with producing and supplying the fuel are also taken into account, potentially changing the relative attractiveness of fuels that may appear cleaner when only their use on board is considered. For shipowners deciding between conventional fuels, biofuels, LNG, methanol, ammonia and other emerging alternatives, the final methodology can therefore have significant commercial consequences. The same applies to the financial mechanism contained in the framework. Under the draft MARPOL amendments, initial remedial unit prices for the 2028-2030 reporting periods were set at $100 per tonne of CO₂ equivalent for Tier 1 and $380 per tonne for Tier 2, calculated on a well-to-wake basis. Ships performing above the required levels may generate surplus units, while ships failing to meet their targets would have to address their compliance deficits through available surplus units or remedial units linked to payments into the Net-Zero Fund. For Cyprus, the uncertainty surrounding those details is particularly relevant. According to the Shipping Deputy Ministry, Cyprus has the third-largest fleet in Europe and the 11th largest globally, while companies operating from the island manage more than 20 per cent of the world’s third-party managed fleet. Limassol alone hosts more than 200 shipping and shipping-related companies, ranging from shipowners and shipmanagers to insurers, financiers, brokers and maritime technology providers. The Cyprus Shipping Chamber (CSC) has consequently been among those calling for a global solution capable of giving international shipping a common regulatory framework. Following MEPC 84 in May, the Chamber welcomed the decision to continue intensive negotiations, while stressing that the eventual system needs to be practical, effective and globally applicable. It also emphasised the importance of a solution capable of maintaining a level playing field for international shipping while meeting environmental objectives. Chamber director general Alexandros Josephides attended MEPC 84 as part of the Shipping Deputy Ministry delegation, with the Chamber saying it remained committed to supporting sustainable but realistic solutions for the sector. For Cyprus-based shipowners and managers, the concern is that major investment decisions cannot simply be postponed until every part of the IMO framework has been settled. A vessel ordered today for delivery towards the end of the decade could remain in service well beyond 2050. Decisions over engines, fuel capability, retrofitting possibilities and other technologies must therefore be made while the financial treatment of those choices under the future global system is still being finalised. A fuel or propulsion option that appears commercially attractive today could become more expensive once its full life-cycle emissions are calculated. Conversely, technologies carrying a higher initial cost could become more attractive if the eventual rules give them access to rewards or lower compliance costs. There is also a broader issue for shipping companies attempting to plan fleets over several decades. Once the framework is adopted, MARPOL procedures mean the regulations would be expected to enter into force 16 months later, leaving a relatively short period between regulatory certainty and practical application. The next opportunity to close the remaining gaps will come at ISWG-GHG 23 from November 23 to 27. That meeting will be followed almost immediately by MEPC 85 from November 30 to December 3, when member states will again consider the future of the framework. The second extraordinary session of MEPC, originally adjourned in October 2025, is then scheduled to resume on December 4, subject to the discussions and decisions taken at MEPC 85. Until then, the IMO Net-Zero Framework remains very much alive. But for Cyprus shipping, as for the wider international industry, the central difficulty remains unchanged: ships are being designed, financed and ordered now, while some of the rules that will determine how those vessels operate and what they cost over their lifetime are still being negotiated.