China seeks green fuel incentives under IMO shipping emissions framework

China has renewed its call for incentives to make zero and near-zero emission marine fuels more commercially competitive, ahead of International Maritime Organization (IMO) negotiations in London in November 2026. Its proposal would give eligible fuels additional weight in regulatory compliance calculations, helping shipowners offset their higher costs.

The submission, ISWG-GHG 23/3/3, also acknowledges a trade-off: incentives that improve compliance economics could allow ships to meet regulatory targets while achieving smaller reductions in actual emissions. China is therefore seeking careful calibration of the mechanism within the proposed IMO Net-Zero Framework.

How would the green fuel incentives work?

The proposed mechanism uses a multiplier to increase the compliance value of zero and near-zero emission (ZNZ) fuels. Indicative values start at approximately 1.95 in 2029 and decline to 1.10 in 2035, reflecting an anticipated narrowing of the fuel cost gap.

Under the approach, eligible fuel energy receives additional weighting when calculating a vessel’s greenhouse gas (GHG) fuel intensity. Actual lifecycle emissions remain in the calculation, but the increased energy denominator lowers the reported intensity and can generate additional compliance surplus.

The Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping explains that this would provide an automatic incentive through the compliance calculation, without depending on the collection and subsequent distribution of financial rewards.

What does the emissions modelling show?

China’s modelling indicates that multiplier-based compliance could produce annual well-to-wake emissions between 2.7% and 8.2% above a reference scenario using conventional fuel and biodiesel.

The difference arises because enhanced regulatory credit can allow a vessel to achieve the same compliance target with a smaller proportion of alternative fuel. Increasing the multiplier therefore does not necessarily increase physical consumption of ZNZ fuels.

The submission calls for the incentive to be reviewed against fuel prices, emissions performance and compliance requirements, balancing commercial support with measurable environmental progress. These are modelled outcomes, rather than measurements from an operational scheme.

Where does the proposal fit within IMO rules?

The draft IMO Net-Zero Framework combines a global marine fuel standard with a GHG pricing mechanism. It measures emissions per unit of energy across a fuel’s lifecycle, including production and use aboard ships.

This well-to-wake approach includes carbon dioxide, methane and nitrous oxide. It is intended to capture emissions beyond those released directly from a vessel’s exhaust.

The IMO approved the draft framework in April 2025. However, the extraordinary session convened for formal adoption in October 2025 was adjourned until 2026. The framework has therefore not become binding international regulation, and China’s multiplier remains a proposal under negotiation.

What remains unresolved on fuel rewards?

September discussions showed broad support for a dedicated ZNZ incentive, but governments have yet to agree whether support should take the form of monetary payments, calculation-based rewards or a combination.

The zero-carbon shipping centre identifies potential drawbacks to multipliers, including a larger supply of compliance surplus units that could weaken their market value. It also notes that the incremental compliance benefit diminishes as a ship increases its ZNZ fuel share, while fuel expenditure continues to rise.

When will negotiations continue?

The IMO’s 23rd Intersessional Working Group on Reduction of GHG Emissions from Ships is scheduled for 23–27 November 2026. The Marine Environment Protection Committee’s 85th session follows from 30 November to 3 December.

The adjourned extraordinary session is scheduled to resume on 4 December, subject to discussions at the committee meeting. These negotiations will address outstanding choices on the framework and its implementation.