The IMO Net Zero Framework and the ammonia shipping investment case: a mid-2026 assessment

The relationship between regulatory certainty and capital allocation in the shipping sector is unusually direct. Unlike many industries where investment decisions can proceed ahead of regulatory frameworks — or where technology choices are sufficiently mature that the commercial case stands independently — the economics of zero-emission shipping fuels remain acutely sensitive to the policy environment. Ammonia as a marine fuel is cheaper than conventional bunker fuel only under conditions of carbon pricing, fuel intensity regulation, or both. Without those conditions, the economics of switching from fuel oil or LNG do not close for the overwhelming majority of shipowners, at any realistic near-term fuel production cost trajectory.

This is the structural context within which the IMO Net Zero Framework negotiations matter so much. Not because regulation is the only driver of ammonia shipping development — the evidence of 2025 demonstrates that engine commercialisation, bunkering demonstrations, and first vessel deliveries can proceed ahead of global regulatory adoption — but because the scale at which ammonia becomes a serious competitor to conventional fuels, rather than a niche first-mover position, depends on whether a globally binding framework enters force and at what level of ambition.

What follows is the Observatory's assessment of the regulatory landscape as it stands in June 2026, structured around three questions: what has happened, what MEPC 85 is likely to produce, and what the different outcomes mean for investment decisions being made now.

The regulatory timeline: what has actually happened

MEPC 83 — April 2025

The 83rd session of the Marine Environment Protection Committee, held in London in April 2025, produced the most significant regulatory outcome in maritime decarbonisation to date. After several years of negotiation, IMO member states agreed in principle to a Net Zero Framework comprising two core instruments: a global fuel intensity standard that sets declining greenhouse gas intensity targets for ships on an annual basis through 2035, and an economic mechanism — a carbon credit trading system — that imposes costs on non-compliant vessels and generates revenues to fund zero-emission fuel incentives and support a just and equitable transition.

The framework applies to ocean-going ships above 5,000 gross tonnage, which account for approximately 85% of international shipping's CO2 emissions. Its well-to-wake accounting methodology — measuring the full lifecycle greenhouse gas intensity of fuel from production through combustion — is directly significant for ammonia: green ammonia, produced from renewable electricity, carries a well-to-wake intensity close to zero, making it fully compliant under the proposed standard without the need for any carbon offset purchase.

The framework was not without significant criticism. Its ambition level was assessed by several analysts as insufficient to place shipping on a trajectory consistent with the IMO's own 2023 strategy goal of net-zero emissions by or around 2050. The carbon pricing mechanism's specific design — the price-setting methodology, the treatment of different fuel pathways, and the distribution of revenues — remained to be finalised in implementation guidelines. And the framework's treatment of N2O emissions from ammonia combustion — one of the critical unresolved technical questions for the sector — was not fully specified.

Nevertheless, the broad reaction from the ammonia energy industry was clear: adopt it. A hard-won multilateral compromise that creates binding demand for zero-emission fuels is better than continued voluntary commitments. The Ammonia Energy Association issued a call to action urging member states to vote for formal adoption at the extraordinary session planned for October 2025.

The extraordinary session — October 2025

The extraordinary MEPC session convened in London in October 2025 to formally adopt the draft MARPOL Annex VI amendments constituting the Net Zero Framework. Adoption through the IMO's tacit acceptance procedure requires a two-thirds majority and normally proceeds without substantive renegotiation following political agreement.

What happened instead was a significant rupture. In August 2025, the United States — under the second Trump administration — signalled opposition to the framework and indicated it might impose trade, port, and other restrictions on member states that voted in favour. When the session convened, Singapore and Saudi Arabia, supported by 57 member states including Russia, proposed adjournment by one year. The motion carried. The session ended without formal adoption, deferring the decision to a new extraordinary session to be held alongside MEPC 85.

The geopolitical dynamics behind the October adjournment are relevant to assessing what happens next. The US position was characterised by several observers as primarily ideological — consistent with a broader posture of opposition to international climate agreements — rather than a principled objection to the Net Zero Framework's specific design. Several countries that voted to adjourn stated separately that they supported the framework's objectives and voted procedurally rather than substantively. Whether those positions hold when MEPC 85 convenes in late November 2026 will determine the outcome.

MEPC 84 — April to May 2026

The 84th session of the MEPC, held in London from 27 April to 1 May 2026, was the first formal opportunity to assess the damage from the October adjournment and determine whether the Net Zero Framework could be preserved as the basis for a 2026 adoption. The outcome was qualified but genuinely positive.

Member states agreed to preserve the Net Zero Framework as the central reference point for continued negotiations — explicitly rejecting alternative proposals that were presented but "did not gather significant support". A compromise timeline was adopted for intersessional working group meetings ahead of MEPC 85, with two sessions scheduled for early September and late November 2026, followed by the resumed extraordinary session on 4 December. The IMO Secretary-General described the outcome as a "restoration of rhythm".

MEPC 84 also adopted amendments to MARPOL Annex VI designating the North-East Atlantic as a new Emission Control Area for SOx, PM, and NOx — a decision that applies to any new ammonia-fuelled vessels operating in those waters and was accompanied by guidance on compliance for non-carbon fuels. And the session approved Terms of Reference for the Fifth IMO GHG Study, which will provide the foundational emissions data for the next decade of maritime regulation.

What MEPC 84 did not do is resolve the political tensions that caused the October 2025 adjournment. Several member states, including Japan, submitted proposals that would weaken the fuel standard provisions of the framework. The US position remains unchanged. Fluidity around a portion of member states' positions persists. The IMO Secretary-General's call to "rebuild trust" is a signal that the consensus the October session fractured has not yet been fully reconstructed.

The regulatory stack: what is already in force

The focus on the IMO Net Zero Framework sometimes obscures the extent to which shipping decarbonisation regulation has already entered force through other channels. For operators trading in or to European waters — which represents a substantial proportion of global deep-sea shipping — the regulatory cost of carbon-intensive fuel is already real and growing.

EU Emissions Trading System

The EU ETS was extended to maritime transport from January 2024. In 2025, operators were required to surrender allowances covering 70% of verified emissions. From January 2026, coverage extended to 100% of CO2 emissions, and — critically for the ammonia sector — the scope was expanded to include methane (CH4) and nitrous oxide (N2O) on a CO2-equivalent basis. This last point matters significantly for ammonia combustion: the N2O emissions produced during ammonia combustion are now within the EU ETS scope, creating a direct regulatory cost for operators of ammonia-fuelled vessels if their engines produce material N2O slip.

The current EU ETS certificate price in 2026 is approximately €75 per tonne of CO2 equivalent. At full 100% coverage and the current carbon price, the additional cost imposed on a large vessel operating on conventional heavy fuel oil — with a lifecycle emissions intensity of approximately 90 grammes of CO2-equivalent per megajoule — is substantial on routes calling at EU ports. For routes between two EU ports, 100% of voyage emissions are covered; for routes between an EU port and a non-EU port, 50% are covered.

FuelEU Maritime

FuelEU Maritime entered force in January 2025 as the first well-to-wake GHG intensity regulation for shipping globally. It applies to vessels above 5,000 gross tonnes calling at EU or EEA ports, regardless of flag, setting declining GHG intensity targets — measured in grammes of CO2-equivalent per megajoule, well-to-wake — on all energy consumed on covered voyages. The first compliance cycle ran through 2025, with FuelEU Reports due by 31 March 2026 and Documents of Compliance required on board by 30 June 2026.

For ammonia specifically, FuelEU Maritime provides an RFNBO multiplier incentive: renewable ammonia qualifying as an RFNBO under EU definitions receives preferential treatment in the well-to-wake calculation, effectively counting as a negative emissions fuel for compliance purposes during the incentive period running to 2033. This creates a direct compliance-value premium for green ammonia relative to both conventional fuels and ammonia produced from non-renewable sources.

The interaction between the EU ETS, FuelEU Maritime, and the IMO Net Zero Framework — if and when it enters force — creates a layered regulatory cost structure for conventional fuel operation that compounds annually. The fleet economics of a large bulk carrier or tanker operating on conventional fuel oil in 2028 or 2030, accounting for all three regimes at modelled carbon price trajectories, look materially different from current economics. This is the commercial context in which shipowners evaluating newbuild fuel choices for delivery in 2028 to 2031 are making decisions now.

What MEPC 85 is likely to produce

The question of whether the Net Zero Framework will be formally adopted at MEPC 85 — scheduled for late November 2026, with the resumed extraordinary session on 4 December — is the most consequential single regulatory event for the ammonia shipping sector in the current period. The Observatory's assessment of the three plausible outcomes is as follows.

Scenario A: Framework adopted in substantively unchanged form

The MEPC 84 outcome — preservation of the NZF as the negotiating reference point, rejection of alternatives, positive momentum signals from the Secretary-General — is consistent with a scenario in which sufficient member states coalesce around adoption in late 2026. The US position creates a complication but not necessarily a veto: the IMO operates by two-thirds majority, not consensus, and the US was not a blocking force at MEPC 83. If the political environment shifts — including any change in US trade posture — or if sufficient developing nations are secured through the equity provisions of the framework, adoption in substantively unchanged form is achievable.

Under this scenario, the framework enters force in 2027 with phased application. The fuel intensity standard creates binding demand for zero-emission fuels from initial implementation, with the economic mechanism providing growing financial incentive from the late 2020s. The ammonia shipping investment case strengthens materially: bunkering infrastructure can be financed against contracted demand, ammonia fuel producers can secure longer-term offtake commitments from vessels with compliance obligations, and the orderbook for ammonia-fuelled vessels grows from the current ~100 units to materially larger numbers.

Scenario B: Framework adopted in weakened form

Japan's MEPC 84 submission proposed modifications to the fuel standard that would weaken its ambition. Several other member states have expressed reservations about specific provisions. Under a weakening scenario, adoption occurs in late 2026 but with a lower-ambition fuel standard, a delayed or weakened economic mechanism, or modified treatment of fuel pathways that reduces the relative advantage of green ammonia.

This is the scenario that requires most careful analysis. A weakened framework adopted on time is in some respects worse for the ammonia shipping investment case than a delayed framework that preserves the MEPC 83 text. The specific provisions around the economic mechanism's price level, the RFNBO multiplier, and the N2O accounting methodology will determine whether the framework creates the commercial differentiation that the ammonia sector requires. A framework that allows LNG to benefit from methane emission discounts, or that sets the fuel standard at a level that can be met through biofuel blending without structural fuel switching, would be insufficient.

Scenario C: Further delay or framework collapse

The risk that MEPC 85 fails to adopt the framework — through a repetition of the October 2025 extraordinary session outcome, or through an impasse in the September and November intersessional meetings — cannot be discounted. The US position has not changed. Political pressure on developing nations that have commercial interests in continuing fossil fuel trade is real. The fluidity noted at MEPC 84 is not fully resolved.

Under this scenario, the global regulatory tailwind for ammonia shipping disappears from near-term investment models. The EU regulatory stack — ETS and FuelEU Maritime — continues to provide a meaningful signal for routes touching European waters, and the RFNBO incentive structure remains intact for green ammonia qualifying for the EU market. But the global demand signal that a worldwide fuel intensity standard would provide — covering all deep-sea trades, not just those calling at EU ports — would be absent. The growth trajectory for the ammonia shipping sector slows materially, particularly in non-European trades.

What the investment case looks like in each scenario

For shipowners, the fuel choice decision for vessels ordered today with delivery in 2028 to 2030 spans a period during which the regulatory environment will be substantially clearer than it is now. The decision is therefore about positioning for a range of scenarios rather than betting on a single outcome.

Dual-fuel ammonia engine designs — now commercially available from MAN Energy Solutions, WinGD, and Wärtsilä across a range of vessel types and sizes — provide the most regulation-agnostic approach. A vessel ordered with dual-fuel ammonia capability can operate on conventional fuel if ammonia supply is delayed or uneconomic, and switch to ammonia as supply, regulatory costs, and fuel economics align. The additional capital cost of dual-fuel capability is modest relative to the optionality it preserves.

For ammonia fuel producers and bunkering infrastructure developers, the calculus is different. A bunkering terminal requires four to six years from commitment to operation and demands contracted volume before it can be financed. Under Scenario A, the contracted volume can be assembled against regulatory obligation. Under Scenario C, it can only be assembled against voluntary commitment — a much harder commercial exercise. This asymmetry explains why the bunkering infrastructure investment is more sensitive to MEPC 85's outcome than the vessel investment.

The Port of Rotterdam demonstrated in April 2025 that ship-to-ship ammonia bunkering is technically feasible and safe at operational scale. Following that demonstration, the Port moved to Port Readiness Level 6, with commercial ammonia bunkering on a project-by-project basis expected from 2026 onwards. Singapore has similarly published plans for its first Technical Reference for Ammonia Bunkering in 2026, with Keppel Infrastructure leading FEED studies for an integrated ammonia power and bunkering facility at Jurong Island. Japan has ordered a dedicated ammonia bunkering vessel for 2027 delivery. The bunkering infrastructure is developing — but its pace is directly linked to the regulatory certainty that the IMO process will or will not provide.

The N2O question: an underappreciated variable

One issue that cuts across all three regulatory scenarios but receives insufficient attention in mainstream shipping discussions is the treatment of nitrous oxide emissions from ammonia combustion in regulatory accounting frameworks. N2O is a potent greenhouse gas with a global warming potential approximately 273 times that of CO2 over a 100-year period. Ammonia combustion engines produce N2O as a byproduct of incomplete combustion and as a slip product. The actual N2O emission factor of ammonia-fuelled marine engines under real operating conditions — variable loads, cold starts, port manoeuvring — has not been fully characterised in published data from deployed vessels.

The regulatory significance of this is acute. Under the EU ETS's 2026 expansion to include N2O on a CO2-equivalent basis, a vessel with material N2O slip could face carbon costs that partially or fully offset the climate benefit of switching from fossil fuels. MEPC 84's approval of amendments to the NOx Technical Code establishing a certification basis for N2O from ammonia-fuelled engines is therefore a practically important development — it creates the regulatory framework for measuring and certifying what engines actually emit, rather than relying on theoretical assumptions.

Engine manufacturers have addressed this in design — selective catalytic reduction systems are standard on MAN ES engines, and Wärtsilä's testing has demonstrated up to 90% lifecycle greenhouse gas reductions — but the operational data from vessels at sea is limited. The first ammonia-fuelled Newcastlemax vessels, expected in commercial service from late 2026, will provide the initial real-world dataset. This data will directly inform the implementation guidelines that MEPC 85 needs to finalise, making the vessel delivery schedule and the regulatory timeline interdependent in a way that has not been widely acknowledged.

The mid-2026 position: where the sector actually stands

Stepping back from the regulatory detail, the mid-2026 position of ammonia as a marine fuel is more advanced than the political turbulence of the past eighteen months might suggest. Engines are commercially available. The first vessels are being delivered. Ship-to-ship bunkering has been demonstrated in Rotterdam. The world's first green marine ammonia bunkering operation was completed at Dalian in July 2025. Port readiness is progressing simultaneously in Rotterdam, Singapore, Japan, Australia, and the UK. The production infrastructure — led by the northeast China plants now operational at over 500,000 tonnes per year, with AM Green's Kakinada project under construction at 1 MTPA — is developing ahead of vessel demand.

The regulatory environment, for all its uncertainty, is moving in one direction. FuelEU Maritime is in force. The EU ETS now covers N2O and methane. The North-East Atlantic Emission Control Area adopted at MEPC 84 increases the regulatory pressure on vessels operating in those waters. And MEPC 85's outcome — whatever it is — will provide a degree of clarity that the sector currently lacks.

The Observatory's assessment is that the MEPC 85 decision in late November 2026 is the most important single event for the ammonia shipping sector between now and 2030. The regulatory scenarios it could produce span a wide range of outcomes for the investment case. What is not in question is the direction: zero-emission fuel regulation in shipping is a permanent feature of the landscape, the only question is the pace and ambition at which it develops. For investors, operators, and infrastructure developers making decisions now, the appropriate response is to position for the range rather than to wait for certainty that the regulatory process may be slow to provide.