A landmark study from the UCL Shipping and Oceans Research Group and RMI has found that the inclusion of GHG pricing in the International Maritime Organization’s (IMO’s) policy framework will be critical in the shipping industry achieving a cost-effective energy transition.
The analysis shows that there are multiple benefits from GHG pricing, including a less volatile and more investable fuel market, improving the availability of compliant solutions, protecting countries from risks of policy-driven economic shocks, enabling early adoption of low-emissions fuels, and creating the revenue streams crucial for contributing to a just and equitable transition.
The results are publishing just as the IMO is about to reconvene at the 84th session of the Marine Environment Protection Committee (MEPC 84) to consider how to move forward policy ambitions after the decision to adopt the Net Zero Framework (NZF), a global policy framework for the shipping sector, was postponed in October 2025. The in-depth research shows that alternative policy architecture proposals removing GHG pricing and focusing on a technical-only solution will have negative impacts on the sector’s transition.
The findings come from a new fleet evolution modelling (FEM) framework from the UCL Shipping and Oceans Research Group and RMI — the first of its kind to explicitly model several shipowner behaviours, including ‘peer influence’ on how they perceive different fuel options. The modelling was used to evaluate both the NZF, approved in principle at MEPC 83 last year, along with other policy architectures that have been proposed as a way forwards in the event the negotiations on architecture are reopened. The results reveal critical differences in the ability to invest in the transition for early adopters and fuel producers based on policy choices.
Dr Marie Fricaudet, Senior Research Fellow at UCL Shipping and Oceans Research Group said: “This research fills a critical gap in the evidence base. By modelling how mass market shipowners actually make decisions — cautiously, with limited foresight, and with one eye on their competitors — we get a fundamentally different picture of what different policy architectures and GHG pricing will deliver.”
What the fleet evolution model reveals for policy design
- Applied to five foreseeable IMO policy architectures, the model produces findings that differ meaningfully from existing approaches:
- Regional policy alone cannot drive global fleet transition. A ‘no IMO, EU only’ scenario shows no evidence of driving energy transition in the global fleet. Most vessels have limited exposure to EU regulation, so those policies alone don’t change investment decisions — reinforcing the imperative for a robust global IMO measure.
- The transition will start slowly — then accelerate quickly. Most shipowners will wait until a critical mass adopts new fuels. However, once that tipping point is reached, including peer effects can drive rapid, self-reinforcing shifts that can put pressure on fuel supply chains. Policymakers should plan for both the slow-start to transition and the acceleration.
- Policy design determines investability. Only architectures combining a GHG price, a capped SU market, and a reward mechanism for zero- and near-zero (ZNZ) fuels create the conditions for an investable transition. Uncapped SU supply, as arises under a technical-only measure, generates price volatility that deters the investment the policy is meant to unlock.
- Early adopter support is critical, not optional. Mass market actors will not move until early adopters have demonstrated a technology pathway. Without reward mechanisms to incentivise early ZNZ uptake, first movers won’t invest. Failing to support early adopters in policy design carries significant transition risk.
- Price stability requires deliberate design. Even under the NZF, credit prices could become unstable if too many rewards or multipliers create a surplus of units too quickly. If governments then step in to keep prices artificially low — below the real cost of compliance — it would weaken the business case for investing in clean fuels and disrupt the very markets the policy is meant to support.
- Fuel availability is as decisive as fuel cost. Supply constraints can slow adoption even when alternative fuels are economically viable. Rapid demand surges — particularly for ammonia in high biofuel price scenarios — may outpace production, Strong revenue support for early fuel investment is critical to avoid these bottlenecks.
Modelling innovations in this study
Existing models used in IMO policy debates have typically assumed shipowners have perfect foresight and minimise costs rationally, and that surplus unit (SU) prices are fixed or modelled independently of fleet behaviour. This research demonstrates that neither holds, and addresses both through two key innovations:
Realistic mass market behaviour. Drawing on interviews with 16 shipowners, the model distinguishes early adopters from mass market actors (95% of the fleet). Most shipowners are modelled as risk-averse, with shorter planning horizons and a tendency to follow others — investing most confidently when around 20% of the fleet has done so. This produces non-linear adoption dynamics and tipping points that conventional models often miss.
Dynamic SU market modelling. Rather than assuming a fixed SU price, the model calculates SU supply and demand across the fleet at each time step to determine a market price. This creates a feedback loop — investment decisions today affect SU prices tomorrow, which in turn shape future investment — mirroring how the NZF and other architectures would operate in practice.
Ruosida Lin, Modelling & Analytics Lead at RMI climate aligned industry program shipping team said: “By linking individual shipowner behaviour to sector-wide dynamics, this research offers a bottom-up view of the shipping transition. It shows how cautious, competitive decisions shape market outcomes and policy effectiveness. We see this as an advancement over traditional modelling and look forward to building on this further.”
Implications for the NZF architecture
The analysis offers a direct comparative assessment of the four candidate IMO policy architectures:
The NZF ‘as is’ contains the key structural features needed for an investable transition: a capped SU market and a reward mechanism. Careful design of reward rates, multipliers and review mechanisms will be needed to manage SU price volatility.
A levy combined with a Greenhouse Gas Fuel Intensity (GFI) limit offers the same structural features with a simpler, more predictable revenue architecture and greater flexibility to fund a just and equitable transition.
A single-tier GFI can provide a capped SU market but introduces risks of SU price instability if the regulatory unit (RU) price must balance both compliance incentives and revenue generation simultaneously.
A technical-only measure delivers none of the above. It leaves the SU market uncapped, provides no revenue for rewards or just transition, and — on the evidence of this modelling — carries the highest transition risk and cost of any architecture considered.
A well-designed global framework that reflects real-world investment behaviour, and that rewards early action and ensures price stability, can unlock the momentum needed to scale clean fuels across the shipping sector. As the IMO moves toward finalizing its Net Zero Framework, the right policy decisions can help the sector achieve a timely, cost-effective, just and equitable transition.
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