Introduction to IMO Global Fuel Standard
The IMO’s Marine Environment Protection Committee (MEPC 83) has adopted in draft form the IMO Net-Zero Framework. This introduces a GHG global fuel standard (GFS) that will apply to all ships above 5,000 GT engaged in international trade. The regulation will enter into force in 2028 subject to a successful final vote in October 2025.
Similarly to the FuelEU, the scheme sets annual GHG intensity limits for marine fuels on a well-to-wake basis, measured in gCO2eq/MJ. There are two main compliance thresholds:
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Base GFI Target – the minimum performance level vessels must meet.
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Direct Compliance Target – a more ambitious target that, if exceeded, unlocks tradable surplus units (SUs).
If a vessel exceeds either target, it must purchase Remedial Units (RUs).
The vessel must purchase Tier 1 RUs (priced at $100/tCO2eq) if its annual fuel intensity meets the Base GFI target but fails to meet the Direct Compliance Target.
The vessel must purchase Tier 2 RUs (priced at $380/tCO2eq) if its annual fuel intensity fails to meet the Base GFI target.
Note: These prices apply only to emissions above the target, not to total ship emissions.
Ships that exceed the Direct Compliance Target generate Surplus Units. These can be sold to those in Tier 2 deficit, pooled amongst the fleet, or banked for up two years.
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​The IMO Global Fuel Standard (GFS), as shown in the chart at the bottom of the page, will impose increasingly steep penalties per ton of VLSFO used from 2028 to 2035, rising from $139/t in 2028 to $510/t by 2035.
These penalties are designed to push shipowners toward cleaner fuels such as biofuel blends like B30. However, the economic incentives may not align as clearly as intended.
The price difference between B30 and VLSFO is widening, already reaching a premium of over $300/t as of early 2025.
Since the GFS penalty is fixed annually, it effectively creates a price ceiling: if the cost of using B30 exceeds the penalty by a significant margin, shipowners and charterers are financially better off simply paying the fine and continuing with conventional VLSFO.
Based on current VLSFO prices, the threshold at which it becomes cheaper to pay the penalty rather than switch to B30 is already here.
This dynamic raises a question: will the Global Fuel Standard unintentionally act as a price ceiling for marine biofuels?
If so, this could suppress demand in shipping and redirect available biofuel supply toward industries with greater willingness or regulatory pressure to pay higher prices—such as aviation or heavy industry, where decarbonisation pathways are more limited.
In short, without stronger alignment between biofuel supply economics and the structure of the GFS penalties, we risk creating a perverse incentive: penalising shipping without actually accelerating biofuel uptake.
