Shipping Industry Decarbonization Faces Historic Decision

This week, a group of Penn faculty, students, and staff traveled to New York for Climate Week NYC to see firsthand one possible approach to decarbonization—innovation in the shipping industry. The event, co-hosted by Penn Climate, the Penn Center for Science, Sustainability, and the Media, and the University of Exeter, took place aboard the world’s first green ammonia dual-powered vessel.

Docked in Lower Manhattan, the Fortescue’s Green Pioneer looks like any other shipping vessel, but was actually retrofitted to run on green ammonia. This retrofitting process “bypasses transitional fuels like biofuels and liquefied natural gases by converting standard engines to run on a green ammonia mix,” according to technology, energy, and metals group Fortescue.

Dr. Andrew Forrest AO, the Executive Chairman and Founder of Fortescue, explained to attendees that Fortescue elected to focus on the emissions around the world that were the hardest to abate—shipping being one of them. “‘Let’s lead by example. Let’s prove that you can run a ship on ammonia,” he said. Forrest explained that when the Green Pioneer demonstrates profitability and value for shareholders, other companies will follow suit. 

At the same time that the Green Pioneer was being developed and built, the International Maritime Organization (IMO), a United Nations specialized agency, was considering a new framework to push the shipping industry towards decarbonization at the global level. In April 2025, a draft of the “IMO Net-Zero Framework” was passed, which includes mandatory emissions limits for large ocean ships and a global emissions pricing. If passed by the full IMO in October, the framework would be the first-ever global emissions price for an entire industry—and the majority of the shipping industry is on board. 

Almost 90% of global trade travels by sea, producing 3% of global greenhouse gas (GHG) emissions. The proposed regulations specifically target ships of over 5,000 gross tonnage, which account for 85% of the shipping industry’s total CO₂ emissions, according to the IMO.

The framework’s global fuel standard requires ships to reduce the amount of GHGs emitted from each unit of energy and penalizes ships that exceed these limits. It allows ships to buy credits generated by low-emissions ships in a new credit trading scheme and rewards ships that emit fewer GHGs. This proposed Net-Zero Framework would be a major step towards reaching IMO’s target of net-zero GHG emissions by 2050, and its simultaneous goal to increase the use of zero or near-zero emissions fuels in the shipping industry.

Earlier this month, almost 200 shipping companies across the globe announced support for the regulations. The International Chamber of Shipping (ICS), whose members include 80% of the global merchant fleet, also publicly backed the framework in July. The ICS warned simultaneously that smaller and medium-sized shipping companies could struggle with compliance costs, and advised governments to set standards for cleaner fuels to encourage investment in green fuel infrastructure.

Denmark-based Maersk, the largest shipping company in the world, has publicly supported the draft regulations. According to Chief Executive Officer Vincent Clerc, “decarbonizing shipping is both essential and ambitious. Bridging the cost gap between fossil fuels and low-GHG emission alternatives is critical—and it demands firm regulatory support.” Clerc notes that these measures, aligned with the 2015 Paris Agreement, will provide direction and predictability that the “shipping industry has long sought to drive decarbonization.” He emphasizes that success requires “collaboration between customers, fuel producers, shipping companies, and policymakers.” 

But not all companies agree with these proposed regulations. A group of 15 major shipping companies insists that the framework will not effectively decarbonize the industry, stating that the timeline is too tight and could cost the industry $300 billion over the next decade. The group issued a joint statement, arguing that the framework lacks interim fuel availability checkpoints and encourages premature adoption of emerging fuel technologies.

The current U.S. administration, which withdrew from the Paris Agreement via an Executive Order on January 20, 2025, seeks to prevent the draft regulations from passing in October. A joint statement by Secretary of State Marco Rubio, Secretary of Commerce Howard Lutnick, Secretary of Energy Chris Wright, and Secretary of Transportation Sean Duffy denounced the Net-Zero Framework, saying that it levies a “global carbon tax on Americans” while benefiting other countries, like China. They warn that the U.S. will “not hesitate to retaliate” against countries that support the framework. 

The U.S. depends on maritime shipping for 80% of its international trade by weight, but only builds .13% of the ships carrying that cargo. Additionally, the ships carrying goods to the U.S. are almost exclusively owned and operated by European and Asian companies. Thus, even if the U.S. votes against the framework, support for the regulations from other countries—especially those with greater control over the shipping industry—will likely allow the framework’s goals to persist. According to Witold Henisz, Vice Dean and Faculty Director of the Wharton Impact, Value, and Sustainable Business Initiative, and the Deloitte & Touche Professor of Management: “If you have a shipping fleet, you want it to be flexible and go where the business is—so you want it to go to lots of places. So as long as the rest of the world is supportive of this, there’s probably going to be continued movement.”

So, the ammonia-powered vessel boarded by Penn faculty, staff, and students in NYC is part of a broader global debate about how to decarbonize the shipping industry. Henisz notes that international policies like the IMO’s Net-Zero Framework can help accelerate adoption of emerging technologies. “The hope is by creating this policy, you accelerate investments, [and] you accelerate technological innovation—so the cost curve comes down faster,” Henisz said. “If all the companies do it together, you get to scale faster, get to build the shipping yards faster, and build all the parts much faster,” he continued.

Back on the Green Pioneer, Forrest emphasized that industry leaders know that climate change is a real threat, and must be “brave” in the face of pushback from political leaders.

The IMO will convene from October 14 to 17 to formally vote on adopting the Net-Zero Framework. If adopted, the new guidelines would take effect in 2028. 

Elea Castiglione is an undergraduate student studying philosophy, politics, & economics with a concentration in public policy and governance, and minors in sustainability and environmental management and fine arts.