Shipping companies in Cyprus and Greece could face a radically different carbon bill depending on which of four rival proposals prevails at the International Maritime Organisation (IMO), with the options ranging from no direct greenhouse gas charge to a Tier 1 compliance price of $300 per tonne of CO2 equivalent. 

The outcome directly concerns Cyprus’ shipmanagement cluster and the Greek-owned fleet, affecting operating costs, charter agreements, investment in cleaner fuels and decisions over whether older vessels remain commercially viable. 

It also comes as companies operating through European ports are already paying under the EU Emissions Trading System and complying with FuelEU Maritime, creating fears that a future IMO mechanism could expose them to overlapping charges for the same emissions. 

At the centre of the negotiations is a question with a very expensive answer, how much should a ship pay for its pollution, and who will ultimately pick up the bill? 

The proposals now heading into the next round of talks could take the IMO framework in sharply different directions. 

Approved in principle in April 2025 but not yet legally binding, the framework combines a global marine fuel standard with an emissions-pricing mechanism. It would apply to ocean-going ships above 5,000 gross tonnes, which account for more than 85 per cent of the international shipping emissions covered by the IMO. 

At the strictest end of the debate is Tuvalu, which wants the price of Tier 1 remedial units tripled from $100 to $300 per tonne of CO2e, while retaining the Tier 2 price at $380. 

The Pacific island state is also proposing a 100 per cent direct-compliance threshold from 2029 to 2035 and the removal of surplus units. As a result, ships exceeding the required greenhouse gas fuel-intensity limits would have to make payments into the IMO Net-Zero Fund rather than purchase credits from better-performing vessels. 

Tuvalu’s proposal would keep the base fuel-intensity targets but remove the 2028 step, beginning the trajectory with a 6 per cent reduction in 2029. In practice, the plan would place a price on all emissions from that year and produce the largest pool of revenue for cleaner fuels and support for vulnerable developing countries. 

However, it would also result in the highest initial increase in transport costs, particularly for vessels unable to obtain suitable low or zero-emission fuels at a commercially workable price. 

Liberia, whose flag is used by a large number of Greek-owned ships, is pushing in almost the opposite direction. 

Its proposal, building on an earlier submission with Argentina and Panama, would remove direct greenhouse gas pricing and the purchase of remedial units. Instead, compliance would depend on tradable surplus units that shipping companies could transfer, bank or borrow. 

Fuel-intensity targets would also be determined according to the cost, availability and market share of lower-emission fuels, with the trajectory recalculated every five years rather than tied directly to the checkpoints in the IMO’s 2023 greenhouse gas strategy. 

The argument is that ships should not face heavy penalties when the cleaner fuels required for compliance are still unavailable in sufficient quantities or at competitive prices. 

However, critics warn that relying heavily on traded credits could expose owners to volatile compliance costs and weaken the stable price signal needed to support investment in genuinely zero or near-zero-emission fuels. Removing payments into the Net-Zero Fund would also leave no clear mechanism for directing revenue towards developing countries affected by higher transport costs. 

Between the two sides is Brazil, which is proposing a slower start followed by stricter requirements later. 

Its plan would ease compliance during 2029 and 2030 by aligning the base and direct-compliance targets, before returning to the previously agreed trajectory from 2031. To compensate for the softer beginning, Brazil wants the longer-term base target tightened to 70 per cent in 2041, compared with 65 per cent in 2040 under the existing framework. 

Meanwhile, Australia, Canada, South Africa and the United Kingdom are seeking to retain most of the original system, including its fuel-intensity targets and compliance prices, while adjusting the implementation dates to reflect the one-year delay in negotiations. 

For Cyprus and Greek shipping companies, these differences go far beyond regulatory language. 

A high global carbon price could change the financial picture of an individual vessel. Older ships with heavier fuel consumption may become considerably more expensive to operate and less attractive to charterers, while newer and more efficient tonnage could secure a stronger commercial advantage. 

The final decision will therefore influence investments worth hundreds of millions of dollars that are being considered today. Shipowners must decide whether new vessels should be equipped with dual-fuel engines, which alternative fuels they should be capable of using and whether retrofits to existing ships will deliver sufficient returns. 

The difficulty is that these decisions must be taken before companies know which fuel will become widely available, how much it will cost or how heavily conventional emissions will eventually be priced. 

There is also the question of who pays. Under time-charter agreements, the charterer often controls the ship’s route, speed and fuel consumption, while responsibility for regulatory compliance may remain with the shipping company. 

As carbon costs increase, charterparties will need to define more clearly who monitors emissions, purchases compliance units and bears the financial consequences when a vessel exceeds the required limits. 

For companies trading through Europe, the calculation becomes even more complicated. The EU ETS already covers 100 per cent of emissions from voyages between EU ports and 50 per cent from voyages beginning or ending outside the bloc. FuelEU Maritime separately requires a gradual reduction in the greenhouse gas intensity of the energy used on board. 

If a global IMO mechanism is introduced without a clear reconciliation system, vessels could face different calculations, reporting requirements and liabilities for overlapping emissions. 

Philippos Ioulianou, managing director of Cyprus-based EmissionLink, said, “Shipping should not pay twice for the same tonne of emissions. If the EU ETS operates alongside a future IMO carbon-pricing mechanism, there must be an automatic and transparent way to recognise payments and reconcile liabilities.” 

EmissionLink has also called for at least 50 per cent of the EU ETS revenue generated by shipping to be reinvested in sustainable fuels, port infrastructure, vessel retrofits and credible energy-efficiency technologies. 

The next stage of the debate will take place during intersessional meetings on September 1 – 4 and November 23 – 27, before MEPC 85 meets from November 30 to December 3. 

The extraordinary session adjourned in 2025 is then expected to resume on December 4, subject to confirmation by MEPC 85, according to the IMO timetable.