- The IMO’s proposed net-zero framework is expected to incentivize wider adoption of green fuels through penalties and carbon trading, beginning in 2028.
- Despite high prices, charterers are exploring shared cost models for alternative fuels, while owners focus on cutting conventional fuel use.
- Container shipping is emerging as a key testing ground for fuel efficiency technologies amid slow uptake of alternative fuels across bulk and tanker segments.
Fresh regulation from the International Maritime Organization (IMO) is poised to give maritime decarbonization a stronger push, though high renewable fuel costs continue to challenge adoption. The sector is now seeking ways to distribute these expenses fairly across the shipping value chain.
In April, the IMO advanced a global framework for greenhouse gas emissions, aiming to drive net-zero shipping by 2050. If formally adopted in October, the rules will take effect in 2028. They include annual lifecycle GHG intensity thresholds and a carbon trading mechanism, introducing financial consequences for emissions industry-wide. According to industry leaders, this approach could significantly improve the outlook for greener fuels.
Green Fuel Gap Still Wide
As of April, the average price for very low sulfur fuel oil (VLSFO) in Singapore stood at $493.62 per metric ton—substantially lower than the $1,886.55/mtVLSFOe for fully renewable methanol. This pricing gap remains a major barrier to adoption. However, some charterers are actively exploring shared payment models to make sustainable options viable. On time-chartered vessels, where fuel costs are borne by the charterer, the economics begin to shift when regulations like the IMO’s framework are factored in. Industry stakeholders, including mining and commodities firms, have expressed optimism that low-carbon freight will become a competitive advantage over time.
Regulation Over Market Forces
Many in the industry see regulation, not efficiency or demand, as the real catalyst behind this transition. Representatives from leading operators emphasized that this energy transition is driven by policy mandates rather than market incentives.
Ammonia and hydrogen are emerging as the preferred alternatives to meet carbon targets, though significant infrastructure investments will be required. ESG-driven capital is expected to play a central role in enabling scalable fuel supply and vessel retrofits.
Owner Pushback and Market Resistance
Despite future ambitions, some vessel owners remain cautious. Several limited support from charterers when it comes to financing low-emission operations. While container operators have had some success passing on added costs, tanker and dry bulk sectors face more resistance.
Executives from major tanker firms shared concerns about the lack of client willingness to pay for greener transport. Some companies have shelved plans for alternative-fuel ships, citing uncompetitive pricing and geographic mismatch in fuel availability.
Focus on Efficiency Gains
Given the current economic barriers, much of the focus remains on improving fuel efficiency with conventional fuels. Cutting fuel burn not only reduces emissions but offers immediate financial benefits.
Charterers, under pressure from upcoming IMO and EU regulations, are placing more value on vessels with lower fuel consumption. As a result, firms like Manta Marine are seeing rising demand for optimization technologies. The company recently delivered its 500th fuel efficiency unit.
Container ships, in particular, are a promising market for such solutions due to their high fuel use and limited compatibility with wind-assisted propulsion.
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Source: S&P Global
