- Fossil Fuels Likely to Remain Dominant Amid Regulatory Uncertainty.
- Industry Warns Delay Could Slow Maritime Low-Carbon Transition.
- LNG Gains Competitiveness as Green Fuel Investment Faces Uncertainty.
Fossil fuels might still be the go-to energy source for shipping, especially since the International Maritime Organisation (IMO) is facing delays with its new decarbonization rules, as noted by industry insiders. Advocates of the Net-Zero Framework (NZF) were counting on these regulations to speed up the transition from oil-based fuels to greener options like methanol and ammonia, reports S&P Global.
Framework Adoption Postponed
Just earlier this month, member states of the IMO decided to push back the adoption of the NZF by a year, which means we might not see it implemented until the end of this decade—or even longer. Thomas Blomgren-Hansen, Chief Advisor at the Danish Maritime Authority, said: “The delay will in reality lead to a reopening of text because a revision of dates is required.” “That could lead a complete renegotiation, putting the whole deal at risk [and] delaying the transition for an even longer period.”
According to S&P Global Commodity Insights, oil-based fuels made up a whopping 97% of the global bunker mix in 2024, with LNG trailing at just 2%. The new IMO regulation aims to impose a cost on the greenhouse gas emissions from bunker fuels starting in 2028, which should help close the price gap between traditional and sustainable fuels.
Industry Reaction and Concerns
This delay has thrown a wrench into the plans of shipping and bunker companies that are trying to make a low-carbon shift, although some are optimistic that it gives them more time to refine the framework’s design. Jan Dieleman, Cargill’s shipping head, said: “After what happened… I can understand why people don’t want to double down on net-zero fuels.”
There’s been pushback against the framework from the US, Russia, Venezuela, and several Middle Eastern oil producers, who argue that it imposes hefty carbon costs and strict decarbonization rules. Saudi Arabia has suggested a postponement, with backing from China, India, and key flag states like Panama and Liberia. Even with an EU mandate to adopt the regulation, Greece and Cyprus abstained from the postponement vote. Greece’s Minister of Shipping, Vassilis Kikilias, said the framework has “unfair treatment of LNG fuel” and would likely cause serious disruptions in global trade and lead to inflation.
Regulatory and Implementation Outlook
IMO Secretary-General Arsenio Dominguez emphasised: “The framework is in place, what we need to do is to develop the guideline. What we paused is the adoption itself, not further work.” DNV estimates LNG could become a non-compliant fuel by the end of this decade, though member states could extend its use with a low default emissions factor.
Lars Jensen, CEO of Vespucci Maritime, noted: “LNG just got another improvement in its relative competitiveness versus the fully green fuels,” citing increased uncertainty over the investment case for green fuel production due to the framework’s delay.
LNG as a Transitional Fuel
LNG can reduce emissions by 20%-30% compared with oil-based fuels. Supporters argue LNG-capable ships can later switch to bio-LNG or e-LNG for deep decarbonization.
SEA-LNG, an industry association promoting marine LNG, stated: “The methane pathway is currently the only practical, realistic and scalable solution to the decarbonization of the global maritime industry.”
The association plans to continue scientific studies to support the IMO’s work. Rystad Energy estimates the well-to-tank GHG intensity of LNG bunker fell from 18.8 g CO2e/MJ in 2019 to 13.9 g CO2e/MJ in 2024.
Geopolitics Overshadowing Regulation
Some industry participants warn that the adoption of the IMO regulation may depend more on geopolitical factors than content.
Maria Skipper Schwenn, Director of Public Affairs at Bunker Holding, said: “The world we’re living in today is very different from the one just a few years ago. I think it would be fair to say that the opponents’ reasoning had very little to do with shipping.” The combination of regulatory delays, political opposition, and high fossil fuel reliance continues to cloud the outlook for a low-carbon maritime transition.
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Source: S&P Global
