- Biofuels Gain Traction as Shipping Seeks Compliance Path.
- Global Fleet Faces Pressure to Adopt Multi-Fuel Engines.
- Only 1% of New Ships Designed for Ammonia or LPG.
According to Wärtsilä CEO Håkan Agnevall, oil-based bunker costs are set to double in the next decade. This prediction comes as the International Maritime Organisation (IMO) prepares to enforce stringent greenhouse gas (GHG) emission regulations for the shipping sector, reports S&P Global.
IMO’s Carbon Framework for Shipping
In April, the United Nations’ IMO approved a dual-threshold framework aimed at reducing marine fuel GHG intensity from 2028 to 2035. This new regulation will impose financial penalties on ship operators who don’t cut down their emissions, while also providing incentives for those who opt for low-carbon fuels. “It’s a complex framework,” Agnevall said in a recent interview. “The cost for operating on heavy fuel alone will basically double until 2035.”
Pending final approval from IMO member states this October, shipping companies will be hit with a fee of $100 for every metric ton of CO₂ equivalent (mtCO₂e) they produce over the lower emissions limit, and a steeper charge of $380/mtCO₂e if they exceed the higher threshold. On the flip side, operators who manage to stay below the lower limit, often by opting for low-carbon alternatives, can earn carbon credits, which they can then sell to companies that are still dependent on oil-based fuels. Agnevall called the IMO plan: “A major milestone for the whole shipping industry”.
Rising Targets and Market Implications
The greenhouse gas (GHG) intensity targets are set to become more stringent over time. We’re kicking things off with a 4% reduction by 2028, and by 2035, that lower limit will have climbed to 30%. On the flip side, the higher compliance target starts at 17% and ramps up to 43% during the same timeframe, all measured against a 2008 baseline of 93.3 grams of CO₂e per megajoule.
This initiative is part of the International Maritime Organisation’s (IMO) larger goal of achieving net-zero shipping by 2050. “The critical thing is to create a level playing field between the fossil fuel and the green fuels … At least short term, it could probably lead to a stronger demand for biofuels.”
Biofuel Costs and Current Bunker Market
In May 2025, the average price for delivered very low sulfur fuel oil (VLSFO) hit $504.35 per metric ton in Singapore. On the other hand, B24 bioblend, which consists of 24% used cooking oil methyl ester and 76% VLSFO, was going for $713.84 per metric ton, as reported by Platts.
Even though the demand for low-carbon fuels is projected to grow, a staggering 99% of the global fleet is still reliant on conventional fuels or biodiesel, according to the classification society DNV.
Preparing for a Multi-Fuel Future
To prevent stranded assets, shipowners need to start investing in multi-fuel capabilities, Agnevall cautioned, since vessels usually stay operational for about 25 to 30 years. “None of the green fuels is available in significant quantities. But shipowners still want to, kind of, derisk… If you build a vessel today, you know that during the lifetime of the vessel, some of these major [fuel] transitions will happen.”
Alternative marine fuels like biodiesel, bio-LNG, biomethanol, and eMethanol are set to become widely accessible by the early 2030s, with renewable ammonia likely making its debut in the late 2030s. According to DNV’s data on the current order book:
- 8% of new ships are designed to be LNG-capable
- 5% are equipped to support methanol
- 1.8% can handle LPG
- 0.5% are ready for ammonia
Wärtsilä’s R&D Push
Wärtsilä has ramped up its R&D investment to €296 million ($349 million) in 2024, which is about 4.6% of their net sales, a noticeable increase from their historical average of 3%. A significant portion of this boost is aimed at developing decarbonization technologies.
The company is already leading the way in propulsion systems for LNG, LPG, and methanol. By 2026, Wärtsilä plans to retrofit the Viking Energy platform supply vessel, making it the world’s first ship powered by ammonia.
Role of Carbon Capture and Fossil Fuels
Even as the industry transitions, fossil fuels will not disappear immediately. Agnevall acknowledged: “Oil and gas will remain in the bunker mix ‘for a considerable time,’ and shipowners could use fuel efficiency and carbon capture equipment for decarbonization.”S&P Global Commodity Insights predicts that by 2050, oil and LNG will still make up 56% of marine fuel consumption, a significant drop from 98% in 2025.
In May, Wärtsilä rolled out a scrubber system equipped with carbon capture technology, boasting a 70% capture rate and estimated costs ranging from €50 to €70 per metric ton. This system was already put to use on Solvang’s Clipper Eris ethylene carrier back in February. Agnevall pointed out that the overall cost of carbon capture and storage (CCS) for shipowners will be higher, taking into account the logistics of handling and disposal.
While some companies like Value Maritime (backed by Shell) have dedicated arms for carbon management, Agnevall noted: “The ecosystem needs to evolve… We are a technology provider, and we focus on that.”
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Source: S&P Global
