- Ammonia dual-fuel ships emerge as the most competitive option from the mid-2030s, with potential cost advantages starting as early as 2028 under expected policy incentives.
- Conventional fuel-only vessels are no longer competitive, limiting opportunities to benefit from future policy-driven revenues.
- LNG may hold a short-term advantage until the late 2020s, but its competitiveness declines by the early 2030s due to emissions limitations and reliance on costly abatement technologies.
- Infrastructure planning should prioritize ammonia, as fuel producers and ports face mixed signals and opportunities for biogenic fuels if cost targets are met.
A new study released by the UMAS and UCL Energy Institute’s Shipping and Oceans Research Group for the Global Maritime Forum highlights the growing competitiveness of ammonia dual-fuel ships. According to the report, under the key terms recently outlined in the IMO Net Zero Framework, these ships are expected to hold a clear advantage by the mid-2030s. However, in the near term, the choice of fuel and technology remains uncertain, as several options show similar levels of competitiveness depending on evolving policies and other influencing factors, according to the report published by the UCL Shipping and Oceans Research Group.
Clarity and Challenges in the IMO Framework
The report, “IMO’s new Net Zero Framework: Implications for the Competitiveness of Different Fuel/Energy Options,” evaluates the relative cost-effectiveness of various fuel and ship technologies using a Total Cost of Operation (TCO) model. It finds that the IMO’s new Net Zero Framework offers greater clarity on some aspects of the energy transition, particularly through the introduction of fuel standards and remedial unit pricing. However, key uncertainties remain, especially around Zero and Near Zero (ZNZ) fuel incentives and the mechanics of the Surplus Unit (SU) trading system.
Dr. Tristan Smith, Professor of Energy and Transport at the UCL Energy Institute, noted that while the framework provides enough direction for shipowners to confidently consider ammonia dual-fuel ships a favorable option, similar certainty is still lacking for fuel producers, especially those focused on e-fuels. He emphasized that major investment decisions in that space are likely to hinge on how the IMO finalizes its approach to the ZNZ reward mechanism, unless alternative backing comes from governments or other market opportunities.
Fuel Competitiveness and Transition Pathways
The study finds that ammonia dual-fuel ships offer the strongest competitive advantage starting in the mid-2030s, even without factoring in rewards for low-emission fuels. They also provide the most flexible and cost-effective path for compliance in the short term. With expected policy incentives, e-ammonia could become a viable option as early as 2028.
In contrast, ships running only on conventional fuels are no longer seen as competitive, even in the short term. This approach also limits the ability to benefit from potential future policy incentives.
LNG remains a viable option in the early transition years and may hold a cost advantage through the late 2020s. However, its long-term competitiveness is uncertain. LNG’s higher emissions mean it cannot meet new standards without carbon capture or cleaner alternatives, which could lead to added costs and weaker investment signals over time.
Policy Uncertainty and Infrastructure Planning
The study highlights that uncertainties surrounding Remedial Unit (RU) and Surplus Unit (SU) pricing, along with the design of the reward mechanism, significantly influence the competitiveness of fuel options. Because these elements are still being finalized, the analysis had to account for a wide range of possible outcomes to assess the risks and benefits of each fuel type fairly.
For ports and fuel producers, the findings suggest that investment should prioritize ammonia infrastructure, with flexibility to scale up quickly. LNG may see short-term growth, but demand could decline sharply. Conventional and LNG fuel producers face uncertainty, while producers of biogenic fuels are likely to benefit if they can offer competitive prices.
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Source: UCLEnergyInstitute
