Decarbonization, here I come? The International Maritime Organization’s (IMO) Net-Zero Framework (NZF) is set to give the maritime industry a big push towards decarbonization, but the supply of low-carbon fuels must pick up for the rules to realize their full potential, the Norwegian maritime industry advisor DNV’s Maritime Forecast to 2050 (pdf) expects.

Demand for low-carbon shipping fuels is expected to hit 25 mn tonnes of oil equivalent (mtoe) by 2030, up from the 17 mtoe predicted in DNV’s 2024 forecast. The availability of alternative-fueled vessels is also expected to surge — with their total consumption capacity projected to reach 50 mtoe by 2030, indicating potential for higher demand if favorable markets emerge.

Larger ships are more ready than smaller ones: About 8.9% of ships currently operating (measured by gross tonnage) can use alternative fuels, while 51.1% of vessels in the order book have this capability. However, measured by the number of ships, these percentages are lower, with 2.4% in operation and 26.5% for the order book, suggesting that larger ships are more frequently opting for dual-fuel solutions, DNV says. The trend isn’t surprising given that IMO rules put more focus on bigger ships.

Among these alternative-fueled vessels, LNG- and methanol-ready engines dominate, with the uptake of engines ready for ammonia and hydrogen still in early stages.

But the supply side of low-carbon fuel remains in a phase of stalled momentum, amid headwinds facing hydrogen-derived options such as green methane, hydrogen, and ammonia. Forecasted production capacity for these fuels has not increased since 2023 estimates — leaving us with a limited number of projects currently operational or having reached a final investment decision.

Competition from other decarbonizing sectors — including aviation, heavy trucking, and industry — adds further pressure to the forecasted supply glut. While total production capacity of low-emission fuels is expected to rise 50% across all sectors by 2030, the maritime sector will need to clinch nearly a third of that. Given that the sector accounts for just 3% of global energy consumption, it will face stiff competition from other heavy-emitting sectors, such as heavy industries — alone responsible for 37% of the world’s energy demand.

Other non-fuel-based approaches like wind-assisted propulsion (WAP) could also help the sector decarbonize. WAP — whose uptake more than doubled y-o-y to reach 64 vessels — could cut fuel usage by 5-15%, with advancements suggesting a 30% reduction is soon possible. Still, WAP comes with some challenges. Installing the systems could take up space and tonnage capacity, reducing a vessel’s capacity. The technology is also under-regulated, with several safety and compliance issues, the report says.

Carbon capture tech is another promising area, with the potential to cut emissions by 9% if 20 of the world’s largest ports integrate carbon storage infrastructure, the report says. The tech, however, needs to become more energy-efficient to become compatible with the IMO’s energy use mandates. Other options like nuclear power and air lubrication — albeit less developed — are also being explored.

DNV expects the trajectory of oil and gas prices to have some impact on how far the IMO mandate would go. It may remain more affordable for shippers using very low-sulfur fuel oil (VLSFO) — a type of fossil-derived fuel containing up to 0.5% sulfur and currently used by the industry’s largest ships — to pay IMO penalties until 2030 before they are incentivized to switch to cleaner alternatives, according to a Hydrogen Council report (pdf). VLSFO was mandated by the IMO in 2020 to limit harmful sulfur emissions.

REMEMBER- The IMO rules will set two escalating emissions targets, requiring gradual cuts to ships’ GHG fuel intensity. A stricter standard mandates a 17% cut by 2028 from 2008 levels, increasing to 21% by 2030 and 43% by 2035, the Financial Times reported on Friday. Ships that fail to meet this strict target would pay USD 100 per excess tonne of CO2 equivalent. The softer target would see cuts by 4% by 2028 and 8% by 2030, increasing to 30% by 2035, but failure to meet this level would result in steeper fees of up to USD 380 per excess tonne. The system also allows for credit trading, with compliant vessels able to sell credits to those that fall short.

The next few years will be critical for the green fuels market, as both industry and government enter a period of “recalibration.” CEOs surveyed by the Hydrogen Council expect the hype to turn into “realism and pragmatism” over the next phase — with only the strongest projects advancing, paving the way for a more resilient industry. Competing priorities regarding energy security, competitiveness, and cost-efficiency will inform this calibration, the report says.

The bottom line: There is no single silver bullet for decarbonization. Instead, success will depend on deploying a diverse portfolio approach — integrating low-emission fuels, energy efficiency, onboard carbon capture, and digital optimization, says DNV.

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