Decarbonisation: the shipping industry’s most pressing challenge in 2025

In the last few years, heavy emitters have witnessed the development of decarbonisation solutions, with financial markets facilitating connections between low-carbon fuel producers and consumers, offering solutions for a rapid scale-up and comprehensive adoption.
Heavy industry, including shipping, is responsible for approximately 40% of global CO2 emissions. While there exists no single solution to decarbonise heavy emitters, a combination of smaller ad hoc initiatives can add up to a broad shift away from fossil fuels across the industrial world. Blending ethanol into the gasoline pool, mixing used cooking or crop oils into middle distillates, replacing regular power with renewable alternatives, or using gases produced from waste or compost can together amount to a significant decarbonisation effort.
With increasing regulatory and stakeholder pressure, two heavily emitting industries are facing particular challenges in their decarbonisation paths: shipping and aviation. Volume and weight constraints, combined with the extended length of a typical voyage compared to even the best battery usage cycles, have meant electrification has not yet been practicable for either ships or planes. Small-scale initiatives exist and should not be discounted, from algal biofuels to ships running on hydrogen or ammonia, but these would either be constrained by scale limits, or by prohibitive retrofitting costs.

Biomethane, a potential silver bullet?In decarbonising the shipping industry, a number of pathways have emerged in low carbon fuels: The Maersk Mc-Kinney Møller Center estimates that for the deep sea shipping sector in 2050, biogas fuels could account from 19% to 37% of the overall mix. A credible alternative will emerge from biomethane and its derived marine fuels.

Produced from the smallest hydrocarbon building block – methane – contained in organic waste, biomethane has nearly the same chemical composition as natural gas. It can be directly injected into the gas grid, and then consumed as feedstock to create hydrocarbon chains tailored to the end-user’s specifications and engineered to any length or degree of complexity — with virtually zero sulphur content and minimal, or sometimes negative, carbon intensity.
Logistical advantages
Furthermore, port infrastructures are typically located near population centres and can easily be connected to existing gas grids, removing the need to move Natural Gas Liquids through dedicated supply chains to bunkering stations, and greatly improving the scalability of this new type of fuel production. The technology may not be revolutionary, but its ability to be deployed on-site makes it far more economically viable than the other contenders to replace oil-based marine fuel oils and diesels.
Emissions offsetting
Altogether, the International Energy Association predicts that biofuels, hydrogen, ammonia and methanol will account for 85% of the share in final energy consumption in the shipping industry by 2050. But until biomethane and renewable fuels constitute a meaningful share of the daily fuel consumption for ship engines, the industry must face the reality of its carbon footprint. End-users who can access an alternative to fossil fuel-based energy sources are likely to do so – driven by regulations, investor pressure, or a genuine desire to reduce the impact of their operations. When no such alternative exists, operators must turn to emissions offsetting: having positive carbon emissions to conduct business but financing a carbon sink for the same amount of emissions and be in the legitimate position to claim a net-zero operation.

Next steps
Starting from January 1, 2025, companies operating ships that call at EU ports will be required to monitor the energy used on board during voyages and while staying in EU ports. This step is crucial for tracking the energy consumption and emissions that contribute to the greenhouse gas (GHG) intensity of the maritime sector.
Here are the key deadlines and requirements for compliance:
Monitoring Energy Use (from January 1, 2025):
Companies must begin monitoring the energy used by their ships during EU-related voyages and stays in EU ports.
The data collected will focus on the type and amount of energy consumed, including fuel types and alternative power sources like renewable and low-carbon fuels or onshore power supply (OPS) when available.
Submission of the FuelEU Report (by January 31, 2026):
By this date, companies must submit the FuelEU Report to a selected verifier.
The verifier will oversee the monitoring and reporting process and confirm whether the data meets the regulation's standards.
The FuelEU Report will serve as the official record for assessing whether the company’s ships have complied with the GHG intensity reduction targets for the year 2025, which start with an initial reduction target of -2%.
Calculating GHG Intensity Reduction:
The data in the FuelEU Report will be used to calculate the ship's performance in terms of GHG intensity, comparing it to the reduction targets outlined in the regulation.
Companies will need to demonstrate compliance with the gradually increasing GHG intensity reduction targets (starting at -2% in 2025) in order to meet the regulatory requirements.
This monitoring and reporting process is a critical part of the EU's strategy to decarbonize the maritime sector, ensuring that the industry follows through on its emissions reduction commitments over time.

Background
The EU's ambitious goal of reducing greenhouse gas (GHG) emissions from transport by 90% by 2050 relies heavily on decarbonizing the maritime sector, a key contributor to transport emissions. Here's an overview of the EU's measures and initiatives to achieve this goal:
1. FuelEU Maritime Regulation
This regulation mandates significant reductions in the GHG intensity of fuels used by ships calling at EU ports. The target starts at a -2% reduction in 2025, gradually increasing to -80% by 2050, compared to 2020 levels. The regulation promotes the adoption of renewable and low-carbon fuels while also introducing zero-emission requirements for ships at berth in ports.

2. Extension of the EU Emissions Trading System (ETS) to Shipping
The EU is extending its Emissions Trading System (ETS) to include shipping. This will incentivize the maritime sector to reduce emissions through market-based mechanisms, making it financially beneficial to adopt low-carbon technologies and fuels. The ETS will cap the total emissions from shipping and allow companies to trade carbon allowances, rewarding those who reduce emissions more efficiently.
3. Alternative Fuels Infrastructure Regulation (AFIR)
Under the AFIR, the EU is developing the infrastructure needed to support the use of alternative fuels. This includes setting up facilities for onshore power supply (OPS) in ports and encouraging the installation of refueling infrastructure for renewable and low-carbon maritime fuels.
4. Financial Support for Clean Fuels
To boost the production of renewable and low-carbon fuels in Europe, the EU has allocated EUR 20 million from its EU Innovation Fund to the maritime sector. This funding is aimed at scaling up the production of clean fuels that can replace conventional fossil fuels in shipping.
The Horizon Europe program has dedicated EUR 530 million for research and innovation in zero-emission waterborne transport. This funding supports the development of new technologies, cleaner fuel alternatives, and innovative solutions to decarbonize the maritime sector.
5. Renewable and Low-Carbon Fuels Industrial Alliance (RLCF)
The RLCF Alliance brings together stakeholders from the aviation and maritime sectors to advance the production and supply of renewable and low-carbon fuels. This collaboration aims to increase the availability of clean fuels, help scale up production, and ensure that the maritime sector has access to sustainable alternatives to conventional fossil fuels.
6. Global Collaboration through the International Maritime Organization (IMO)
The EU is also working with Member States to develop global measures through the International Maritime Organization (IMO). This collaboration aims to ensure that the maritime sector worldwide adopts uniform standards for emissions reductions and the transition to sustainable fuel sources.
These efforts represent a comprehensive strategy to decarbonize the maritime sector, combining regulatory measures, financial support, technological innovation, and global cooperation. Together, these initiatives should pave the way for a cleaner, more sustainable maritime industry in the coming decades.