Executive summary

Early adoption of e-fuels is key to avoiding an inefficient energy transition towards zero-emission shipping with costly technology lock-in. E-fuels will likely be the best bet in the long run due to their high emissions reduction potential and scalability.

Because scaling up the use of e-fuels will take a long time, targeted investments should be made now to increase production capacity in time, establish global supply chains, and ensure the availability of e-fuels at key bunkering hubs.

Upcoming policy measures from the International Maritime Organization (IMO) should create certainty, ensure e-fuels are cost-competitive, and reduce investment risks. The transition to e-fuels requires large-scale investments from shipowners, fuel producers, ports, and charterers/cargo owners. These investments can only be securely made if the sector is certain that e-fuels are a competitive way to comply with the upcoming regulations.

Only a universal price on greenhouse gas (GHG) emissions with targeted rewards for e-fuels can close the price gap. A fixed levy on GHG emissions with rewards for e-fuels is the only policy option that can make e-fuels competitive with other fuel pathways. Key industry players, including e-fuel producers and infrastructure developers, suggest that a levy is key to investing in e-fuels early.

Ensuring a just and equitable transition requires an equitable revenue disbursement mechanism: Any revenue generated from economic measures should also be strategically allocated to support lower-income countries in their energy transition. This could include funding for zero-emission fuel production, infrastructure development, workforce training, and targeted broader climate adaptation initiatives to ensure no country is left behind.

Introduction

In 2023, IMO Member States agreed on a new pathway for shipping’s decarbonisation. The IMO’s revised GHG strategy (‘2023 IMO Strategy on Reduction of GHG Emissions from Ships’) calls for ending fossil fuel consumption and reaching net-zero GHG emissions “by or around, i.e. close to, 2050.” This cut-off date is supported by indicative checkpoints of reducing emissions by 20%, striving for 30%, by 2030 and 70%, striving for 80%, by 2040. Alongside this, the industry now has a target of at least 5%, striving for 10%, (near-)zero-emission fuel uptake by 2030.

Besides setting these ambition levels, the 2023 Strategy also outlined that “mid-term GHG reduction measures should effectively promote the energy transition of shipping and provide the world fleet with a needed incentive while contributing to a level playing field and a just and equitable transition”. This requires:

Promoting an energy transition: Shipping’s transition will involve a variety of fuels. However, e-fuels will likely be the best option in the long run due to their scalability and emissions reduction potential. Bringing e-fuels to market requires immediate investments to build the value chain—developing production infrastructure, securing supply networks, and ordering zero-emission vessels. This must happen already this decade to ensure the industry and e-fuel value chains are ready at scale on the required timeline.

Ensuring a just and equitable transition: Climate change impacts and the transition to a zero-emission economy will likely hit poorer countries disproportionately harder. At the same time, some countries will need additional support to comply with more stringent regulations. The IMO’s mid-term measures should therefore ensure no country is left behind in the transition and support the countries most impacted.

The policy measures to deliver on the targets set in the 2023 IMO GHG strategy are currently being negotiated and are set to be agreed upon at the 83rd meeting of the IMO’s Marine Environment Protection Committee (MEPC 83) in April 2025, adopted in autumn 2025, and enter into force in 2027 at the earliest.

The binding global nature of the regulations will mark a key milestone for shipping and set it apart from essentially every other sector in today’s global regulatory landscape. The legal regulation will be part of the International Convention for the Prevention of Pollution from Ships (MARPOL), specifically Annex VI (Prevention of Air Pollution from Ships). MEPC is currently developing a new chapter to MARPOL Annex VI, namely Chapter 5, referred to as the “Net Zero Framework”. This chapter will outline the main components of the technical and economic elements. The regulation will be complemented with supporting guidelines—the scope of which still needs to be defined— on revenue disbursement and the emission factors of alternative fuels and technologies.

This insight brief will dive deeper into the policy measures under consideration, highlighting what is currently on the table and what must be achieved to deliver on the IMO’s objectives. It builds on stakeholder engagements within the Getting to Zero Coalition and beyond, as well as scenario-based analytical assessments, to outline key takeaways and learnings on the implications of different policy measures for the maritime sector.

What is currently on the table?

Over recent months, IMO Member States have worked together to find commonalities among their positions. But key questions remain, including on the following essential elements of the measures:

Establishing regulations for the greenhouse gas content of fuels in a global fuel standard (GFS)

Designing an economic instrument such as a universal levy on emissions

Designing mechanisms—including those for revenue-sharing—that ensure a just and equitable energy transition.

Within these areas, many more details need to be decided, including penalties for non-compliance with the GFS, alternative compliance (i.e., whether to adopt a flexibility mechanism within a GFS), a definition of zero- and near-zero GHG emission fuels (ZNZ fuels), the emissions factors of different fuels, and the objectives and modalities of revenue disbursement. While the overall design of the measures is expected to be developed as a regulatory text in MARPOL Annex VI, many of the details will likely end up in supporting guidelines, which are set to be developed in the period between the measures’ adoption and implementation.

Going into MEPC 83, negotiations have converged on a global fuel standard, with discussions ongoing on the exact levels of the GHG intensity reduction limits. However, areas of divergence remain, particularly regarding the nature of the economic element required to deliver on the IMO strategy.

Many countries, including both developing and developed economies from across the world, and representing a majority of the global tonnage of signatories to MARPOL Annex VI, have explicitly expressed support for a standalone universal levy. A smaller number have explicitly expressed opposition to a universal levy. At the same time, several countries have put forward proposals aimed at bridging the gaps between supporters and opponents of the levy.

While member states have been siding with one of the three overall designs illustrated above, the last months have seen shifts towards potential compromise solutions, or so-called bridging proposals. These proposals were designed to address concerns about the flexible compliance mechanism and its ability to generate reliable revenue. The proposals are generally based on a banded flexible compliance mechanism (see Figure 2), designed to drive more vessels to pay fees to the IMO and generate central revenue rather than trade between vessels. By setting multiple pathways for compliance, this system creates different tiers of (non-) compliance, each associated with its own costs and potential benefits. For example, the lowest tier of non-compliance pays a higher fee than vessels operating in the middle tier. Another proposed option is to add the condition of using ZNZ fuels, where fees are paid when vessels do not use ZNZ fuels, although the production pathways this concept covers remain to be decided.

What does good look like? Enabling an early, just, and equitable energy transition

The shipping industry cannot decarbonise without a full-scale energy transition from fossil fuels to scalable zero-emission fuels. As the GHG intensity limits reduce over time and become more stringent, especially from 2040 onwards, fuels must meet two main criteria to be a viable option: GHG reduction potential and scalability.

Several technologies exist that can partly reduce ships’ emissions, including onboard carbon capture and storage or liquified natural gas (LNG). However, these technologies lack the GHG reduction potential to comply with the IMO ambitions from 2040 onwards and are therefore not viable long-term options. This leaves biofuels and e-fuels as the remaining options. Sustainable feedstocks for biofuels will likely be constrained and this limited scalability makes biofuels unlikely to be a viable long-term option. This leaves e-fuels, such as e-methanol and e-ammonia, as the best bets in the long run.

However, the production of e-fuels is at a nascent stage, and they currently face challenges related to cost, risk, and availability. Operating a vessel on e-methanol or e-ammonia is currently twice as expensive as using conventional fuel. Meanwhile, the lead times for building the new vessels, large-scale production and infrastructure needed to operate on e-fuels are long—taking two years or more in the case of new vessels and five or more years in the case of production projects. An early transition to e-fuels that features a gradual ramp-up in their use is therefore critical as this allows for:

Cost reduction through learning and scale: Early deployment allows producers and technology providers to climb the learning curve, which means technological improvements and economies of scale can reduce production costs over time. If adoption is delayed, these cost reductions also get delayed, prolonging dependence on fossil fuels.

Developing skills and workforce: Building a robust labour force capable of producing, handling, and distributing e-fuels takes time. Early action means that skills and expertise can grow organically, avoiding a future scramble to train workers in a compressed time frame when demand spikes.

Building global supply chains: E-fuels require global value chains — for example, production in areas rich in renewable energy (like wind or solar) and transportation to end-users. Starting the development of these value chains early help controlled growth, reducing possible bottlenecks later.

Avoiding technology lock-ins: Without a clear pathway to e-fuels, industries might invest heavily in transitional technologies (e.g., fossil-based synthetic fuels or hybrid solutions) that risk becoming stranded assets when cleaner alternatives arrive. By signalling and starting the shift to e-fuels now, policymakers and businesses can avoid sinking capital into short-lived, less sustainable pathways.

The transition to maritime decarbonisation must also be done in a just and equitable way, with the global nature of shipping requiring a level playing field that leaves no country behind. This has several implications in practice, from addressing disproportionate increases in trade costs to supporting access to the required infrastructure and technologies and minimising further impacts of climate change on vulnerable states by reducing GHG emissions as quickly as possible. Many countries in the Global South will also need support in seafarer training, wider climate adaptation and mitigation efforts, and unlocking their opportunities to competitively produce e-fuels.

Full report: Global Maritime Forum