What is needed to get there?

Four sets of investments/commitments, each with its own drivers, are needed to make e-fuel-powered shipping a reality.

Shipowners will need to invest in new vessels. This investment decision will be based on an assessment of relative capital and fuel costs as well as residual value across different fuel and technology options. Fuel producers will need to invest in production facilities, which will be based on projected demand for fuel. Ports need to make significant investments in their bunkering and storage infrastructure. Cargo owners will choose which fuels are used on ships in the bulk segment based on the short-term cost and availability of different options.

Cost of the compliant fuels will be a deciding factor. Deep-sea shipping is a highly competitive market with relatively low profit margins. In the context of IMO policy, this means that shipowners and operators will be driven to choose the lowest-cost fuels and technologies to comply with the GFS over the short term.

Allowing this development to take place without further intervention can, however, risk locking long-term investments into fuels and infrastructure that will not be viable options some years later. Targeted subsidies or rewards for e-fuels can mitigate this by supporting fuels that, while essential for the transition, are not yet commercially viable. The goal is not to select a single “winning fuel” or prioritise the option with the highest emissions reductions today but rather ensure that emerging high-potential technologies can compete in the long term to maximise emissions reduction over time. As the GFS naturally encourages the adoption of the most cost-effective compliant fuels, targeted rewards can provide the necessary push for e-fuels, ensuring a broader range of viable solutions for shipping’s transition to low-emission energy.

Business risks will be a critical element in deciding on fuel pathways. When two fuels reach price parity in a competitive market, demand will not be split evenly between them. Instead, demand will shift toward the fuel with a lower commercial risk profile. This dynamic significantly delays the adoption of e-fuels, which face higher financial and operational uncertainties. For instance, securing ammonia as a marine fuel requires long-term (10–15 years) fixed-price offtake contracts, exposing buyers to substantial balance sheet commitments, technology risks in the fuel’s production and use, and the possibility of lower-cost competitors emerging that undercut their investment.

In contrast, biofuels are already proven for use and can be purchased on the spot market without long-term commercial risks, allowing shipowners to remain risk-free after each voyage from a short-term investment perspective. However, when demand increases for a constrained resource like biofuel, prices rise over time. This creates scenarios in which paying to pollute (opting for emission fees rather than adopting low-emission fuels) becomes an even lower-risk option. For example, if bio-LNG prices rise to match the prices of e-fuels, shipowners will naturally opt for the pathway with the lowest risk—making pay-to-pollute a more common outcome.

Risk can be reduced by increasing investment certainty. Investors and shipowners require clear long-term signals that justify the substantial capital commitments needed for new vessels, fuel infrastructure, and production. Without predictable regulatory frameworks and stable financial incentives, investments in emerging low-emission technologies will stall and short-term compliance solutions will be favoured over long-term decarbonisation. The lifespan of deep-sea vessels (typically 20–30 years) means that uncertainty in fuel pathways or policy effects can delay fleet renewal and create a bias toward using drop-in or transitional fuels rather than investing in more future-proof solutions over a long period. Moreover, fluctuating greenhouse gas pricing, unreliable reward structures, and changing policies can create financial volatility, deterring large-scale commitments to e-fuel production and supply chains.

E-fuels must also be sufficiently available at bunkering hubs to ensure their commercial viability. While e-fuels offer high GHG reduction potential, their adoption is currently constrained by limited production capacity, high energy input requirements, and supply chain immaturity, requiring significant upstream investments in renewable electricity, electrolysers, and carbon capture systems. The global production capacity for these fuels remains a fraction of projected demand, making early-stage deployment vulnerable to supply bottlenecks. If shipping meets the fuel uptake targets of 5%-10% set out in the IMO’s strategy, shipping demand will equal 0.6 to 1.2 exajoules (or 5-10 million tonnes) of hydrogen in 2030. This will likely need to ramp up to nearly 100 million tonnes of hydrogen by 2050. However, the current total global hydrogen production is only around three million tonnes.

Shipping is not the only sector likely to transition to hydrogen-based fuels, but it can send a major demand signal to further spur production. As fuel producers have repeatedly indicated, if the demand signal is there, fuel production will be able to reach final investment decisions and scale up.

Can the proposals on the table get us there?

Ambitious IMO policy measures will be critical to delivering an energy transition that supports the early uptake of e-fuels. A just and equitable transition. A global fuel standard regulating the greenhouse gas content of fuel from now until 2050 is the measure that provides the clearest pathway for emission reductions. This will need to be combined with an economic measure, rewards for eligible fuels, and revenue disbursement to support lower-income countries in their transitions.

As highlighted above, evidence exists on which proposals are more likely to be most effective in delivering the two transition goals, including their ability to build the business case for e-fuels, particularly in relation to cost, risk, and availability, as well as to enable a just and equitable transition.

A universal levy and rewards can make e-fuels competitive early on

In the first decade of the GFS, the GHG intensity targets will allow multiple fuels to comply with the IMO ambitions. Considering the low targets in the first decade, shipowners have multiple options:

1.Conventional vessels pathway, either in combination with onboard carbon capture and storage (OCCS) or by consuming bio-marine gas oil (MGO) as a drop-in fuel to comply

2.Dual-fuel (DF) methanol vessels that might use bio-methanol first and then switch to e-methanol or use e-methanol from the start.

3.LNG-fuelled vessels that switch to bio-LNG and then e-LNG in the long run or use e-LNG immediately.

4.Dual-fuel ammonia vessels that either start with blue ammonia (synthesised from fossil fuels and using OCCS) and then switch to e-ammonia or run on e-ammonia from the beginning.

Vessel owners could also take an approach based on retrofitting: for example, opting for an LNG-fuelled vessel to comply in the early years of the GFS and retrofitting this vessel to an ammonia-fuelled one later.

Without the right incentives, shipowners are likely to opt for the cheapest fuels that allow them to comply with the GHG intensity targets. For e-fuels to be able to compete with other lower-cost compliance fuels in the early years, the total cost of ownership (TCO) of operating a vessel on e-fuels should be on par with the others. As shown by various models from UMAS/University College London, DNV, and the Maersk McKinney Møller Center for Zero Carbon Shipping, not all proposals on the table are currently able to achieve this. Figure 4 below shows the different TCOs, covering both the cost of the ship and fuel, for various fuels for a scenario with a credit trading system only, and for a scenario with a lower levy with reward mechanism targeted at e-fuels.

In the first scenario, e-fuels like e-ammonia only become viable from 2037 onwards, with LNG as the lowest-cost compliance option, potentially combined with onboard carbon capture, until then. When ammonia becomes a viable option, it would first be blue ammonia, with e-ammonia only being adopted at scale from 2043 onwards.

The second scenario, with a levy and a targeted reward for e-fuels, paints a very different picture. Here, e-ammonia becomes competitive from the beginning of the regulation in 2027, turning into the lowest-cost compliance option from 2037 onwards. This shows that a sufficiently high levy combined with targeted rewards can make e-fuels competitive early on in the transition.

A universal levy and rewards can generate certainty and mitigate investment risk

Certainty is crucial for e-fuel producers making capital investments in infrastructure designed to last over 50 years. A levy and targeted rewards for e-fuels are essential to counteract market risks that come with such long-term investments. A levy discourages reliance on fossil fuels by making emissions financially burdensome, while rewards help mitigate the commercial risk of adopting e-fuels by providing financial support during their early stages of market entry. This combined approach ensures that high-potential e-fuels remain a viable option for long-term decarbonisation, even in a market that would otherwise favour lower-risk alternatives like biofuels or continued fossil fuel use.

Credit trading systems fluctuate with market forces and generate less predictable revenues for green fuels and costs for emitting, which e-fuel producers and other infrastructure developers have highlighted as a major barrier to attracting the investments needed. The main uncertainties from the flexible compliance mechanism through credit trading stem from:

Not knowing the price of the units to sell surplus and offset deficit. As these will be traded between vessels, the prices will be set by the market. Whilst there is a likely range for these credits (between the cost of biofuels and the fee for non-compliance), the uncertainty and fluctuations of prices pose significant challenges for shipowners who need to pass on the costs to customers.

Not knowing how much central revenue will be collected and thus available for rewards. In a credit trading system, the revenue going into a central IMO fund will be driven by shipowners paying fees for non-compliance. However, in this system, it is unclear how many shipowners will opt for paying such fees and how many will manage to buy surplus from overperforming vessels. This creates uncertainty on how much revenue the central fund will have to spend. Given that the rewards for e-fuels will be paid through this fund, this design comes with high uncertainty that the revenues will be sufficient to cover rewards.

Whilst compromise solutions such as a tiered flexible compliance mechanism can generate more revenue, fuel producers and infrastructure developers have indicated that such an approach still creates too much uncertainty for the required investments. The risks of not knowing the costs of the surplus units and unreliable revenue collection are likely to persist in such scenarios, inhibiting the required investments.

Full report: Global Maritime Forum