Key regulations affecting demand from the maritime sector

Having started in 2024, the maritime sector is being gradually included in the EU ETS. Emissions from the maritime sector are constituting a growing share of EU ETS emissions, as the decline in emissions in the maritime sector is estimated to be slower than emissions in other sectors such as the power sector. The EU’s Clean Industrial Deal (CID) is expected to influence the maritime sector, especially with the production of alternative fuels. A transition from conventional fuels to hydrogen-based fuel is seen as one of the key strategies for decarbonising the maritime sector. Lower energy prices and the establishment of the European Hydrogen Bank, could help bolster supply of hydrogen-based fuels. If successful, it can provide more supply side certainty within Europe, but a lot of detail remain.

The Fuel EU Maritime regulation, which applies from 2025, aims to lower greenhouse gas intensity in maritime fuel, but it only mandates a 2% reduction by 2030. Also, the ability to bank and trade compliance surplus to comply with the Fuel EU Maritime regulation will provide flexibility for shipowners. As regulatory stringency increases significantly from 2035 and onwards, the role of these flexibility mechanisms will become even more important.

Under the Fuel EU Maritime, compliance can be achieved by conventional fuels, LNG and some biofuels to 2035. From then onwards, near-zero or zero carbon fuels will be necessary. The inclusion of maritime emissions in the EU Emission Trading System (EU ETS) puts a carbon cost on emissions thus incentivising emission reductions, but does not require a technological shift.

Globally, the International Maritime Organization (IMO) is considering a basket of mid-term measures when they meet for the IMO`s 83rd Marine Environment Protection Committee (MEPC 83) in April.So far, discussions have revolved around a greenhouse gas fuel intensity standard with a flexibility mechanism, and, possibly, an emission pricing mechanism. The IMO aims to approve the mid-term measures at MEPC 83, with adoption in the fall of 2025. Any levy or emissions trading system being implemented by the IMO could significantly impact global compliance costs.

How is the global fleet transitioning to meet emission regulations from the EU and possibly from the IMO? In this analysis we look at the fuel use of the current fleet, and the vessels that are being launched in the next years.