The New Energy Economy: How Shipping Can Cut Emissions Without Losing Efficiency
The global economy charts its course at sea.
Every container ship crossing the Pacific, every tanker navigating the Suez Canal, every bulk carrier hauling iron ore operates on the same calculus: Every year, ships carry around 80% of world trade because no other mode of transport can move 10+ billion metric tons as efficiently, in terms of cost and carbon intensity per ton carried.
The efficiency of shipping has helped build the global economy, and it is the core performance metric by which operators compete and win business. This competitive edge is being sustained through investment in newer, more efficient vessels and technologies, which continues to drive growth in shipping volumes and fleets as trade expands.
However, without sustainable action, that same efficiency-led growth will continue to push shipping emissions beyond their current level of around 3% of global carbon emissions. Today’s challenge is not efficiency itself, but ensuring that this efficiency continues to underpin growth while emissions fall.
Ships built today are likely to sail into the 2050s, making fleet renewal one of the most consequential decisions shipowners face. Increasingly they are addressing emissions with ships that accommodate both fossil and bio-based fuels. Yet with the potential for broad regulatory clarity delayed by the International Maritime Organization (IMO) and global standards continuing to be fragmented, owners must nevertheless act amid diverging regional measures and uncertainty over which lower-carbon fuels will ultimately scale.
In a sector where efficiency and compliance underpin competitiveness, pausing is not an option. Delays in fleet renewal risk lost charter premiums, higher compliance costs, aging fleets and erosion of market position.
In this environment, decisions that enable progress today and provide options for the future become paramount to retain competitiveness. The cost of inaction is too great. In the IMO’s business-as-usual scenario, emissions from shipping are projected to increase 50% between 2018 and 2050—from 1 billion to 1.5 billion metric tons of CO2.
Today’s shipowners have the option to invest in low-carbon fuel solutions that allow progress now, while retaining fuel flexibility as the market’s regulatory framework evolves.
In October 2025, the IMO postponed a vote on its Net Zero Framework, delaying a decision on global emissions standards as delegates sought more economic assessment of policies with decades-long implications. The process continues to move toward alignment, but this delay extends the period of uncertainty for fleet investment, which would be easier to absorb if ships were short-lived assets. Instead, long asset lives mean that regulatory uncertainty today can invite incremental retrofit costs and risks later.
As global consensus continues to take shape, regional regulators have been moving ahead. The European Union, for example, has established Europe’s FuelEU Maritime regulation, which requires progressive GHG emission cuts reaching 80% in 2050, from a 2020 baseline. Separately, the EU Emissions Trading Scheme, extended to include shipping in 2024, requires companies to surrender emissions allowances on a phased schedule, starting with 40% in 2024 and reaching 100% from 2026 onward.
The result is a regulatory patchwork where the cost of compliance depends not just on what fuel a ship burns, but on where it’s registered and where it sails—and where regulations will tighten next.
Shipowners say regulatory stability is now the missing piece. “We need clear, long-term regulatory mechanisms that make lower carbon fuels cost-competitive with fossil fuels,” agrees Ilyas Muhammad, Head of Green Fuels at global shipping and logistics company Hapag-Lloyd.
In the absence of harmonized global regulations, shipowners face an uneasy choice: Act without regulatory clarity and risk making the wrong bet on alternative fuel, or default to conventional fuel to reduce capital expenditure today and risk difficult compliance options in the future. What's needed is a pathway that cuts emissions today while creating flexibility to adapt as rules tighten and renewable fuels scale, and a framework that offers commercial opportunities for countries producing lower-carbon fuels.
That pathway begins with liquified natural gas (LNG), a methane-based fuel. “It provides the shipping industry with a pragmatic bridge to net zero,” says Houda Dabboussi, President of Shell Marine.
Available at commercial scale now, LNG delivers lifecycle greenhouse gas reductions versus conventional marine fuel using proven infrastructure that continues to expand globally. Dual-fuel vessels designed to run on methane (LNG) and liquid fuels maximize flexibility and optionality: They can operate using LNG as a primary fuel, can switch to conventional or bio-liquid fuels when required, blend in bio-LNG as the supply scales, and ultimately, transition to synthetic LNG produced from renewable energy.
“Liquified Bio-Methane (bio-LNG) is the easiest fuel to use for the decarbonization of the shipping sector, supply is relatively high and prices are competitive compared with other lower-carbon fuels,” says Muhammad. For dual-fuel vessels, “Bio-methane is a drop-in fuel, so one does not need to invest in retrofits or buy new dual-fuel engines.”
The industry is being proactive. Over one-third of new ship orders now specify LNG capability. LNG demand is projected to reach 70 million tons by 2050, according to BNEF. Charter premiums for cleaner vessels have emerged faster than expected—driven not by regulation, but by cargo owners under pressure from shareholders and customers to decarbonize their operations. Amazon, IKEA, Michelin, and Unilever, through Cargo Owners for Zero Emission Vessels (coZEV), have committed to zero-carbon shipping by 2040.
The commercial imperative is clear. Shipowners who opt for fuel flexibility today will likely control access to premium contracts as fuel standards tighten and late movers find themselves at a competitive disadvantage. New vessels with LNG capability run more efficiently and reliably, and are better positioned to secure charters.
LNG use helps cut emissions today. Depending on the production pathway, bio-LNG—made from organic waste—can cut lifecycle emissions by up to 80%. When sourced from manure and other high-methane feedstocks, it can deliver net-negative climate impact on a lifecycle basis, avoiding methane emissions that would otherwise escape into the atmosphere. Current production is minimal, but the potential is staggering.
The International Energy Agency estimates at least 1 trillion cubic meters [716 million metric tons] of biomethane could be produced each year sustainably using organic waste streams. “That’s about a quarter of today's natural gas demand,” says Anna Onida, Policy Officer for Transport at the European Biogas Association (EBA). The association’s latest Guidehouse report on biogases towards 2040 and beyond estimates that the EU could produce up to 101 billion cubic meters of biomethane, enough to cover 80% of the EU’s gaseous fuel demand. “This highlights biomethane’s crucial role not only in advancing decarbonization, but also in strengthening Europe’s energy security,” adds Onida.
Bio-LNG requires no new infrastructure, engines or bunkering systems and vessels running on conventional LNG can shift to this renewable fuel the moment supply arrives. “Biomethane is fully compatible with existing methane pathways, which means vessels can switch to bio-LNG the moment supply becomes available,” says Onida.
Synthetic LNG, produced from renewable electricity and captured carbon, could offer the maritime sector the potential for an eventual pathway to near-zero emissions using the same compatibility advantage. According to the EBA, when sourced from specific feedstocks and managed properly, bio-LNG doesn’t just lower emissions, it can actually reach a negative emissions potential. Other alternatives—methanol, ammonia, hydrogen—face infrastructure gaps, technical hurdles, or supply constraints that have delayed their commercial viability at scale.
But technology alone won't deliver the transition. Scaling renewable supply demands a level of coordination the industry hasn’t yet achieved—requiring simultaneous investment across producers, carriers, and cargo owners, each betting billions on outcomes that depend on others following through.
Long-term partnerships are crucial, Muhammad emphasizes, because green fuels are not yet a globally available commodity like fossil fuels. “Fuel suppliers need to invest big money into scaling up these fuel production assets,” he says. “We, as a shipping company, need to provide long-term offtake support for those projects to materialize so that lower-carbon fuels are available when they’re needed.”
LNG provides a pragmatic route forward today. But shipping’s sustainable growth and long-term prosperity depend on collaboration as bio-LNG scales and regulatory frameworks stabilize.
“No single party can solve this alone,“ says Dabboussi. “Ship owners, cargo operators, ship and engine builders, fuel and energy providers, policy makers—everyone needs to pull together.“
Disclaimer: In 2024, 78.2% of Shell’s global investments included oil & gas, 11.37% included low-carbon energy solutions and 10.43% non-energy products. Shell’s target is to become a net-zero emissions (NZE) energy business by 2050. Disclaimers, including NZE target: shell.com/disclaimer
