2025 outlook for marine propulsion: more regulatory heavy lifting ahead

Shipowners invested at record levels in newbuilds equipped with alternative fuel-capable engine technology in 2024, and there’s no reason to think this trend will not continue. But owners will have to wait years until green fuels are available at any type of scale, calling into question shipping’s ability to meet IMO’s interim greenhouse gas (GHG) reduction targets.

One of the biggest commercial challenges in 2025 for shipping is FuelEU Maritime. Layered on top of shipping’s inclusion in the EU Emissions Trading System and IMO’s Carbon Intensity Index (CII), the newest EU regulation is designed to drive the use of low- and zero-carbon fuels in the maritime sector.

While EU ETS regulates what comes out of a ship’s stack, FuelEU Maritime is focused on what owners put in their tank. It places stringent GHG emissions intensity requirements for ships over 5,000 gt transporting cargo or passengers for commercial purposes in the EU. As of 1 January 2025, a 2% carbon intensity reduction kicked in, and will be progressively stricter, reducing every 5 years. The carbon intensity of the fuel will be reduced by 6.0% in 2030, 14.5% in 2035, 31.0% by 2040, 62.0% by 2045 and 80.0% by 2050. GHG emissions are calculated on a well-to-wake basis. What that means is any shipowner thinking of using fossil fuel versions of ammonia or methanol in shipping goods or passenger to or between EU ports better think again. They will be financially punished by the price of the fuel and the FuelEU Maritime penalty they will have to pay.

On a positive note, owners that have ships powered by two-stroke, slow-speed LNG dual-fuel engines fare well under the regulations because the technology has negligible methane slip. Additionally, engine designers continue to wring out unburnt fuel in new low-pressure two-stroke and four-stroke models. It is no wonder that Maersk is hedging its bets on methanol by investing in LNG dual-fuel newbuilds.

Where shipowners can make significant headway is in energy efficiency. A white paper published by DNV points out that energy efficiency measures can result in savings of up to 16% or US$21M over a vessel’s lifetime compared with using bio-marine gasoil as a compliance option.

As one the most influential leaders in the maritime sector, DNV Maritime chief executive Knut Ørbeck-Nilssen, puts it, “Adopting a cost-efficient strategy with the right combination of measures can help shipowners reach compliance at reduced costs.”

Problems around the pricing, availability and production of low- and zero-carbon fuels will persist, and when those fuels do become available, their additional energy costs will creep into the supply chain.

Contracting for alternative-fuelled capable ships reached record levels as of the end of November 2024, hitting 55.7M gt, surpassing the 47.2M gt placed in 2022, according to Clarksons.

With numerous pilot projects underway, the technology readiness of onboard carbon capture (OCC) continues to progress. 2025 will see the first full-scale testing and installation of OCC by Wärtsilä and Solvang in Clipper EOS.

Expectations are that the first ammonia dual-fuel engines will be commercially installed in 2025, and there will be continued momentum behind the uptake of wind-assisted propulsion as owners look to squeeze out fuel savings and emissions. With IMO MEPC 83 meeting in April, there is clearly more regulatory heavy lifting ahead for shipping.