Decarbonizing maritime shipping will require a suite of technological interventions, including alternative fuels and energy sources, electrification, and improved efficiency.
In particular, we think that low-carbon hydrogen-derived fuels have long-term, cross-cutting potential to reduce a substantial amount of emissions.10
Alternative Fuels
Most fuels currently used in shipping vessels are made from crude oil, but there are several alternative fuel pathways applicable to the sector. In 2022, low-carbon fuels made up only 0.1% of energy consumption in international shipping.11 However, they are predicted to grow in use, making up 5-33% of the shipping fuel mix in 2030 and 70-100% in 2050.12 E-ammonia, produced using low-carbon electricity, air, and water, is typically seen as the most promising alternative fuel, making up more than half of the projected alternative fuel mix in 2050, with smaller shares (<25%) of hydrogen, biofuels, and methanol.13 We also note that there has been industry interest in transitioning to liquid natural gas (LNG), but studies indicate that given LNG’s lifecycle methane emissions, it should not be considered a clean alternative.14 While slow-speed and high-pressure LNG vessels tend to have modest improvements in lifecycle emissions compared to fossil fuel vessels, the industry’s most popular vessels (medium-speed, low-pressure) are prone to methane leakage and have higher life cycle emissions than fossil fuels.15
The main barrier to widespread adoption of alternative fuels is cost. Biofuels and e-fuels cost 2-4 times and 4-4.5 times more than heavy fuel oil, respectively.16 Moreover, ships compatible with e-fuels are costlier. The IEA predicts that e-ammonia and e-methanol ships will remain 75% more expensive than fossil fuel ships in 2030.17 However, this extra cost can be small compared to costs across the value chain, especially if tankers are transporting high-value goods like IT equipment. The IEA estimates typical green premiums representing only <1% of the value of goods transported in containers.18 In the near term, the availability of e-fuels is also an important barrier, both in terms of volume and location, as e-fuel commercialization is not expected until 2027 at the earliest.
Biofuels
Biofuels can be produced from various feedstocks, including sugars, starches, algae, woody residues, agricultural residues, oils, and municipal solid waste.19 Fuels derived from biomass-based feedstocks are already in use for shipping.20 We think the sustainability of biofuels is often overstated, especially when life cycle analyses (LCAs) fail to account for indirect land-use change emissions. By displacing food crops, biofuel crops are at risk of driving expansion of cropland into forests and grasslands, resulting in direct and indirect land-use change emissions.
Until e-fuels become more readily available and lower in cost, the shipping industry may view the use of biofuels as the only viable option for complying with decarbonization regulations. However, due to the land-use concerns mentioned above, we do not think biofuels are a promising technology for decarbonizing shipping in the long term. To reduce reliance on biofuels, we think governments, financial institutions, and industry should support the accelerated commercialization of e-fuels.
While advanced biofuels have lower well-to-wake emissions than fossil alternatives for shipping, we think that, in the long term, limited biofuel supplies should be reserved for use in the aviation sector, where the cost and energy use of producing low-carbon alternative fuels is much higher.21 See more in our strategy report on reducing aviation emissions.
E-fuels
E-fuels, produced from electricity and hydrogen, can reduce shipping emissions by up to 99% compared to conventional marine fuels when made with low-carbon hydrogen, especially green hydrogen.22 The three main e-fuels relevant to shipping are e-ammonia, hydrogen, and e-methanol.
E-ammonia is currently considered the leading e-fuel in decarbonization scenarios, which indicate it could account for more than half of the sector’s fuel mix by 2050 and deliver roughly 32% of total emissions reductions.23 Unlike biofuels, its feedstocks—nitrogen and hydrogen—are effectively inexhaustible.24 However, production remains both energy-intensive and costly, largely due to the hydrogen electrolysis step.25 A further challenge is that e-fuels are less energy-dense (by volume) than fossil fuels.26 Since larger fuel tanks are required to store the same quantity of energy, there is less space available on these vessels for transporting goods, reducing shipping profits.
Ammonia can be used in both ammonia tankers and conventional tankers with modified internal combustion engines, and many ports already have ammonia storage and handling infrastructure.27 The world’s first ammonia vessel was developed in 2023, following which Maersk ordered up to ten ‘very large’ ammonia vessels, due to be delivered in 2026.28 Market maturity is anticipated between 2030 and 2035.29
Ammonia shipping still faces technical and safety challenges. Ammonia is corrosive and toxic, posing public health and environmental risks in production, transport, and storage.30 While complete combustion produces only nitrogen and water, leaks of reactive nitrogen can lead to nitrous oxide (N₂O) emissions—a greenhouse gas 273 times more potent than CO₂.31 With minimal N₂O leakage, e-ammonia’s emissions intensity can be 68–80% lower than heavy fuel oil; under high-leak conditions, however, its climate impact could exceed that of heavy fuel oil.32
Regarding costs, using e-ammonia currently has a premium of $1,400-1,650 per ton of heavy fuel oil replaced, equivalent to a 3.2-4.5X increase on base costs.33 However, current EU regulations, which increase the price of shipping emissions over time, make e-ammonia-fueled ships and conventional ships cost-equivalent over their 30-year lifespan.34 E-ammonia is also still more expensive than conventional ammonia (made using a feedstock of natural gas or coal), but is expected to reach price parity by 2030.35
Other than e-ammonia, hydrogen and e-methanol are other prominent e-fuels. In 2024, Maersk launched the world’s first e-methanol container ship, and MITSUI E&S tested the first hydrogen ship.36 E-methanol is the easiest drop-in solution for existing fuel systems, aided by the commercialization of biomethanol. However, burning methanol still emits CO2, meaning that it is only carbon neutral if using renewable CO2 as a feedstock.37 It is currently bottlenecked by low availability of CO2 feedstocks due to the limited number of waste CO2 point sources, competition on use of this CO2 from other end-uses, and high cost of DAC.38
On the other hand, hydrogen is simpler to produce than methanol. However, its low volumetric energy density limits the amount of fuel that can be carried onboard, restricting the range of hydrogen-fueled ships.39 We prioritize e-ammonia over e-methanol and hydrogen ships because it can be used for long voyages, which account for most global shipping emissions, and because we think it is more scalable than e-methanol.
The development and scaling of e-fuels are closely tied to the progress and policy of hydrogen, a key enabling feedstock for these technologies. Despite growing policy efforts, incentives remain insufficient to scale low-carbon hydrogen production, especially green hydrogen, to meet cross-sector climate goals. In particular, most policies address supply-side barriers, such as by providing subsidies and R&D funding. However, advocates argue that more demand-side policy is also needed.40 Since clean hydrogen demand far exceeds supply, we think there should be stronger guardrails on its use.41 For example, guardrails could involve preventing incentives for hydrogen use in sectors where cost-effective and readily available decarbonization options exist, such as road transport, buildings, and power generation.42 Instead, its use should be guided towards hard-to-abate sectors.43
We think adoption of e-fuels at scale will require efforts to a) make e-fuels cost-competitive and readily available worldwide, b) rapidly roll out bunkering infrastructure and ships compatible with e-fuels, and c) produce key feedstocks – such as green hydrogen – at a large scale.
Electrification, Alternative Power, and Improved Efficiency
In maritime shipping, there are a variety of additional interventions that can reduce emissions of the sector, such as optimizing route planning and fleet optimization strategies, using electric and hybrid shipping, integrating waste heat recovery systems, modifying hull and propeller design, and incorporating wind-assisted propulsion. Most of these interventions are at a high technological readiness level. However, the associated emissions reduction potentials for these pathways are generally lower in scale compared to alternative fuels (<15% of total shipping emissions).
While we think the combined effect of efficiency sub-strategies could result in significant emission reductions, we think they are still lower in scale than fuel transition sub-strategies. We focus our attention on e-fuels because we think they will be the most significant lever for reducing shipping emissions, but we will continue to monitor progress in alternative propulsion methods, including electric and hybrid shipping, nuclear propulsion, and wind-assisted propulsion.
10 “Our analyses suggest that switching from low sulfur fuel oil (LSFO) to alternative fuels could reduce well-to-wake emissions by 80 to 100%.”; Figure 2 (Alternative fuel production pathways in shipping) shows that of the alternative fuels, hydrogen and e-ammonia have among the lowest WtW emissions. Mærsk Mc-Kinney Møller Center for zero-carbon Shipping, 2022
11 “Fuels used by marine vessels are known as bunker fuels. Those commonly used today are typically produced by refining crude oil—heavy fuel oils are essentially what’s left after the distillation process that separates out kerosene or gasoline, which contributes to the lower prices—and are differentiated by their sulfur content.” CTVC, 2023; Figure: Energy consumption in international shipping by fuel in the Net Zero Scenario, 2010-2030 IEA, n.d., (accessed August 21, 2025)
12 Table 3. Evolution of the fuel mix for the four pathways Oxford Smith School, 2024
13 We refer to e-ammonia when talking specifically about ammonia produced from low-carbon electricity and ammonia when talking about the molecule more generally.
14 “The authors use a representative life-cycle emission factor as well as the 100-year and 20-year global warming potentials (GWPs) for methane included in the Intergovernmental Panel on Climate Change’s Fifth Assessment Report. The 20-year GWP better reflects the need to reduce GHGs quickly, in order to meet the International Maritime Organization’s (IMO) climate goals, and the results show that when combined with a trend toward higher leakage, there is no climate benefit from using LNG, regardless of the engine technology.” ICCT, 2020
15 Benefits of LNG vs fossil fuels depend on the timeframe being measured. The stated claims are both true for GWP20 and GWP 100, but measurement using GWP20 results in a less favourable case for LNG compared to GWP100. For full data, see Figures 3 and 4 in ICCT, 2020
16 “The estimated B2B green premium for the shipping industry is high, at 30-80%. The green premium projections for low-emission fuels and ZEFs also remain high. For example, biofuels are expected to cost 2-4 times the cost of heavy fuel oil, and hydrogen-based fuels are expected to cost 4-4.5 times the cost of heavy fuel oil. However, this green premium only translates to a 1-2% increase in the final retail price to customers (in case of high-value products such as IT equipment), since shipping costs form a small percentage of the price of products.” WEF, 2024
17 “The total cost of ownership of a 100% e-ammonia or e-methanol-fuelled containership would be 75% higher than a conventional containership operating on fossil fuels. Although a substantial increase, the extra cost would represent less than 1% of the typical value of goods transported in containers.” IEA, 2023
18 ibid.
19 “These resources include: Corn grain; Oil seeds; Algae; Other fats, oils, and greases; Agricultural residues; Forestry residues; Wood mill waste; Municipal solid waste streams; Wet wastes (manures, wastewater treatment sludge); Dedicated energy crops." DOE, Bioenergies Technology Office, n.d. (accessed August 13, 2025)
20 “The first flight using blended biofuel took place in 2008. Since then, more than 150,000 flights have used biofuels.” IEA, 2019
21 Well-to-wake is used as the fuel-cycle emissions analog to cradle-to-grave, and indicates a full life cycle analysis including extraction, production, and use. “The problem, in short, is that the amount of biofuel the two industries expect to use going forward far exceeds the amount of existing biofuels, and scaling new climate-beneficial biofuels and supply chains entails significant challenges. Airlines have fewer alternatives when it comes to energy carriers so they will be highly motivated to outspend marine shipping companies (and every other industry) for all the biofuel they can get. The implication for the maritime sector is clear: the role that biofuels can play in its energy transition will be small at most.” CATF, 2025
22 Conventional methods produce hydrogen from natural gas through a process called steam methane reforming. When some of the resulting emissions are mitigated via carbon, capture, and storage (CCS), the produced hydrogen is often referred to as “blue hydrogen.” Hydrogen can also be produced by splitting water into hydrogen and water through a process called electrolysis; this is often referred to as “green hydrogen.” Given that the production of both blue and green hydrogen produces fewer emissions than conventional methods, they are often both categorized as low-carbon hydrogen. “Hydrogen, ammonia and methanol produced using low-carbon hydrogen have up to 99% GHG emission reduction benefits compared to low-sulphur fuel oil (LSFO).” WEF, 2024
23 Figure 30: Decarbonization levers and top mitigation methods (IRENA’s NZE Scenario) WEF, 2024
24 “The production of ammonia is massively scalable because its constituent parts – nitrogen and hydrogen – are nearly inexhaustible (although isolating hydrogen is energy-intensive).” CATF, 2025
25 Hydrogen electrolysis accounts for around 80% of the energy needed to produce e-ammonia “It is observed in Figure 8 that the electrolysis step requires the highest energy consumption (80.6%)...” de la Hera et al., 2024
26 “Figure 1-1: Energy densities for different energy carriers” DNV GL, 2019
27 We note that commercialization of slow-speed ammonia vessels lags behind commercialization of medium-speed vessels; “Ammonia can be used as fuel in both purpose-designed and modified internal combustion engines (ICEs), either neat or in a blend with petroleum fuel. Marine vessels are especially well-positioned to use ammonia-fueled ICEs because they can accommodate heavier engines and larger fuel tanks more easily. Many ports already site and build ammonia storage and handling equipment.” CATF, 2025
28 “Yara Clean Ammonia, North Sea Container Line and Yara International formed a strategic partnership to develop the world’s first container ship powered by clean ammonia as a fuel source in 2023.” WEF, 2024; “Maersk orders world's biggest ammonia carriers from Hyundai to ship hydrogen derivative across oceans. The first four vessels will be delivered from late 2026, with an option for an extra six carriers…” Hydrogen Insight, 2023
29 Figure 4-2: Forecast of readiness and availability of fuel production pathways DNV – Ricardo Energy & Environment, 2023
30 “In considering expanded roles for ammonia in energy storage, the health risks from ammonia exposure and the environmental risks arising from leaks must be closely scrutinised and all systems must be designed to minimise, and effectively eliminate, these risks.” The Royal Society, 2020
31 “N2O, with 273 times the global warming potential of carbon dioxide (CO2), is also indirectly emitted through transformations of reactive nitrogen (Nr) species, like NH3 and NOx, in natural environments.” Esquivel-Elizondo et al., 2025
32 “In a low emissions scenario, its CO2-equivalent intensity is 68–80% lower than fuel oil.” “In a high emissions scenario, this benefit drops to 11–23% for 1–2% N-to-N2Oi conversion, and at 5–10% N-to-N2Oi conversion, e-ammonia’s impact exceeds fuel oil by >24%.” Esquivel-Elizondo et al., 2025
33 Calculation: 1900/600 = 3.2; 2250/500= 4.5 “heavy fuel oil (HFO) prices ranged between 500 and 600 USD per ton….” “In other words, green ammonia would cost between 1,900 to 2,250 USD for each ton of HFO replaced, amounting to a price gap of 1,400 to 1,650 USD per ton.” ClimateWorks, 2025
34 Excluding cost-decreases for producing low-carbon ammonia expected from technology scale-up “With a projected carbon price of $100/ton in 2025 increasing 4.25% annually…” “all three ammonia-fueled ships evaluated were able to comply with or outperform the new FuelEU Maritime targets at a cost equal to or below that of a conventional heavy fuel oil powered ship.” CATF, 2024
35 Figure 1: Cost of ammonia production in 2023 (left) and 2030 (right) BloombergNEF, 2024
36 “Maersk launched its first methanol-powered container ship in 2024. In collaboration with MAN Energy Solutions, MITSUI E&S successfully tested the world’s first hydrogen-powered marine engine in 2024.” WEF, 2024
37 “To qualify as a net-zero fuel, the production of e-methanol therefore requires the use, as inputs, of green hydrogen and CO2 captured through biogenic processes or direct air capture using renewable power.” Oxford Smith School, 2024
38 “Point sources of renewable CO2 are too limited to provide for full maritime decarbonization, but global volumes should be sufficient in the near term to supply e-fuels for a small fraction of the world fleet. However, access to this CO2 is challenged by competition from other uses, such as permanent sequestration. Carbon removal solutions such as DAC and DOC are very costly due to low efficiencies of selecting ppm-level concentrations of CO2 in air and dilute concentrations in the ocean, respectively.” Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, n.d. (accessed August 14, 2025)
39 “It can be directly used as a zero-carbon marine fuel, although it faces storage constraints due to its low volumetric density. Oxford Smith School, 2024
40 “However, creating the green hydrogen market necessary for decarbonization requires sufficient demand-side policy that incentivizes that change. For the green hydrogen market to really scale, these policies will need to exist in the form of sectoral standards or sector-based or economy-wide carbon policies.” Rhodium Group, 2023
41 “Low-carbon H2 can only meet a minimal fraction of today’s European demand.” FCA, 2025; “BNEF expects clean H2 supply to skyrocket 30-fold to 16.4 million metric tons per year by 2030, driven by supportive policy and a maturing project pipeline. Still, this is not sufficient to meet most government targets.” Bloomberg NEF, 2024
42 “Road transport, buildings, and power generation should be excluded from hydrogen deployment strategies or public funding support. “ FCA, 2025
43 “However, these sectors have more effective and readily available decarbonization solutions (e.g., electrification). These solutions should be opted for to maximize emissions savings and ensure hydrogen is both readily available and prioritized for those essential and hard-to-abate sectors.” FCA, 2025
44 Table 1: Energy efficiency levers, their potential impact and current uptake. Mærsk Mc-Kinney Møller Center for Zero-Carbon Shipping, 2022
45 Figure 30: Decarbonization levers and top mitigation methods (IRENA’s NZE Scenario) WEF, 2024
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