Predictions for 2025: Regulatory focus

Question: How do you see upcoming regulations, FuelEU Maritime perhaps the most pressing, shaping the development and adoption of propulsion systems in the near future?

Martin Crawford-Brunt, emissions lead at Baltic Exchange and CEO of Lookout Maritime: ”FuelEU Maritime (FEM) has already influenced decisions on the adoption of propulsion systems, in particular, the decisions by liner companies and others to proceed with several new dual fuel LNG ship orders. These will predominantly be fitted with slow-speed 2-stroke diesel engines like the MEGI from MAN.

This is because, under FEM, these slow-speed 2-stroke engines produce a surplus compliance balance, which can be sold, banked or used to offset the negative balances from conventionally fuelled vessels. By contrast, the same LNG fuel burned in a 4-stroke medium-speed engine produces a near-zero compliance balance under FEM, due to the increased methane slip. FEM is intended to accelerate the production and adoption of green fuels. However, any methanol or ammonia that is derived from a fossil source incurs significant penalties through FEM as a result of the very high WtT production factors in Annex II of the regulation.

Every metric tonne (VLSFO equivalent energy) of grey ammonia results in a compliance penalty of $755/tonne burned. For grey methanol, the compliance penalty is $342/t. By contrast LNG burned in a steam turbine propulsion plant is the most favourable option, given the complete combustion of LNG. This results in a surplus compliance balance of $475/ tonne (VLSFOeq) for these ships. All these costs need to be considered on top of the already high expected cost for these fuels.

Very few dual-fuel capable ships will be operated on EU voyages on methanol or ammonia until the green alternatives are both available and more affordable. This reduces access to vital experience building, training and safety familiarisation onboard and ashore, including for the bunker providers. FEM will also negatively influence decisions to invest an additional $10m-$20 million per ship for methanol or ammonia capability now, if there is any possibility they will trade to the EU.

Baltic Exchange has produced a free and easy to use FEM impact calculator, offering a quick and easy way to see the financial impact of this regulation across a selection of alternative fuels. The resources provided bring added clarity to the commercial implication of the increasingly complex emissions regulation.”

Stergios Stamopoulos, director of global sustainability, at ABS: ”Upcoming regulations like FuelEU Maritime initiative are poised to significantly influence the trajectory of propulsion system development and adoption. FuelEU Maritime, which aims to reduce the carbon intensity of maritime fuels, sets stringent limits on greenhouse gas emissions, incentivising the shift away from traditional fossil fuels.

Traditional energy efficiency technologies do not affect the carbon intensity, but merely reduce the amount of fuel consumed, and as such are no longer sufficient to ensure compliance. As these regulations tighten, shipowners and operators are under pressure to adopt low-emission/zero-emission propulsion systems to comply with emission thresholds and avoid penalties.

It also fosters innovation in fuel-flexible systems, capable of operating with a mix of conventional and alternative fuels to meet immediate compliance needs while ensuring long-term adaptability.

This regulatory framework is expected to accelerate the adoption of alternative propulsion technologies such as dual-fuel engines, electric and hybrid systems, and wind assisted propulsion.

Onshore Power Supply (OPS) will likely become mandatory for certain ship types and port calls, particularly in regulated areas. The inclusion of carbon capture technologies in the IMO’s developing Life Cycle Assessment (LCA) guidelines suggests that these technologies could gain traction as a means of reducing a vessel’s carbon footprint, although questions of lifecycle emissions of carbon capture technology itself will need to be addressed.

For short-sea voyages, the development and adoption of electric and hybrid solutions are likely to accelerate, offering a pathway to near-zero emissions in specific applications.

Moreover, regulations like FuelEU Maritime will drive industry-wide collaboration and investment in infrastructure to support alternative fuels such as green hydrogen, ammonia, and methanol. The operational requirements of these fuels necessitate significant advancements in propulsion technologies, including material compatibility, fuel storage systems, and safety standards.

As a result, propulsion systems of the future will need to balance compliance with operational efficiency, lifecycle costs, and integration with decarbonization strategies. Ultimately, these regulations are not just a challenge but a catalyst for innovation, creating opportunities for the industry to redefine sustainable maritime operations.”

Roger Holm, president of Wärtsilä Marine and excutive vice president of Wärtsilä Coroporation: ”Supportive policy frameworks will drive forward the financial viability of sustainable technologies. This is reflected in alternative fuel powered vessels now representing about one-third of newbuild orders.

EU regulations – such as FuelEU Maritime – are providing stronger financial incentives compared to existing global regulations. But for transformation to happen on an even wider scale, regulations – at both regional and international level – must enable companies to stay competitive through the industry’s decarbonisation journey. Without predictable financial incentives, the shipping industry’s transformation will not happen soon enough.

Ultimately, the industry faces a fundamental challenge: ship owners are hesitant to commit to expensive, limited-supply fuels, while producers need clear demand signals to scale up production. Our own analysis suggests emissions policies could help sustainable fuels reach cost parity with fossil fuels by 2035.”

Ossi Mettälä, product manager, NAPA Shipping Solutions: ”FuelEU Maritime’s greenhouse gas intensity penalties are robust and, at €2,400 per tonne VLSFO energy equivalent, they are high enough to encourage investment in decarbonisation solutions today. Viable and valuable investments include wind-assisted propulsion technologies such as rotor sails, which are enhanced when combined with operational efficiency technology and in-depth voyage data. Based on NAPA analysis, a Ro-Ro vessel equipped with rotor sails and voyage optimisation software operated between EU ports in the Northern Atlantic can generate a compliance surplus of 1750 tons annually. This surplus can be banked or pooled to generate further commercial benefit for the shipowner.”

Kjeld Aabo, senior advisor on marine affairs at the Methanol Institute: ”Designed to measure carbon intensity of marine fuels on a well to wake basis, FuelEU Maritime is the most significant incoming regulation for the maritime industry. The regulation itself and its increasingly tight requirements for limitation of GHG emissions seems should be manageable for shipping.

To satisfy the different considerations of the regulation requires a neutral and optimum consideration of all available technologies for GHG reduction. This includes all the different means of producing fuel for low-carbon and net carbon neutral emissions, such as blue and green methanol. Further, carbon intensity targets can be met by blending grey or blue methanol with some green bio-methanol and even less e-methanol.

The biggest concern is how the IMO GHG reduction strategy and FuelEU Maritime regulation will work in parallel, making the regulation applicable and developing rules which enable them to interact successfully worldwide. Penalties for continued use of diesel bunker fuels under FuelEU Maritime or potential carbon levies under IMO regulations provide significant economic value to using methanol as an alternative compliance tool.”

Stay tuned for more predictions on 2025