All hands on deck: the challenge of decarbonising international shipping by 2050

With global maritime trade set to grow by around 50% by mid-century, we have analysed the outlook for global marine fuels in the context of International Maritime Organization (IMO) commitments to reduce greenhouse gas (GHG) emissions from international shipping to net zero by around 2050. A major milestone was reached in April as the IMO Marine Environmental Protection Committee (MEPC) agreed to the implementation of a net zero framework covering international shipping.

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Marine LNG to dominate growth in the coming years

Total global marine fuel sales are expected to grow by 2% between now and 2030, significantly lagging the growth in international maritime trade due to efficiency gains. Asia Pacific accounts for around half of all global marine bunkers, which is sustained at this level to 2030.

The global marine fuel market is expected to start declining by the early 2030s as improving fuel efficiency continues to erode demand. International trade in LNG is expected to grow at a much faster rate, although gas carriers account for a lower volume of trade growth compared to both the container and dry bulk segments.

Global oil marine bunkers are expected to peak by the mid-2020s at just under 5.3 million barrels per day (b/d). Marine liquified natural gas (LNG) will be the main source of growth over the next few years, displacing over 0.4 million b/d of oil by 2030.

Growth in marine LNG will slow after 2040 as synthetic fuels, or e-fuels, become more widespread, displacing around 1.0 million b/d by 2050, supported by increasingly stringent carbon regulations and the increasing availability of green hydrogen. 

IMO net zero framework to hike the cost of marine fossil fuels

The IMO net-zero framework agreed at MEPC 83 will cover the emissions from all vessels above 5,000 gross tonnage operating internationally.  The GHG emissions pricing system will be based on a vessel’s well-to-wake GHG fuel intensity (GFI), with a 2-tier mechanism which penalises emissions above targets. Fossil fuels will be penalised, but LNG vessels’ lower emissions are strongly advantaged against VLSFO. Penalties will impose a 90% cost increase for VLSFO vessels by 2035, and a 40% increase for LNG-fuelled vessels.

Our in-house Refinery Supply Model (RSM) indicates that rising IMO levies would re-distribute global refinery throughputs away from established export refining locations. Latin America is the key winner, with the Middle East the key loser when assessing regional crude throughputs.

Part of the revenue will go towards the IMO Net-Zero Fund for the development of low-carbon technologies and reward the use of low and zero carbon fuelled vessels. The other part will be used to contribute to “just and equitable transition” (JET), for national energy transition programs and climate protection.

Green liquid fuels to gain traction towards mid-century

Of the new generation of low and zero carbon marine fuels, green methanol is the most commercially advanced in terms of supply availability, handling and engine technology for marine applications.

Penetration of e-fuels is expected to be highest in Europe, driven by substantial regulatory support through the Fuel EU Maritime regulation and the EU ETS.  By 2050, the price of green ammonia will be able to displace very low sulphur fuel oil (VLSFO) for all voyages starting or leaving a port in the European Economic Area (EEA). On the other hand, displacing VLSFO is still likely to be challenging for ammonia and other low-carbon fuels under the current IMO pricing mechanism.

Fill in the form to receive a complimentary extract from 'IMO 2050: Outlook for Global Marine Fuels'.