Alternative Fuels in Shipping and Operating Vessels

June 6, 2026
Blogs Updates

By Nitin Yadav, Researcher, NITISARA

This section provides a comprehensive overview of the key alternative fuels driving the maritime industry’s transition toward decarbonization. It examines the environmental benefits, storage requirements, safety considerations, and cost implications of leading fuel options, including LNG, methanol, ammonia, and hydrogen. With a strong regulatory push from bodies like the IMO and the EU, shipowners and operators are under growing pressure to adapt. This analysis also explores the readiness of global infrastructure, compares well-to-wake emissions, and outlines how each fuel fits into short-term and long-term maritime sustainability strategies, aligning with net-zero goals by mid-century.

Introduction

The global maritime sector is undergoing a profound transformation, driven by the urgent need to reduce greenhouse gas emissions and align with international climate goals. As regulatory pressures intensify, led by frameworks such as the IMO 2023 GHG Strategy and the EU’s FuelEU Maritime Regulation, shipping companies are exploring a diverse set of alternative fuels to decarbonize operations and future-proof their fleets. This section introduces the major alternative marine fuels under consideration, LNG, methanol, ammonia, and hydrogen, highlighting their environmental performance, technical and safety considerations, infrastructure requirements, and cost implications. By comparing these options, the industry can better navigate fuel choices that balance sustainability, operational viability, and long-term investment strategy.

The Regulatory Compass: Driving the Green Transition

The maritime industry’s decarbonization is being shaped by a tightening web of international and regional regulations aimed at drastically reducing greenhouse gas (GHG) emissions and accelerating the shift to cleaner fuels and technologies.

IMO 2023 GHG Strategy

The International Maritime Organization (IMO) adopted its revised 2023 GHG Strategy to achieve net-zero emissions from international shipping by around 2050. Key milestones include at least a 20% reduction in GHG emissions by 2030 (striving for 30%) and 70% by 2040 (striving for 80%), from 2008 levels. Additionally, the strategy targets that at least 5% (striving for 10%) of the energy used by ships should come from zero or near-zero emission fuels by 2030.

The IMO’s approach includes:

Technical measures: a phased goal-based marine fuel standard.
Economic measures: a global GHG pricing mechanism. Implementation begins with adoption in 2025 and full operation by 2028. Meanwhile, existing measures like the EEXI and CII ratings, mandatory from January 2023, aim to improve ship energy efficiency. The IMO has also introduced life-cycle GHG guidelines, assessing emissions from production to combustion (“well-to-wake”).

European Union’s Regulatory Push: The EU complements IMO actions with its own strong regulations.

EU Emissions Trading System (ETS): Extended to shipping in 2024, it prices CO₂ emissions from all large vessels visiting EU ports. It covers 50% of emissions from international voyages and 100% of intra-EU journeys, with full compliance (100% allowance surrender) required by 2027. The ETS is reinforced by updated MRV rules, including methane and nitrous oxide.
FuelEU Maritime Regulation: Effective from 2025, it caps GHG intensity of energy used on ships over 5,000 GT and mandates OPS or zero-emission technology at berth by 2030. Reduction targets start at 2% in 2025 and reach 80% by 2050.

Converging Pressures, Rising Costs

Global and EU regulations are converging, setting a clear direction for the industry. Compliance is becoming economically consequential—carbon pricing under the EU ETS and FuelEU will significantly raise costs for fossil fuels like VLSFO, with projections showing a rise from $206/MT in 2025 to $2,412/MT in 2050. Nearly 90% of this increase will be due to FuelEU Maritime. The focus is also expanding from tank-to-wake to well-to-wake emissions, encouraging investment in green fuel production pathways and infrastructure.

Liquefied Natural Gas (LNG): The Transitional Fuel

Liquefied Natural Gas (LNG) is a cryogenic liquid fuel, primarily composed of methane, stored at an extremely cold temperature of -162°C. Its high energy density makes it an attractive alternative to traditional marine fuels.

Environmental Benefits: LNG is widely regarded as the most environmentally friendly, readily available fuel for shipping today. It offers significant reductions in local air pollutants: virtually eliminating SOx and particulate matter (PM) emissions and reducing NOx emissions by up to 95% compared to HFO. This performance ensures compliance with stringent Emission Control Areas (ECAs) and the global sulfur cap. Furthermore, LNG reduces CO2 emissions by up to 25% compared to HFO. On a Well-to-Wake basis, GHG reductions can range from 11% to 30%, depending on engine technology. Unlike scrubbers, LNG use avoids waste disposal or discharge issues, and it poses no pollution risk to ocean environments from fuel spills.
Operational Aspects: The storage of LNG requires specialized cryogenic tanks, which can reduce cargo capacity for some vessels due to the volume needed. Maintaining a consistent temperature within these tanks is crucial to prevent the LNG from expanding and creating an explosion risk. While LNG bunkering infrastructure is still developing in some regions, it is becoming increasingly established in major ports worldwide. As of January, 185 ports were capable of bunkering LNG, a significant increase from 141 a year prior, with an additional 50 ports expected to join by 2025. LNG-fueled ships require specialized engines. A notable concern has been “methane slip,” where uncombusted methane, a potent GHG, is released into the atmosphere. However, the industry asserts that significant progress has been made in tackling this problem, with some engines operating on gas in the Diesel cycle reportedly not experiencing methane slip.
Safety: LNG is flammable, and its cryogenic nature necessitates specialized handling and storage. However, LNG infrastructure and safety protocols are generally well-established and understood, making it a more mature option compared to less developed alternatives like hydrogen and ammonia.
Adoption Trends & Cost: LNG currently accounts for 5-8% of the maritime fuel market. It is the most popular alternative fuel choice for newbuilds, representing 81% (222 out of 275) of new orders for alternative-fueled vessels in the past year. While LNG-capable vessels constitute 4.6% of the global fleet by tonnage, they represent a substantial 17.8% of ships currently on order (39.5% in gross tonnage). DNV forecasts 876 LNG-capable ships by the end of the decade, with industry association SEA-LNG projecting an even higher figure of 2,000-4,000 vessels by 2030. LNG is relatively inexpensive compared to many other alternatives, priced around $400 per ton. Its higher energy density can lead to a 10-15% reduction in fuel consumption and a 20-30% reduction in operating costs compared to HFO-fueled ships.

Methanol: A Versatile Liquid Solution

Methanol is a light, versatile, colorless, and flammable alcohol that is gaining traction as a promising alternative marine fuel. A key advantage is its liquid state at ambient temperatures and pressures, which significantly simplifies storage and handling compared to cryogenic fuels like LNG or hydrogen. However, it has a lower energy density than conventional fuel oil (225 grams of methanol provides the same energy as 100 grams of gasoil), necessitating larger storage volumes onboard to maintain the same operational range.

Environmental Benefits: Methanol burns cleanly, with very little sulfur content, resulting in virtually no SOx emissions, and low particulate matter and soot emissions. While the combustion of fossil-derived methanol produces CO2 (1 kg of methanol forms 1.375 kg of CO2), it can achieve net-zero carbon lifecycle emissions if produced from biomass or renewably sourced hydrogen and captured CO2 (e-methanol). E-methanol, specifically, can even be carbon-negative when carbon capture credits are applied. In the event of a spill, methanol is lighter than water, highly miscible (rapidly dissolves in seawater), and biodegradable, significantly reducing its environmental impact.
Operational Considerations: Its liquid state allows for storage in modified fuel tanks on existing vessels, facilitating retrofits. However, methanol’s corrosive nature requires specific storage and handling arrangements to prevent material degradation. Methanol engines are typically dual-fuel, meaning they require a small amount of pilot fuel (e.g., marine diesel) to initiate combustion. Major engine manufacturers are developing and have already introduced engines capable of operating on methanol, and retrofitting existing vessels is a viable option to upgrade fuel systems without costly vessel replacements. Due to its liquid form, methanol is compatible with existing bunkering infrastructure, and its availability is expected to improve as demand increases and dedicated infrastructure develops in ports.
Safety: Methanol is toxic, and its low flashpoint contributes to increased fire and explosion hazards. Extreme care is required during handling, as exposure through inhalation, ingestion, or skin contact can have severe, potentially fatal, health effects that may not be immediately evident. Nevertheless, methanol is considered less hazardous than hydrogen or ammonia, and its safety risks are manageable with existing safety standards and proper crew training.
Production & Cost: Methanol can be produced from various sources, including natural gas, biomass, and captured carbon dioxide. E-methanol production involves generating green hydrogen through renewable energy-powered water electrolysis, capturing CO2 from industrial flue gases or directly from the air, and then synthesizing methanol from these components. Currently, e-methanol is significantly more expensive than fossil-based methanol due to the high costs of renewable electricity and production inefficiencies. The market price of methanol is generally uncompetitive compared to traditional marine fuels. Newbuild methanol dual-fuel vessels are estimated to cost approximately 11% more than a standard newbuild, while converting existing fuel oil vessels to full-range methanol dual-fuel can cost between 10-16% of a standard newbuild. Opting for reduced-range methanol conversions can further cut capital expenditure (CapEx) to 9-12% of a standard newbuild.

Ammonia: The Zero-Carbon Contender

Ammonia (NH3) is a colorless but highly pungent and toxic gas, composed of nitrogen and hydrogen, making it carbon-free. It can be stored in liquid form at approximately -33°C, requiring less cooling than hydrogen, and offers an acceptable energy density, similar to methanol and higher than hydrogen, making onboard storage economically feasible, albeit less compact than HFO.

Zero-Carbon Potential & Emissions: When combusted, ammonia produces nitrogen and water as by-products, meaning it emits no CO2 at the point of combustion. If produced using renewable energy (e-ammonia), it holds the potential to be a truly zero-carbon Well-to-Wake fuel. However, the combustion process can release nitrogen oxides (NOx) and nitrous oxide (N2O), with N2O being a potent greenhouse gas. For every gram of ammonia consumed, even a small release of N2O can significantly reduce the climate benefits of switching from fossil fuels. Ammonia also has low flammability, which may necessitate a pilot fuel to initiate combustion, potentially introducing some carbon emissions. To manage NOx and N2O emissions, advanced exhaust gas treatment technologies like Selective Catalytic Reduction (SCR) systems are required.

Operational Challenges: Ammonia’s toxicity and flammability are significant safety concerns. It requires careful handling, rigorous safety protocols, specialized storage facilities, and comprehensive crew training to mitigate risks. An ammonia spill could have serious environmental consequences for aquatic habitats and ecosystems, though some studies suggest it is less likely to spread and persist in the environment compared to conventional fuel spills. The 2-stroke engine technology for ammonia is anticipated to be available around 2025, with retrofit systems also under development. Widespread adoption will require significant investment in new bunkering infrastructure.

Production & Cost: Green ammonia production involves synthesizing hydrogen via water electrolysis using renewable electricity. While the technology is proven, scaling deployment to meet projected 2050 demand for maritime shipping (estimated at 225 million tons per year) presents a substantial challenge, as current global production capacity is around 200 million tons per year for all uses. Green ammonia is currently 2 to 3 times more expensive to produce than regular ammonia. In early 2025, green ammonia was priced at $885-1050 per ton, effectively costing $1900-2250 for each ton of HFO replaced (on an energy equivalent basis). However, production costs are projected to decrease as the technology matures and scales up. Newbuild ammonia dual-fuel vessels are estimated to cost approximately 16% more than a standard newbuild, while converting existing fuel oil vessels to full-range ammonia dual-fuel can cost between 19-24% of a standard newbuild. A retrofit to ammonia propulsion could represent more than half of a vessel’s market value, with one report estimating $22 million for a dry bulk carrier valued at $35 million.

Analysts project that ammonia could make up approximately 35-50% of the marine fuel mix by 2050, with the International Energy Agency (IEA) forecasting its share of final energy consumption in shipping to rise to 44% by 2050. Shipping companies have already begun ordering ammonia-powered vessels. The IMO’s Maritime Safety Committee has approved interim guidelines for the use of ammonia fuel onboard vessels, potentially making them operable by 2026 under certain conditions. While ammonia offers the promise of zero carbon dioxide emissions at the point of combustion, its overall climate benefit is contingent on two critical factors: the production pathway (requiring green ammonia from renewable sources) and the effective mitigation of N2O emissions during combustion.

Hydrogen: The Ultimate Zero-Emission Vision

Hydrogen (H2) is recognized as a truly zero-emission fuel, capable of powering vessels through hydrogen fuel cells or internal combustion engines, producing only water as a byproduct and significantly reducing greenhouse gas emissions.

Characteristics & Storage Challenges: Hydrogen is the smallest molecule and has an extremely low boiling point of -253°C, making its storage in an energy-dense form the most significant barrier to widespread adoption.
Compressed Gaseous Hydrogen (CGH2): While high-pressure storage tanks (up to 700 bar) are being developed, this method still suffers from low storage densities, limiting the amount of fuel that can be carried.
Liquid Hydrogen (LH2): Liquefying hydrogen to -253°C significantly increases its energy density, but requires sophisticated insulation and cryogenic tanks that are even more complex than those for LNG (-162°C). LH2 is generally considered more suitable for long-distance but lower-volume applications.
Hydrogen Carriers: Research is ongoing into materials and technologies that can absorb and release hydrogen, such as metal hydrides and Liquid Organic Hydrogen Carriers (LOHC), to improve storage safety and efficiency. While metal hydrides offer high gravimetric storage capacity, they often require high desorption temperatures. LOHC could potentially reduce costs and optimize storage, but onboard marine installation for merchant ships still needs significant development.
Operational Aspects: Bunkering infrastructure for hydrogen is currently very limited. Hydrogen can be used in highly efficient fuel cells (approximately 60% efficient, most common in maritime applications) or in internal combustion engines (either in pure form or blended with other fuels). However, key technologies like large-bore hydrogen engines remain under development for marine applications.
Safety: Hydrogen is highly flammable and prone to leakage due to its small molecular size, requiring extremely careful handling and storage to mitigate risks.
Production & Cost: Currently, hydrogen is predominantly produced from fossil energy carriers, primarily natural gas, through processes like Steam Methane Reforming (SMR). This method is cost-effective but not considered clean due to associated CO2 emissions. To achieve its true zero-emission potential, hydrogen production must transition to large-scale methods using renewable energy, such as water electrolysis. This requires a significant expansion of global green hydrogen production capacity. Hydrogen is currently the most expensive alternative fuel option, priced around $6000 per ton.

Comparative Analysis: Weighing the Options

The transition to alternative marine fuels is a complex undertaking, with no single “silver bullet” solution universally applicable across the diverse global shipping fleet. The optimal fuel choice depends on various factors, including vessel type, operational profile (e.g., short-sea vs. deep-sea), specific routes, and regional regulatory compliance. This necessitates a strategic portfolio approach by the industry.

Emissions Profile

The shift from traditional fuels to alternatives represents a significant step-change in emissions reduction. Heavy Fuel Oil (HFO) is the most polluting, with high emissions of CO2, SOx, NOx, and PM. Marine Diesel Oil (MDO) and Marine Gas Oil (MGO) offer improvements, particularly in SOx reduction.

LNG provides substantial reductions in local air pollutants, virtually eliminating SOx and PM, and reducing NOx by up to 95% compared to HFO. It also cuts CO2 by up to 25% on a Tank-to-Wake basis. The Well-to-Wake GHG reduction is 11-30%, but methane slip remains a concern for some engine types.
Methanol combustion produces no SOx and very low PM/soot. While fossil methanol emits CO2, e-methanol (produced from green hydrogen and captured CO2) offers net-zero or even carbon-negative Well-to-Wake emissions.
Ammonia is carbon-free, meaning no CO2 emissions at combustion. However, its combustion can lead to NOx and N2O (a potent GHG) emissions, necessitating exhaust gas treatment systems like SCR.
Hydrogen is the ultimate zero-emission fuel at the point of combustion, producing only water. Its Well-to-Wake emissions are entirely dependent on its production pathway, with green hydrogen from renewable energy being the truly zero-carbon option.
Biofuels offer near-zero CO2 and SOx emissions, with varying reductions in NOx and PM. Their Well-to-Wake climate benefit is contingent on the sustainability of their feedstock and robust accounting for indirect land use change (ILUC).

Energy Density & Storage

Fuel energy density significantly impacts onboard storage volume and, consequently, cargo capacity and operational range.

HFO is highly energy-dense.
LNG has high energy density but requires specialized cryogenic tanks at -162°C, which can reduce cargo space.
Methanol is liquid at ambient temperatures, simplifying storage, but its lower energy density compared to traditional fuels necessitates larger tank volumes for the same range.
Ammonia is liquid at -33°C, requiring less cooling than hydrogen, and offers an acceptable energy density similar to methanol.
Hydrogen has extremely low volumetric energy density, requiring very large, specialized cryogenic tanks at -253°C or high-pressure storage, posing significant challenges for deep-sea vessels.

Safety & Handling

Safety is paramount in marine operations, and alternative fuels introduce new considerations.

Traditional Fuels have well-established safety protocols, though HFO requires heating.
LNG is flammable and cryogenic, but its safety protocols are well-established due to its maturity as a marine fuel.
Methanol is toxic and has a low flashpoint, contributing to fire and explosion hazards. It requires careful handling and increased safety systems, though it is considered less hazardous than hydrogen or ammonia. Its miscibility in water reduces spill impact.
Ammonia is highly pungent, toxic, and flammable, demanding rigorous safety protocols, specialized storage, and extensive crew training. Spillages pose environmental risks to aquatic habitats.
Hydrogen is highly flammable and prone to leakage due to its small molecular size, requiring extreme care in handling and storage.
Biofuels are generally safer to handle and store due to their “drop-in” nature. However, FAME is susceptible to microbial growth and has limited oxidation stability, requiring specific management and storage limits.

Infrastructure & Availability

The readiness of bunkering infrastructure and global supply chains is a critical determinant of fuel adoption.

Traditional Fuels are globally available with mature bunkering infrastructure.
LNG has established bunkering facilities in major ports, with rapid expansion underway (185 ports as of January, 50 more expected by 2025). Global LNG demand is projected to rise by over 50% by 2040.
Methanol is globally produced, and its use as a marine fuel is emerging, with availability expected to improve as demand and infrastructure develop. Its liquid state allows compatibility with existing bunkering infrastructure.
Ammonia and Hydrogen are in the early stages of supply chain development, requiring significant investment in new bunkering infrastructure. Scaling green production for both fuels is a major challenge, with current capacity not meeting projected future demand for shipping.
Biofuels (FAME, HVO) can utilize established bunkering infrastructure in main ports due to their “drop-in” nature. However, overall supply is limited and not keeping pace with demand, with intense competition from other sectors like road transport and aviation.

Cost Implications (CapEx & OpEx)

The economic viability of alternative fuels is a critical factor for shipowners.

Traditional Fuels (HFO) are the cheapest, with VLSFO and MGO being progressively more expensive.
LNG is relatively inexpensive (~$400/ton). While LNG-fueled ships have higher upfront investment costs (CapEx) for specialized engines and storage , they can achieve 10-15% reduction in fuel consumption and 20-30% lower operating costs compared to HFO-fueled ships. LNG dual-fuel vessels often offer faster payback than methanol or ammonia.
Methanol is currently uncompetitive in price compared to traditional marine fuels , and e-methanol is significantly more expensive than fossil methanol. Newbuild methanol dual-fuel vessels cost approximately 11% more than a standard newbuild, and conversions range from 10-16%. Reduced-range methanol conversions can cut CapEx to 9-12%.
Ammonia is currently 2-3 times more expensive than regular ammonia, effectively costing $1900-2250 per ton of HFO replaced on an energy equivalent basis. Newbuild ammonia dual-fuel vessels cost approximately 16% more than a standard newbuild, and conversions range from 19-24%. A retrofit to ammonia propulsion could exceed half a vessel’s market value. Reduced-range ammonia-fuel oil conversions can be cost-effective from year zero.
Hydrogen is currently the most expensive alternative fuel, at around $6000 per ton. The high cost of equipment and the need for global green hydrogen production capacity are significant barriers.
Biofuels can be cost-effective, especially bio-LNG, when meeting low-carbon standards and supported by subsidies. However, pure FAME can be 100% more expensive than VLSFO, and HVO is also costly due to its energy-intensive production.

LNG and methanol currently serve as crucial transitional fuels. LNG offers immediate air quality benefits and moderate GHG reductions, supported by rapidly expanding infrastructure and established safety protocols. Methanol, being liquid at ambient temperatures, provides a pragmatic “bridge” solution by leveraging existing liquid fuel infrastructure and handling familiarity. Both fuels offer a “pathway” to net-zero through their bio- or e-versions (bio-LNG, e-LNG, e-methanol), allowing shipowners to incrementally invest and de-risk their fleets by utilizing existing or easily adaptable assets. The value of these fuels lies not just in their current form but in their ability to leverage existing infrastructure for more sustainable, future-proof options.

Ammonia and hydrogen represent the long-term, truly zero-carbon aspirations for shipping. Ammonia, being carbon-free, offers significant CO2 reduction potential, though challenges related to its toxicity, flammability, and the need to mitigate N2O emissions during combustion are paramount. Hydrogen, while offering zero emissions at the point of combustion, faces fundamental physical barriers related to its extremely low energy density and the associated storage challenges, making it more suitable for short-sea applications. The widespread adoption of both ammonia and hydrogen hinges on overcoming these significant hurdles related to safety, energy density, and the massive scaling of green production infrastructure. These fuels demand fundamental shifts in ship design, bunkering networks, and global energy supply chains.

The views expressed do not represent the company’s position on the matter. Stay informed through the Nitisara Platform and Blogs, and adapt to emerging trends that are poised to thrive in the competitive global marketplace.- https://nitisara.org/category/blogs-updates/

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