Navigating Maritime Decarbonization: From LNG Challenges to E-Fuel Subsidies and Carbon Capture

1. Summary

• As of May 20, 2025, the maritime sector is facing intensified pressures to decarbonize, driven largely by stringent regulations enacted by the International Maritime Organization (IMO) aimed at reducing greenhouse gas emissions. These new rules significantly challenge the previously embraced narrative surrounding LNG (liquefied natural gas), which was once hailed as an interim solution towards cleaner shipping. Recent findings indicate that LNG's perceived advantages are being undermined due to increasing scrutiny of methane slip, compelling operators to reconsider LNG's viability as a transition fuel. In response to these regulatory changes, the industry is witnessing a surge in innovative practices, with the development of onboard carbon capture systems using solid oxide fuel cells (SOFCs) actively progressing. Concurrently, e-fuels, also known as electro-fuels, are being positioned as essential components of the zero-emissions puzzle, although their widespread adoption hinges critically on the availability of substantial government subsidies and supportive policy frameworks. Furthermore, alternative propulsion options, including hybrid-electric systems and wind-assisted sails, are evolving, underpinned by recent pilot projects and collaborative industry efforts presented at conferences. This comprehensive overview assesses the current trajectories of various decarbonization pathways, acknowledging both the challenges and the potential for transformative change within the maritime industry toward achieving net-zero emissions by mid-century.

• In summarizing the collective advancements and hurdles within the shipping sector, it is evident that each alternative fuel and technology presents a distinct set of compatibility and integration challenges. The comprehensive analysis underscores the necessity for a multipronged approach that not only addresses the technological viability of e-fuels and carbon capture systems but also contemplates the critical implications of required infrastructure upgrades and aligned regulatory support. By illuminating the intricate interplay between emerging technologies and legacy fuels, this overview seeks to engage stakeholders in a constructive dialogue about the sustainable evolution of the maritime industry.

2. IMO Climate Rules and the Reassessment of LNG

• 2-1. Overview of the latest IMO greenhouse-gas reduction regulations

• The International Maritime Organization (IMO) has recently adopted stringent greenhouse gas (GHG) reduction regulations that are poised to reshape the maritime landscape. As of April 2025, during the 83rd Marine Environment Protection Committee (MEPC 83) meeting, the IMO unveiled a comprehensive Net-Zero Framework aimed at significantly reducing emissions from international shipping. This framework mandates the calculation of a greenhouse gas fuel intensity (GFI) score that each vessel must adhere to annually starting January 2028. The targets are progressively stringent, culminating in a 43% reduction of GHG intensity by 2035 relative to a 2008 baseline. These measures encompass a variety of technical revisions, including stringent monitoring and assessment of methane slip, which is critical in evaluating the environmental impact of LNG as a marine fuel.

• Furthermore, the MEPC 83 session has introduced a two-tier pricing system for non-compliance with emissions targets, where penalties escalate significantly, potentially impacting the economic viability of LNG as a transitional fuel. Compliance is not merely regulatory; it also involves financial considerations tied to emission reductions, underscoring the urgent need for technological advancements within the LNG sector.

• 2-2. Why LNG’s transition-fuel narrative is being challenged

• Historically perceived as a bridge fuel towards cleaner shipping, LNG is now scrutinized under the latest IMO regulations. A key factor is the revised understanding of methane slip, which diminishes the perceived carbon advantage of LNG. The Bureau Veritas analysis raises concerns that LNG-fueled vessels may categorize into a lower compliance band, threatening their operational legitimacy beginning as early as 2031. Without decisive improvements in methane management technologies, LNG's positioning as a sustainable alternative is precarious. This evolving regulatory environment is forcing industry stakeholders to reassess LNG’s role in maritime energy transition, leading to an increased emphasis on alternative fuels.

• Moreover, the latest regulations compel LNG carriers to adopt new measurement guidelines for emissions, which could reveal unfavorable compliance outcomes and create further liabilities for operators. The uncertainty surrounding LNG’s future viability raises critical questions about the infrastructure investments already made and the potential hesitancy among stakeholders to pursue LNG-centric projects.

• 2-3. Industry responses to tighter methane and CO₂ targets

• The maritime industry’s response to the tightened IMO methane and CO₂ targets reflects a growing acknowledgment of the urgent need for innovation within the LNG sector. In reaction to the new regulations, various stakeholders, including shipowners and equipment manufacturers, are exploring enhanced methane reduction technologies and infrastructure adaptations to mitigate emissions. Key initiatives include developing onboard measurement systems designed to better capture actual emissions rather than relying on estimated figures.

• Additionally, the engagement of LNG carriers in voluntary compliance and trials for methane slip control technologies aims to bolster their compliance standing under the new GFI metrics. As part of a proactive strategy, companies are also looking at collaborations for R&D investments into renewable alternatives that could provide a clean slate for compliance, recognizing that LNG’s traditional role may need significant recalibration to remain relevant.

• With the introduction of compliance trading via the GFI Registry, stakeholders are beginning to view compliance not just as a regulatory burden, but as a potential market opportunity, influencing investments towards technologies that facilitate certification under the Sustainable Fuels Certification Scheme established by the IMO.

3. Onboard Carbon Capture with Solid Oxide Fuel Cells

• 3-1. Havila Voyages’ development of SOFC-based CO₂ capture systems

• As of May 20, 2025, the LNGameChanger project, a collaborative initiative involving Havila Voyages, is actively focusing on the development of onboard carbon capture systems utilizing solid oxide fuel cells (SOFCs). This project aims to create an innovative powertrain that integrates LNG-fueled SOFCs with high-efficiency CO₂ capture and liquefaction capabilities. Conducted in partnership with HAV Group, Molgas Norway, and the research institution SINTEF, the project targets significant reductions in CO₂ emissions and seeks to align with the stringent FuelEU Maritime regulations expected to be in force by 2050.

• During a press conference in Ålesund, Norway, representatives of the consortium emphasized the project's ambition to design a low-or zero-emissions solution positioned for future growth in the maritime industry's LNG market. The focus on decarbonization reflects a broader industry trend toward sustainable practices, driven by regulatory pressures and societal expectations.

• 3-2. Technical principles and integration challenges of SOFC on ships

• The implementation of SOFC technology on ships presents several technical principles and challenges. SOFCs are known for their efficiency and ability to generate electricity through electrochemical reactions involving hydrogen and oxygen, producing water and heat as byproducts. In the context of the LNGameChanger project, LNG acts as the fuel source, with the powertrain designed to achieve a high degree of CO₂ capture efficiency. The gases produced during the fuel conversion process contain a much higher concentration of CO₂, around 60-70%, compared to conventional combustion engines, which usually emit single-digit percentages. This elevated concentration is crucial for the efficacy of the onboard CO₂ separation and liquefaction system, as it allows for a compact and energy-efficient removal of CO₂ from the exhaust gases.

• However, integrating SOFC technology within existing ship structures raises logistical challenges. This includes optimizing space and weight requirements for both the fuel cells and the CO₂ storage systems. The project aims to evaluate these parameters while also establishing user cases and operational profiles specific to the vessels involved, such as Havila Voyages' coastal cruise ships.

• 3-3. Projected emission reductions and pilot timelines

• The LNGameChanger project targets a CO₂ equivalent intensity between the 2045 and 2050 emissions limits set by the FuelEU Maritime regulations. For each tonne of LNG converted in the specified SOFC powertrain, approximately 1.25 kg of CO₂ is expected to be captured and liquefied onboard. This not only highlights the project's focus on significant emissions reductions but also underscores its viability in achieving compliance with future regulations.

• The initiative is actively in its pilot phase, with plans for thorough testing and evaluation of the SOFC system. The project timelines are structured to assess energy efficiency, emissions targets, and overall performance metrics, with progress updates anticipated as testing continues throughout 2025 and beyond. The partnership is committed to transparency regarding developments, which could play a pivotal role in shaping industry norms and expectations regarding the use of LNG and SOFC technology in maritime operations.

4. E-Fuels in Shipping: The Crucial Role of Subsidies

• 4-1. Production pathways and classification of maritime e-fuels

• E-fuels, or electro-fuels, are synthetic fuels produced from renewable electricity and have been categorized into several pathways, mainly focusing on e-methanol, e-diesel, and e-methane. As of May 20, 2025, the production of e-methanol is advancing, with shipping companies like Hapag-Lloyd and Maersk already entering contracts for significant annual quantities, reaching 250,000 tons from 2026 onwards. This embrace of e-fuels reflects a broader industry pivot toward sustainable alternatives in the face of stringent emissions regulations imposed by the International Maritime Organization (IMO).

• Current research emphasizes that to scale up production effectively, there must be large expansions in renewable electricity sources and infrastructure required for e-fuel synthesis. This process often involves utilizing excess renewable energy to break down water into hydrogen (via electrolysis) and combining it with carbon dioxide captured from the atmosphere or industrial processes to create synthetic fuel. Successful deployment of these technologies hinges significantly on supportive policy frameworks and incentives.

• 4-2. Cost barriers and subsidy models enabling competitiveness

• Despite potential, the current cost of e-fuels remains prohibitively high, primarily due to the nascent infrastructure and technology required for their production and distribution. A report from UMAS indicates that without targeted government subsidies and support, the price gap between e-fuels and traditional marine fuels (like heavy fuel oil) will likely hinder competitiveness, stalling a transition to greener shipping practices. The report highlights that financial support from entities such as the IMO could involve mechanisms like levies on emissions, which have been discussed but not yet implemented.

• The true financial viability of e-fuels is expected to improve over time; however, immediate action is deemed crucial. Industry experts argue that while the transition may be arduous, it is essential that significant subsidies reduce costs to enable widespread adoption. This move is believed not only to stimulate immediate market uptake but also to catalyze long-term investments in sustainable fuel technologies.

• 4-3. Policy frameworks and early adopters in carrier contracts

• As of May 2025, several foundational policies aimed at promoting e-fuel adoption are in the works, including various regulations and national strategies around carbon neutrality in shipping. The success of these policies hinges on coherent collaboration among governments, industry stakeholders, and international bodies. Early adopters stand at an advantageous position because they can negotiate long-term contracts that stipulate the inclusion of e-fuels in their operational strategies, effectively locking in competitive rates before market prices normalize.

• The narrative around government involvement is gaining momentum, proposing that substantial subsidies or tax incentives could uplift the e-fuel market to dimensions where it operates competitively alongside traditional fuels. Additionally, existing contracts granted by prominent shipping lines for e-fuel supply indicate an acknowledgment of these fuels as viable long-term solutions to maritime emissions, ultimately aligning with broader environmental commitments.

5. Alternative Propulsion Innovations: Sails, Hybrid-Electric and Hydrogen

• 5-1. The resurgence of wind-assisted propulsion in emissions strategies

• The maritime industry is witnessing a revival of interest in wind-assisted propulsion systems as part of broader emissions reduction strategies. This trend reflects a growing recognition of the advantages of harnessing natural wind energy alongside traditional engine power. According to a report published in March 2025, wind propulsion technology, once considered outdated, is now being integrated into modern ship designs to enhance fuel efficiency and minimize greenhouse gas emissions.

• Notably, the Liberian Registry has highlighted the promising results of wind-assisted systems on liberally-flagged vessels, which have demonstrated significant improvements in operational efficiency. These systems, which can be retrofitted to existing ships or incorporated into new designs, are seen as an essential tool in the industry's quest for greener sailing solutions. The implementation of wind propulsion not only addresses regulatory pressures but also offers cost savings through reduced fuel consumption.

• 5-2. Key insights from the 2024 Maritime Hybrid, Electric & Hydrogen Fuel Cells Conference

• The 2024 Maritime Hybrid, Electric & Hydrogen Fuel Cells Conference, held in Bergen, Norway, convened critical players in the maritime industry to examine the latest developments in alternative propulsion technologies. The discussions underscored the importance of transitioning towards hybrid and electric systems as viable solutions for reducing emissions in the maritime sector.

• Key themes emerged from this gathering, including the acknowledgment that electrification, whether through hybrid or fully electric systems, can lead to substantial emissions reductions. Experts shared insights on the growing adoption of fuel cells, positioning them as essential for achieving zero-emissions operations. Addresses on the challenges in charging infrastructures and standardizing shore power highlighted the collective need for innovative strategies to facilitate the transition.

• Exclusive presentations at the conference revealed advancements in battery technology and their implications for shipowners. Presenters also discussed the role of regulatory frameworks in fostering an environment conducive to technological adoption and the urgency of ensuring compliance with international emissions reduction targets.

• 5-3. Progress in hybrid-electric drives and hydrogen fuel-cell trials

• As of early 2025, substantive progress has been observed in the development of hybrid-electric drives and hydrogen fuel-cell trials within the maritime sector. Hybrid systems, which combine traditional fuel sources with electric power, are incrementally becoming more prevalent, suggesting a shift towards reducing dependence on fossil fuels.

• The advancements in fuel cell technology have generated significant interest, with several maritime stakeholders undertaking trials to evaluate the viability of hydrogen as a marine fuel. These trials focus on addressing technical challenges such as energy density, operational safety, and regulatory approvals. While the majority of testing remains at pilot project stages, optimistic projections indicate that successful evaluations could transition some of these systems into commercial operation within the next decade. The 2024 Conference served as a platform for industry experts to collaborate and share findings, emphasizing a collective movement towards exploring hybrid and hydrogen-powered solutions as the maritime sector aims to cut emissions ahead of looming regulatory deadlines.

6. Future Outlook and Integration Challenges

• 6-1. Synergies and trade-offs among decarbonization pathways

• The maritime industry is currently navigating a complex landscape of decarbonization pathways, which include LNG, carbon capture technologies, e-fuels, and alternative propulsion methods like hybrid-electric systems and hydrogen fuel cells. As it stands on May 20, 2025, the need to identify synergies between these pathways is paramount to meet increasingly stringent IMO regulations and national commitments toward emissions reductions. For instance, while LNG has been promoted as a transitional fuel, recent developments in regulatory frameworks have necessitated a reevaluation of its role in the medium to long-term; further complicating the narrative regarding its efficacy as a decarbonization strategy. Meanwhile, the development of e-fuels and the progression of carbon capture technologies, particularly onboard systems, promise to offer complementary solutions. However, it remains critical to acknowledge the potential trade-offs: these technologies may require significant upfront investments, shifts in infrastructure, and enhanced regulatory frameworks to support integration. Therefore, successful maritime decarbonization will hinge on a coordinated strategy that incorporates fuel efficiency measures alongside innovative technologies.

• 6-2. Infrastructure, financing, and regulatory alignment needs

• For the maritime sector to achieve its decarbonization goals, substantial investments in infrastructure will be vital. This includes the need for refueling infrastructures for e-fuels and hydrogen, as well as the development of carbon capture storage facilities. On May 20, 2025, stakeholders must recognize that financing these initiatives will require both public and private sector commitments. Reports underscore that government subsidies have become indispensable in bridging the cost gap associated with new technologies, especially the shift to e-fuels. In addition, alignment of regulatory frameworks needs to be prioritized on both national and international levels. The lack of consistent policies can hinder the adoption of innovative solutions and may contribute to compliance challenges that shipowners face. Harmonized regulations will serve to provide clarity and predictability for investments, ultimately facilitating the transition to a more sustainable maritime industry.

• 6-3. Projected timelines toward commercial scale-up and net-zero targets

• The maritime sector is at a pivotal point in its journey toward achieving net-zero emissions by 2050, as mandated by the IMO's 2023 GHG Strategy. With key mid-term milestones set for 2030 and 2040, stakeholders must act decisively to translate these ambitious timelines into viable commercial frameworks. As of May 20, 2025, the industry has begun laying the groundwork for technological advancements and market-ready solutions that are essential for scaling up emissions reduction efforts. The capital investments needed for retrofitting existing vessels, alongside the timeline for the introduction of new technologies and fuels, are crucial factors that will determine the pace of this transition. Furthermore, pilot projects, such as those focusing on hybrid-electric systems and carbon capture technologies, will play a significant role in demonstrating feasibility at scale. Ultimately, by fostering collaborative partnerships among industry stakeholders and ensuring strategic investments are made, the maritime sector can aspire to reach commercial scale and align with net-zero targets within the designated timeframes.

Conclusion

• The maritime industry's pursuit of decarbonization represents a dynamic interplay of established and emerging technologies alongside evolving regulatory demands. As of May 20, 2025, the landscape showcases both challenges and opportunities: conventional fuels such as LNG are increasingly burdened by stringent emissions regulations, while the potential of e-fuels remains contingent on unprecedented subsidy models to foster competitive pricing against traditional fuels. Meanwhile, innovative solutions, including onboard carbon capture using solid oxide fuel cells, wind-assisted propulsion technologies, and hybrid-electric systems, continue to emerge and demonstrate the promise of substantial emissions reductions. However, the successful deployment of these technologies requires coordinated shifts in regulatory frameworks and comprehensive infrastructure investment.

• To realize the ambitious goal of net-zero operations by 2050, stakeholders must navigate the intricacies associated with technology readiness, financing shortages, and the need for harmonized global regulations. This necessitates a cohesive strategy that facilitates collaboration among industry participants and government bodies to align incentives, fund pilot projects, and standardize compliance measures across various markets. By fortifying these efforts, the maritime sector can not only meet but potentially exceed the stringent emissions reduction targets set forth, paving the way for a more sustainable, resilient shipping industry in the coming decades. Looking forward, the integration of diverse fuel sources and technological innovations stands as a pivotal component in shaping a greener maritime future, and it is through proactive engagement and investment that the industry can chart a credible pathway toward realizing these transformative goals.

Glossary

• IMO climate rules: The International Maritime Organization (IMO) regulations established to reduce greenhouse gas emissions in the maritime sector. As of May 20, 2025, these rules mandate a Net-Zero Framework with specific greenhouse gas fuel intensity (GFI) scores that vessels must meet annually, aiming for a 43% reduction of GHG intensity by 2035 relative to 2008 levels.

• LNG fuel: Liquefied Natural Gas (LNG) is a fossil fuel that has been historically viewed as a transitional solution toward cleaner shipping. As per May 20, 2025, its viability is under scrutiny due to concerns regarding methane slip and compliance with stringent emissions regulations imposed by the IMO.

• carbon capture: The process of capturing carbon dioxide emissions produced from industrial processes or combustion. Innovative methods, such as onboard carbon capture using solid oxide fuel cells (SOFCs), are actively being researched and developed within the maritime industry to reduce emissions as of May 20, 2025.

• solid oxide fuel cell (SOFC): A type of fuel cell that generates electricity through electrochemical reactions involving hydrogen and oxygen, known for its high efficiency. These cells are being integrated into new maritime technologies aimed at improving onboard carbon capture systems.

• e-fuels: Synthetic fuels produced from renewable energy sources, classified into e-methanol, e-diesel, and e-methane. As of May 20, 2025, they are being investigated as sustainable alternatives in the maritime sector, hinging heavily on government subsidies for competitiveness against traditional fuels.

• subsidies: Financial assistance provided by governments to support the development and competitiveness of certain technologies, such as e-fuels in the maritime industry. As of May 20, 2025, subsidies are essential for enabling e-fuels to compete with traditional marine fuels.

• wind propulsion: A method of assisting vessel propulsion using wind energy. With a resurgence in interest as of May 20, 2025, this technology is being re-evaluated as an effective emissions reduction strategy, showcasing economic and environmental benefits.

• hydrogen fuel cell: A fuel cell that generates electricity from hydrogen, producing only water and heat as byproducts. This technology is gaining traction in maritime applications due to its zero-emissions potential, with trials being conducted as of May 2025.

• hybrid-electric systems: Technologies that combine traditional fuel sources with electric power to drive a vessel. These systems represent a significant trend in reducing marine emissions and are becoming increasingly prevalent in shipping practices as of early 2025.

• decarbonization: The process of reducing carbon emissions within an industry. In the context of shipping, as of May 20, 2025, the maritime sector is navigating a complex array of technologies and regulations to transition toward net-zero emissions by 2050.

• emissions reduction: Strategies and technologies aimed at decreasing greenhouse gas outputs from various sources, including maritime shipping. The industry is currently under pressure to implement effective emissions reduction measures to comply with stringent regulatory frameworks as of May 20, 2025.

Source Documents

• Riviera - News Content Hub - IMO climate rules challenge LNG fuel assumptionshttps://www.rivieramm.com/news-content-hub/imo-climate-rules-challenge-lng-fuel-assumptions-84574
• Riviera - News Content Hub - Havila Voyages joins in development of solide oxide fuel cell-based onboard carbon capture systemhttps://www.rivieramm.com/news-content-hub/havila-voyages-collaborates-on-new-solution-for-ccs-84442
• Finding Zerohttps://maritime-executive.com/magazine/finding-zero
• Riviera - News Content Hub - The secret to shipping e-fuels: subsidieshttps://www.rivieramm.com/news-content-hub/the-secret-to-shipping-e-fuels-subsidies-84152
• Maritime Hybrid, Electric & Hydrogen Fuel Cells Conference, 2024 - Events - Rivierahttps://www.rivieramm.com/events/events/maritime-hybrid-electric-and-hydrogen-fuel-cells-conference