More than 80% of global merchandise trade by volume moves by sea, making shipping one of the least visible but most consequential components of the global economy. UN Trade and Development continues to describe maritime transport as the backbone of international trade, while recent disruptions in the Red Sea have demonstrated how quickly longer routes, higher freight costs, and constrained capacity can transmit into the wider economy.
That exposure makes the shipping industry’s fuel transition fundamentally different from a conventional technology substitution exercise. Shipowners are being asked to commit capital to vessels expected to operate for 20 years or more while the regulatory framework is still evolving, alternative fuel supply chains remain uneven, and the economics of different propulsion options vary substantially by vessel type and route.
The result is an increasingly important question for shipping investors: not simply which fuel is technically viable, but which combination of fuel, vessel technology, infrastructure and regulation will remain commercially viable over the asset’s lifetime.
The scale of the existing fleet explains why the transition cannot happen quickly. The source analysis estimates roughly 115,000 vessels above 100 gross tonnes, with approximately 2.5 billion tonnes of deadweight capacity. Its broader point is consistent with UNCTAD data: the existing fleet remains overwhelmingly dependent on conventional fuels even as alternative fuel technologies become more prominent in newbuilding.
UNCTAD’s 2025 Review of Maritime Transport puts the issue in sharper terms. More than 90% of the active fleet still operates on conventional fuels, while alternative fuel vessels already account for more than half of new ship tonnage on order. At the same time, the global fleet expanded by 3.4% in 2024, illustrating the mismatch between the speed of fleet renewal and the much longer investment horizon required to transform it.
That distinction matters. A growing alternative fuel orderbook does not mean that the global shipping system has already transitioned. It means capital is beginning to position itself for a different regulatory and fuel environment while the installed base remains overwhelmingly fossil fuel dependent.
Geopolitics is increasing the energy intensity of maritime trade
The industry’s fuel problem is also being shaped by geography.
UNCTAD reported that shipping distances increased sharply in 2024 as vessels avoided disrupted routes, pushing global ton miles up 5.9%, almost three times the growth in maritime trade volume. Ships travelling longer distances consume more fuel, require more capacity, and generate additional emissions even when the amount of cargo moved remains unchanged.
This creates a structural complication for decarbonization policy. Efficiency improvements can be offset by longer voyages caused by geopolitical disruption. A ship that becomes more efficient on a voyage can nevertheless consume more total fuel if the voyage itself becomes substantially longer.
That is increasingly relevant to energy commodities. Oil, gas and coal remain major components of maritime trade, while disruption around strategic waterways can alter both fuel prices and shipping distances simultaneously.
The implication is that marine fuel demand cannot be analysed independently from geopolitics. Oil prices affect bunker prices directly, while sanctions, route diversions and port availability affect how much fuel ships require in the first place.
Regulation is becoming more coherent globally, but not yet predictable
The IMO approved the architecture of its Net Zero Framework in April 2025, incorporating a global fuel standard and a greenhouse gas pricing mechanism. However, formal adoption was postponed after the October 2025 extraordinary session was adjourned. The IMO subsequently scheduled further work during 2026, with the second extraordinary session expected to resume on 4 December 2026, subject to confirmation at MEPC 85.
That distinction is important. The industry does not have a finalized global carbon pricing framework today, but it is not accurate to describe the IMO as having no emerging global framework.
In parallel, the European Union has already moved much further.
Maritime transport entered the EU Emissions Trading System in January 2024. For ships covered by the system, 100% of emissions are accounted for on voyages between EU ports, while 50% are covered on voyages between an EU port and a non-EU port. Methane and nitrous oxide entered the ETS scope from 2026. The surrender obligation is also being phased in, reaching 100% from 2027 onward for the emissions covered by the system.
The EU’s FuelEU Maritime regulation adds another layer.
From 2025, ships above 5,000 gross tonnes calling at European ports face progressively tighter limits on the greenhouse gas intensity of energy used onboard. The reduction starts at 2% relative to the 2020 reference value and reaches 80% by 2050. Unlike a simple tank-to-wake emissions standard, FuelEU uses a well-to-wake methodology covering the lifecycle of the energy used.
For shipowners, this creates a materially different investment environment from the one that existed only a few years ago.
The regulatory question is no longer whether carbon and fuel standards will influence vessel economics. They already do. The unresolved question is how global and regional systems will interact, how compliance costs will evolve, and which technologies will deliver the lowest cost of compliance over the operating life of a vessel.
The fuel transition is constrained by physics as much as policy
One of the strongest arguments concerns fuel energy density. This is an area where the underlying engineering constraint is real, even though some of the article’s broader environmental conclusions go considerably further than the available evidence supports.
The analysis calculates substantially lower volumetric energy density for methanol, ammonia, and hydrogen than for conventional marine fuel. Its table puts methanol at approximately 42% of the volumetric energy density of VLSFO, liquid ammonia at approximately 35%, and liquid hydrogen at approximately 23%.
The consequence is not merely a matter of fuel cost.
A vessel designed around a lower energy density fuel may require substantially more tank volume to provide equivalent voyage energy. That can affect cargo capacity, vessel architecture, fuel storage arrangements, bunkering procedures and route flexibility.
Hydrogen presents an even more extreme case. The challenge is not only the amount of energy contained in the fuel but also the energy and infrastructure required to produce, liquefy, transport, store and ultimately deliver it.
The International Energy Agency’s 2026 hydrogen analysis estimates that where pure hydrogen is required at the point of use, shipping can involve energy consumption above 10 kWh per kilogram of hydrogen because of liquefaction or reconversion requirements. The IEA estimates minimum shipping-related costs of around $2 per kilogram in such configurations.
That does not make hydrogen irrelevant to maritime transport. It does, however, demonstrate why comparing fuels solely on their tailpipe emissions is insufficient.
The relevant investment metric is the entire system required to deliver usable energy to the vessel.
Alternative fuel adoption is becoming more selective
The emerging orderbook also argues against treating “alternative fuels” as a single category.
DNV reported 275 alternative fuel vessel orders in 2025, down 47% from the previous year as total newbuilding activity also declined. LNG accounted for 188 alternative fuel orders and approximately 31% of total gross tonnage ordered. Methanol orders fell to 61 from 149 in 2024, while ammonia and LPG recorded limited uptake.
That is a very different picture from a generalized rush toward zero carbon fuels.
The investment appears to be concentrating where fuel availability, vessel technology and commercial demand already have some alignment. DNV found particularly strong alternative fuel activity in container shipping, where LNG and methanol have developed supply chains and where cargo owners are increasingly imposing emissions requirements on logistics providers.
The IEA similarly reported that more than 60 methanol-powered vessels were operating by June 2025, with almost 300 more on order. But it also identified bunkering infrastructure as an important potential bottleneck. Singapore alone supplies roughly one fifth of global marine bunkering demand, while 17 ports account for more than 60% of sector refuelling needs.
The investment implication is straightforward: a fuel does not become commercially scalable merely because engines capable of consuming it exist.
Fuel production, certification, storage, port infrastructure, safety procedures, vessel availability, and long-term pricing must develop together.
That creates a classic coordination problem. Fuel suppliers need sufficient vessel demand before committing capital to infrastructure. Shipowners need confidence in fuel availability before committing hundreds of millions of dollars to vessels designed around that fuel.
LNG illustrates the transitional dilemma
LNG demonstrates why the distinction between technological readiness and decarbonization performance matters.
LNG has become one of the leading alternative fuel choices in newbuild shipping because the technology and bunkering infrastructure are relatively mature compared with ammonia or hydrogen. Dual fuel engines can also provide operational flexibility.
But LNG is still a fossil fuel, and its climate performance depends partly on methane leakage and methane slip as well as the upstream emissions associated with natural gas production.
That is precisely why the EU’s FuelEU methodology includes methane and nitrous oxide and assesses greenhouse gas intensity on a well-to-wake basis.
The investment case therefore depends on what the regulation ultimately rewards.
An engine that offers lower conventional emissions today may have a different economic value if future rules increasingly discriminate according to lifecycle emissions. Conversely, infrastructure built for LNG could become strategically valuable if bio-LNG or synthetic methane develops at scale.
This is why fuel flexibility is becoming an important hedge rather than simply a technical specification.
Efficiency remains the least controversial investment
There is a relatively broad area of agreement across the competing perspectives: reducing the energy required to move a tonne of cargo remains economically valuable regardless of which fuel eventually dominates.
Hull optimization, propulsion efficiency, voyage optimization, wind-assisted propulsion, improved engines, digital route planning and operational measures can reduce fuel consumption without requiring shipowners to make a binary bet on a future fuel system.
The EU’s 2026 Maritime Innovation Fund call reflects this logic. Its eligible technologies include advanced energy efficiency measures alongside alternative fuels, electrification, wind-assisted propulsion and zero-emission technologies.
This is significant because it changes the sequencing of investment.
Instead of assuming that every vessel must immediately select a final decarbonization technology, owners can prioritize measures that improve economics under almost any future regulatory scenario, while preserving optionality on fuel.
That strategy becomes particularly valuable when vessels have operating lives measured in decades.
The real risk is stranded capital
The central investment problem facing shipping is therefore not simply whether ammonia, methanol, LNG, hydrogen or another fuel will eventually win.
It is whether today’s vessel and infrastructure investments will remain competitive under tomorrow’s regulatory and fuel market.
A conventional vessel can face rising carbon compliance costs. A dual-fuel vessel can reduce fuel-switching risk but still depend on the availability and cost of its alternative fuel. A vessel optimized around ammonia or hydrogen can reduce exposure to some future regulatory requirements but increase dependence on fuel infrastructure that is still developing.
The source article correctly identifies this as a capital allocation problem. Shipowners ordering vessels today must make assumptions about fuel prices, regulation, infrastructure, and technology that extend well beyond the current investment cycle.
What has changed is that the uncertainty can no longer be attributed simply to a lack of regulation. Europe already has binding rules, while the IMO is working toward a global framework. The uncertainty increasingly comes from the interaction between multiple regulatory systems and the question of which low greenhouse gas fuels can achieve sufficient scale at commercially acceptable cost.
That makes regulatory stability economically important even for owners that support decarbonization.
A clear rule with a demanding target can be easier to finance than an apparently softer rule whose direction changes repeatedly. Capital can price a known constraint. It struggles to price an unresolved technology pathway.
For shipping, the next phase of the energy transition will therefore be decided not only in engine rooms and shipyards, but in fuel supply contracts, port infrastructure projects, carbon markets and regulatory negotiations.
The critical investment signal will be whether those systems begin converging quickly enough for shipowners to make long-lived capital decisions with reasonable confidence. If they do, the transition can become an engineering and financing problem. If they do not, the industry is likely to continue favouring flexible vessels, efficiency improvements and incremental commitments while waiting for the economics of the next fuel system to become clearer.
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