• Looking at just four alternative fuel pathways, tens of millions of tonnes of potential supply are yet to receive a final investment decision, as developers wait for credible long-term demand. 

• The International Maritime Organization Net-Zero Framework (IMO NZF) can build shipping’s role as a meaningful customer for a share of this supply by creating a global, predictable demand signal through reduction targets and penalties. 

• A reward mechanism in the IMO NZF could provide additional support for higher-cost, scalable fuels compatible with net-zero – support that is likely needed to make these fuels commercially viable. 

• Additional demand from other decarbonizing sectors could help move fuel production projects from the pipeline to bankable supply. 

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As we await the second extraordinary session of MEPC in October 2026, where Member States will resume the decision on adoption of the IMO NZF, we are looking to data to understand the implications of the regulation being considered.

The IMO NZF aims to incentivize the use of low-emissions maritime fuels – but a central question is whether there will be sufficient supply of these fuels to help shipping decarbonize.

In this edition of Countdown, we share analysis illuminating the potential supply of scalable low-emissions fuels for shipping, as well as the challenges that need to be addressed to unlock this supply, and how the IMO NZF can help.

 A central concern raised both inside and outside of IMO meetings is whether there will be enough low-emissions alternative fuels for ships to meet their IMO NZF compliance obligations. If this supply is constrained, ships may continue using fuel oil and rely on paying penalties to comply, undermining the regulation’s objective of driving a transition to lower-emissions fuels.

However, our analysis finds evidence of a significant potential supply of low-emissions fuel that could be suitable for compliance with the IMO NZF from projects that are currently under development.

Based on data availability, our analysis focuses on pre-FID (final investment decision) projects for four fuel pathways: blue ammonia, bio-methanol, e-ammonia, and e-methanol. The data shows projected production totaling 52 million tonnes of LSFO-equivalent energy (tLSFOeq) by 2030 or earlier across projects at various stages of pre-FID development.

Our analysis uses project-level data from Rystad Energy for potential fuel production facilities across the four pathways (Figure 1). We convert planned production volumes into LSFO energy equivalence (LSFOeq) and combine information about projects with techno-economic assumptions, like the cost of financing and the levelized cost of energy, to estimate unit production costs. We then convert modeled production costs into abatement costs per tonne of CO2-equivalent emissions (CO2eq) avoided compared to LSFO (see methods box for further details).

Estimated potential supply for bio-methanol, blue ammonia, e-ammonia, and e-methanol. Each bar represents one fuel production project in pre-FID stages. Projects are ordered by abatement cost (bar height), with the bar width indicating the quantity of annual fuel production. Abatement cost, or cost per tonne of emissions reduced below LSFO, is shown across projects of four low-emissions marine fuels. The full and non-risk weighted project-level data from Rystad Energy was combined with transport and storage costs but does not include rewards or surplus unit revenues from the IMO NZF. The 237 projects included in Figure 1 are taken from a broader dataset of 855 projects filtered based on pre-FID status, with a start-up year or commercial operation date (COD) of 2030 or earlier, and production volume of over 100,000 tonnes LSFOeq per year.

Production is not equally spread geographically, but neither is it concentrated in one country or region. Projects in this dataset are found across 59 countries in five continents. Figure 2 highlights illustrative projects spanning different regions and commercial operation dates (COD).

Figure 2: Estimated potential supply for bio-methanol, blue ammonia, e-ammonia, and e-methanol, with illustrative projects across different geographic regions highlighted. COD = commercial operation date. Note: The quoted volumes for individual fuel plants are not converted to LSFOeq.

The first question any business exploring the alternative fuel market for compliance will ask is whether the cost of fuel is lower than the cost of the IMO NZF penalties, known as Remedial Units (RUs).

Under the IMO NZF, there are two RUs corresponding to the framework’s two GHG fuel-intensity limits. The two RUs are set at 100 USD/tCO2eq (Tier 1) and 380 USD/tCO2eq (Tier 2), shown as dotted lines in Figure 1. By design, it will generally be cheaper to pay the Tier 1 RU than to switch to a low-emissions fuel.

The Tier 2 RU, by contrast, is more expensive than a significant share of low-emissions fuel: more than a quarter (26%) of the fuel projects and nearly half (44%) of the output (in tonnes) in our modeled data have abatement costs below 380 USD/tCO2eq. As a result, the Tier 2 RU price can potentially drive interest in using this fuel for compliance with the IMO NZF and reinforce the business case for making alternative fuels at scale.

Two mechanisms in the IMO NZF can reduce these modeled abatement costs further: revenue from Surplus Units, and rewards.

The design of the reward and the eligibility of fuels have not been finalized. We expect that these items will be discussed at the next intersessional working group on GHG emissions in April 2026, whose agenda includes development of the IMO NZF guidelines.

To date, IMO discussions on ZNZ rewards have emphasized the importance of enabling “early uptake of low and zero emissions fuels” and providing “long-term certainty to investors” (ISWG-GHG 12/WP.1, Annex 16, p.1, 2022). The combination of surplus unit revenues and a reward could expand the demand signal for fuels with costs that are higher than the 380 USD RU price.

This analysis suggests that, among the four pathways, blue ammonia has the lowest cost. However, depending on the capture technology, transportation, and upstream emissions, blue ammonia can have relatively high emissions, limiting its ability to reach net-zero.

Several fuels compatible with a net-zero target could achieve lower emissions, but typically at higher costs. Fuels in this category would include e-ammonia and e-methanol – as well as others not included in this data analysis, such as e-methane, e-diesel, and bio-oils. Many of these fuels are likely attractive in the long run, but immature today.

Figure 3: Alternative fuel pathways for shipping from the Center’s Maritime Decarbonization Strategy

Adding to the challenge of high fuel costs, many fuels compatible with net-zero need specialized storage, safety, and engine equipment that add cost and complexity. While the orderbook for many alternative-fueled vessels has grown in recent years, demand will also be limited by the share of the fleet able to use the fuels.

Policymakers will need to factor in these constraints on cost, maturity, and fleet readiness when designing reward mechanisms. Otherwise, regulations risk simply incentivizing fuels which are already competitive, rather than helping to create a credible demand signal strong enough to drive investment and support fuel projects in reaching FID.

It’s unlikely that all the projects in our dataset will achieve FID or start production. BNEF, for example, estimates that only about 9% of announced pre-FID green hydrogen projects will reach construction.

However, the overall attrition rate for our sample may be lower than that in the BNEF report. Around 26% of the low-emissions fuel pipeline in our dataset, equivalent to roughly 14 million tonnes of LSFO per year, is at stages ranging from announcement to feasibility study, with the remainder at later development stages.

Getting to FID ultimately requires solving the offtake challenge: producers generally need reliable long-term sales guarantees to secure financing. Those guarantees require an offtaker to have a robust balance sheet. These are expected to be limited in the shipping industry, in which many players are relatively asset-light and operate with thin margins.

While comparing modeled production costs to penalty rates in the IMO NZF helps confirm that shipping is a potential customer for these fuels, we cannot yet determine whether this industry will be a competitive offtaker. That may require working alongside other sectors, like power generation or fertilizer, or leveraging additional support programs, national subsidies, and voluntary premiums.

Nevertheless, developers are eyeing shipping as a potential customer. In a recent Transport & Environment study, which surveyed European fuel producers, shipping was the most frequently cited potential offtaker of e-methanol and e-ammonia in Europe. A credible incentive to use low-emissions energy, such as the IMO’s global framework, could be an enabling factor to help these projects move from possibilities to practical reality.

Contrary to concerns about a lack of supply, our analysis suggests that even across a limited set of pathways, a meaningful number of pre-FID low-emissions fuel projects are currently in development.

At the same time, these projects face challenges including high costs, project attrition, fleet and infrastructure readiness – and, critically, signing offtake agreements. As a result, only a portion of this pipeline is likely to materialize without additional support.

Whether the IMO NZF is ultimately adopted, and how rewards are designed in its guidelines, could play a decisive role in determining shipping’s role as a customer for innovative low-emissions fuels.

Figure 4

Note on data source: Rystad Energy (full and non-risk weighted project pipeline). Abatement cost modeling and analysis by the Center. Rystad Energy's views on fuel availability and costs may differ.

Authors: Boudewijn Pragt, Yuji Kosaka, Joe Bettles and Theodore Talbot.