Shipping decarbonization requires both life-cycle perspective and economic instruments

Fayas Malik Kanchiralla, postdoctoral researcher at the Department of Environmental and Energy Sciences, has together with colleagues analysed how the International Maritime Organization's (IMO) proposed climate framework affects shipping’s transition to new marine fuels. The study has been published in Nature Energy.

Climate regulations for shipping may have the opposite effect if they are poorly designed. A new study from Chalmers University of Technology, published in Nature Energy, shows that emissions risk being shifted from ships to fuel production if the International Maritime Organization (IMO) removes parts of its proposed climate framework. The researchers conclude that both economic instruments and lifecycle-based fuel requirements are needed to reduce shipping’s climate impact.

In the study Marine fuel choices and related life-cycle environmental impacts under global shipping policies, researchers at the Department of Environmental and Energy Sciences at Chalmers University of Technology analysed IMO’s proposed global climate framework for shipping. The study was recently published in Nature Energy. Using a global energy system optimisation model, the researchers compared different approaches for guiding the transition to fossil-free marine fuels.

The aim was to investigate how different policy instruments influence future fuel choices, both with and without competition for resources from other sectors.

The NZF combines two elements: a goal-based greenhouse gas fuel intensity standard, which limits the lifecycle emissions of marine fuel, and an economic mechanism that penalizes ships for exceeding those limits. The new study shows that fuel choices depend strongly on the wider climate policy context. Without a global carbon budget constraining all sectors, the study finds that the NZF steers shipping predominantly toward biofuels, as these meet the base compliance target at relatively low cost.

However, under a global 2°C target, the picture changes dramatically. Competition across sectors for limited biomass and renewable electricity raises resource costs. As a result, green ammonia produced from renewable energy and bioenergy with carbon capture and storage (BECCS) becomes the most cost-effective fuel option.

“The IMO Net-Zero Framework is an important step forward for shipping. The fuel choices under the framework are sensitive to what happens beyond shipping — particularly in sectors like aviation and heavy industry. This means that national and regional climate targets in the locations where ships operate or bunker fuel will also play an important role in shaping the transition to new marine fuels" says Fayas Malik Kanchiralla, postdoctoral researcher at Chalmers University of Technology.

A levy without a fuel standard can backfire

The study also warns that a simple pricing mechanism carries a high risk of burden-shifting. A marine levy applied without a lifecycle-based fuel standard makes grey ammonia – produced from fossil natural gas without carbon capture – the cost-effective choice for shipowners. Because the levy only charges exhaust emissions, the potentially large share of greenhouse gases generated during fuel production go entirely unpenalized, effectively relocating rather than eliminating the climate impact.

In the study, six policy scenarios are examined. The two best-performing configurations shared a common feature: both paired a pricing mechanism with a fuel intensity standard. This confirms that these two elements are complementary: the fuel standard ensures emissions are not shifted elsewhere, while the pricing mechanism drives shipowners to comply. The results show that the design of policy can be at least as important as technological development – and that poorly designed regulations risk steering investments towards solutions that do not deliver required climate benefits.

"A pricing mechanism alone is not enough. Penalizing ship exhaust alone risks locking in fossil fuels with high upstream emissions. A fuel standard without a pricing mechanism generates no revenue for incentives or a just transition. Our results are clear: both elements are needed, and we hope neither is dropped in the upcoming IMO negotiations" says Fayas Malik Kanchiralla

The life-cycle perspective beyond climate is crucial

When life cycle perspective is included in the fuel intensity part of policy, the study goes beyond greenhouse gas emissions to assess a broader range of environmental impacts using prospective life cycle assessment. This captures impacts that are often overlooked in current shipping policy, including land use, resource consumption, eutrophication, acidification, and particulate matter. As ammonia emerges as one of the most cost-effective fuel alternatives across many scenarios, the study also highlights the associated risk of increased emission of nitrogen compounds, underscoring the need for stricter air quality regulation alongside decarbonization policy. Biofuel adoption also carries land use risks that warrant explicit inclusion of direct and indirect land use in the IMO's lifecycle assessment guidelines. On a more positive note, the study finds that the transition reduces particulate matter and acidification impacts — a direct benefit of the sulfur-free nature of ammonia and biofuels compared to conventional heavy fuel oil.

“A life cycle perspective that looks beyond greenhouse gas emissions is important to prevent unintended consequences. As sectors move towards ammonia and biofuel, we need stricter air quality regulation and updates on IMO LCA guidelines to explicitly include indirect land use and other significant emissions including embodied emissions”, says Fayas Malik Kanchiralla

Research at the intersection of energy and transport

The study is an example of research within two of Chalmers’ strategic research areas – Energy and Transport. By combining energy system analysis, climate policy and life-cycle analysis, the researchers have produced a basis for decision-making that can contribute to international climate targets being met effectively.

“This work shows that integrating a life-cycle perspective into global energy system models creates new opportunities for robust analysis of climate policy instruments, even under uncertain future conditions,” says Selma Brynolf, researcher at Chalmers University of Technology.

Facts: The study

Title: Marine fuel choices and related life-cycle environmental impacts under global shipping policies.

Published in: Nature Energy, 2026

Authors: Fayas Malik Kanchiralla, Selma Brynolf, Julia Hansson and Maria Grahn, Chalmers University of Technology

The study also includes the policy brief “Aligning global shipping climate policies with a life-cycle perspective", published in Nature Energy, with recommendations aimed at decision-makers in international shipping.

Facts: The climate challenge facing the shipping industry

• Around 80 per cent of global trade is transported by ship.

• International shipping accounts for around 3 % of global greenhouse gas emissions.

• The UN’s maritime organization, IMO, has set a target for the sector to achieve net-zero emissions by around 2050.

• The IMO adjourned the extraordinary session held on October 2025, which was convened to consider draft amendments to the relevant International Convention for the Prevention of Pollution from Ships, including the IMO Net-Zero Framework. The session will resume in late November 2027.