EU shipping emissions rules open new market for bio-LNG, says IEA

European Union shipping emissions regulations are creating opportunities for liquefied biomethane, or bio-LNG, as vessel operators seek fuels that can lower emissions while using existing equipment, according to the International Energy Agency (IEA).

In its Renewables 2026 report, published on 6 November, the agency identifies maritime transport as an emerging market for biomethane. FuelEU Maritime is a key driver, encouraging shipping companies to assess fuels on their lifecycle greenhouse gas performance.

Why is bio-LNG attracting shipping interest?

Bio-LNG can replace fossil liquefied natural gas (LNG) in compatible gas-fuelled and dual-fuel ships. Operators can use existing fuel tanks and bunkering infrastructure, limiting the need for major vessel modifications.

The IEA says this compatibility allows shipping companies to draw on established experience with methane-based fuels. It also provides biomethane producers with another potential customer base alongside road transport, industrial users and gas distribution networks.

The agency identifies emerging bio-LNG projects in Southeast Asia, supported by demand for lower-emission marine fuels and opportunities to supply Singapore. However, it cautions that these markets remain at an early stage, with further growth dependent partly on supportive policies.

What does FuelEU Maritime require?

FuelEU Maritime has applied fully since 1 January 2025. It generally covers commercial ships above 5,000 gross tonnage calling at EU ports, irrespective of their flag, subject to specified exemptions.

The regulation requires reductions in the annual average greenhouse gas intensity of onboard energy against a 2020 reference level. Targets begin at 2% in 2025, increase to 6% in 2030 and reach 80% by 2050.

Assessment follows a well-to-wake approach, covering emissions from fuel production and supply through to onboard use. Carbon dioxide, methane and nitrous oxide all count towards the calculation.

The framework does not prescribe a particular fuel. Operators can select fuels and technologies suited to their vessels and trading patterns, provided they meet the applicable requirements. Bio-LNG therefore competes with other lower-emission options on verified lifecycle performance.

How does EU carbon pricing affect the economics?

The EU Emissions Trading System (EU ETS), which extended to maritime transport in January 2024, provides a separate financial incentive to reduce emissions.

Shipping companies must surrender allowances for a progressively larger share of covered emissions. The obligation increases from 40% of emissions reported for 2024 to 70% for 2025 and 100% for 2026 onwards. Methane and nitrous oxide enter the system’s scope from 2026.

Eligible sustainable biomass can receive favourable treatment for combustion carbon dioxide emissions, subject to compliance with the Renewable Energy Directive’s sustainability and greenhouse gas-saving requirements.

For bio-LNG buyers, this means the fuel’s origin and certification affect its compliance value. Renewable sourcing alone does not remove the need to account for other covered greenhouse gases.

Why do certification and methane slip matter?

European Commission guidance confirms that FuelEU Maritime uses the EU renewable-fuel certification framework, including mass-balance certification. This provides a system for tracking sustainability characteristics through qualifying supply chains.

The guidance also distinguishes fuel-production emissions from those released during onboard use. For methane-based fuels, calculations include methane slip, the unburned gas escaping from engines.

Consequently, a fuel’s renewable origin is only one part of its overall emissions assessment. Verified supply-chain characteristics and engine performance both influence compliance outcomes.

For shipowners evaluating bio-LNG supply agreements, the regulatory framework makes documentation and emissions performance central purchasing considerations. Compatibility with existing vessels offers an operational advantage, but the recognised environmental benefit depends on meeting certification requirements and accounting for emissions across the fuel’s lifecycle.