Lower-Carbon Marine Fuels Face Demand Slowdown as IMO Decision Looms

Summary

Demand for lower-carbon marine fuels is weakening as shipowners await clarity on global emissions rules and weigh alternative compliance options. Singapore’s marine biofuel sales fell sharply during January–September 2026, while industry executives say regulatory uncertainty is limiting uptake despite the availability of cleaner fuels and investments in dual-fuel ships.

Biofuel demand reveals an uneven transition

Lower-carbon marine fuels are facing a more difficult commercial environment as uncertainty over the International Maritime Organization’s proposed Net-Zero Framework complicates purchasing decisions.

Singapore sold approximately 603,000 tonnes of marine biofuel between January and September 2026, down 47% from the corresponding period last year. Rotterdam recorded a different trend, with bio-blended bunker sales increasing 28% in the first half, although executives said demand remained below expectations.

Speaking during the Singapore International Bunkering Conference, Oldendorff Carriers director Jens Maul Jorgensen linked stronger biofuel demand to an IMO decision. He also identified available FuelEU Maritime compliance surpluses as competition for additional biofuel purchases.

Seascale Energy chief executive Peter Grunwaldt said some customers continued buying gasoil even when biofuels were occasionally cheaper. The observations suggest that price alone is not determining adoption.

Pooling changes the immediate purchasing calculation

Europe’s FuelEU Maritime regulation provides several ways for shipping companies to meet their obligations. These mechanisms help explain why regulatory demand does not translate directly into equivalent biofuel purchases by every vessel.

Through pooling, the positive compliance balance of an overperforming ship can compensate for deficits elsewhere, provided the pool meets the regulation’s requirements. Participating ships can belong to different companies.

A company may therefore compare the cost of using eligible lower-emission energy aboard a particular ship with the commercial terms available through a compliance pool.

FuelEU also permits banking of positive compliance balances for later reporting periods. Borrowing from the following period is possible under specified conditions and carries an additional compliance adjustment.

These are regulated flexibility arrangements. FuelEU compliance balances should not be confused with unrestricted voluntary carbon offsets: using a surplus across ships requires the pooling mechanism, with records and verification in the FuelEU database.

Commercial pooling charges are determined through private agreements rather than a price fixed by the regulation. Their availability consequently adds another variable to fuel procurement decisions.

Global framework remains unfinished

The proposed IMO Net-Zero Framework would introduce a global marine-fuel greenhouse-gas intensity standard alongside an emissions-pricing mechanism.

Its design considers emissions throughout a fuel’s lifecycle, from production to onboard consumption. Ships exceeding specified intensity thresholds would have to address compliance deficits, while better-performing vessels could generate surplus units. Qualifying zero- or near-zero-emission technologies could also receive financial rewards.

The draft framework was approved in April 2025. However, the extraordinary meeting intended to consider adoption in October 2025 was adjourned, leaving the measures without binding force.

That distinction matters for investment planning. A proposed regulatory structure can indicate the direction of travel, but its final requirements, adoption and implementation determine the obligations against which companies make commercial commitments.

For fuel producers, the unresolved framework leaves uncertainty over the scale and timing of demand that a global standard could create. For operators, it complicates comparisons between buying alternative fuels now and retaining flexibility until the rules become clearer.

Further negotiations scheduled for November and December

The IMO’s published timetable places the next intersessional greenhouse-gas working group meeting on 23–27 November 2026, followed by the Marine Environment Protection Committee’s 85th session from 30 November to 3 December.

The adjourned extraordinary session is scheduled to resume on 4 December, subject to discussions at that committee meeting.

The September working group considered proposals addressing concerns about the draft framework. Its continuation confirms that negotiations remain active, while adoption and the final regulatory outcome remain unresolved.

Fuel capability and actual consumption diverge

Meanwhile, investment in alternative-fuel capability continues alongside cautious purchasing. Singapore supplier Equatorial Marine Fuel Management is preparing to expand LNG bunkering, with its first new LNG bunker barge expected in the third quarter of 2027.

The company also reported that some chemical bunker tankers had been reassigned to conventional fuels amid weaker biofuel demand.

These developments illustrate the distinction between preparing infrastructure for future fuels and generating sustained consumption today. Suppliers must assess both long-term fleet requirements and the fuels customers are currently willing to buy.

FAQs

Why is demand for lower-carbon marine fuels slowing?

Executives point to uncertainty over global rules and the availability of alternative compliance arrangements.

How much did Singapore’s marine biofuel sales fall?

Sales declined 47% year on year during January–September 2026.

What is FuelEU pooling?

It allows participating ships to combine compliance balances so that overperformance can compensate for deficits under prescribed rules.

Are FuelEU compliance surpluses voluntary carbon offsets?

No. They arise within the regulation’s compliance system and are subject to its accounting and verification requirements.

Has the IMO Net-Zero Framework been adopted?

The draft was approved in April 2025, but formal adoption remains outstanding.