Wood Mackenzie says EU carbon rules could accelerate split in LNG carrier fleet

By Romel S. Gurky

Europe’s tightening maritime emissions regulations are creating a growing divide within the global liquefied natural gas (LNG) carrier fleet, with older vessel types facing mounting compliance costs that could hasten their exit from the market, consultancy Wood Mackenzie said on Tuesday.

According to a new analysis by Wood Mackenzie, the type of engine installed on an LNG carrier has become the key determinant of its exposure to carbon-related costs as multiple emissions frameworks take effect.

The consultancy said modern LNG carriers equipped with high-pressure ME-GI (M-type Electronically Controlled Gas Injection) engines face significantly lower methane emissions and compliance costs on European routes, while older steam turbine and dual-fuel diesel-electric (DFDE) vessels are increasingly burdened by regulatory liabilities.

The shift is being driven by a combination of maritime decarbonisation measures, including the European Union Emissions Trading System (EU ETS), FuelEU Maritime regulations, the International Maritime Organization’s (IMO) proposed Net-Zero Framework, the Carbon Intensity Indicator (CII), and the Energy Efficiency Existing Ship Index (EEXI).

The EU ETS reached full emissions coverage for shipping from January 2026, following a phased introduction that began in 2024. Methane and nitrous oxide emissions are now included alongside carbon dioxide, increasing costs for LNG-fuelled vessels with higher methane slip rates.

"Owners who invested in DFDE vessels expecting them to be their compliance answer are facing a more uncomfortable reality," said Itzel Torruco, LNG freight research analyst at Wood Mackenzie.

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"Under EU rules from 2030, a DFDE ship on a European route faces penalties that make it commercially unattractive to charterers. The window to retrofit or exit is narrowing, and it has not yet been fully priced in," she said.

Wood Mackenzie estimates that by 2030 the combined cost of complying with the EU ETS and FuelEU Maritime regulations could reach about $1,256 per tonne of very low sulphur fuel oil (VLSFO), more than double the fuel cost itself and significantly above an estimated $705 per tonne under the IMO framework.

FuelEU Maritime, which entered its first enforcement year in 2026, requires vessels to reduce lifecycle greenhouse gas intensity by 2% from a 2020 baseline, with the target tightening to 6% by 2030 and 80% by 2050. Non-compliance penalties are set at roughly 645 euros ($736) per tonne of CO2 equivalent.

Wood Mackenzie said steam turbine vessels remain the most likely candidates for scrapping under the current framework, although high charter rates have delayed retirements. DFDE vessels could increasingly face similar economics unless operators invest in upgrades, with conversions into floating storage and regasification units (FSRUs) emerging as a potential alternative to scrapping.

The consultancy said a key uncertainty for the sector remains the IMO's proposed Net-Zero Framework, which is scheduled for a formal adoption vote at the IMO's Marine Environment Protection Committee (MEPC 85) meeting in December 2026.

The framework survived an attempt led by the United States to reopen negotiations during MEPC 84 in April and May 2026. The proposal now includes LNG combined with upstream carbon capture and storage (CCS) as a potential zero- or near-zero-emission fuel pathway.

"December 2026 is the most consequential vote for LNG shipping in a decade," Torruco said.

"If the IMO framework is adopted and the EU recognises it as Paris-aligned, the compliance architecture operators have spent two years building could be simplified considerably. If it fails, the overlap between EU ETS, FuelEU Maritime, and the IMO framework becomes the permanent operating environment."

Editing by Reiner Simanjuntak