As carbon rules tighten and alternative-fuel investment accelerates, owners of older ships will face a harder question: does another retrofit extend commercial life, or merely delay an inevitable recycling decision?

Hitesh Vyas, Vice President, Middle East and Green Recycling Coordinator at Wirana Shipping Corporation, examines the factors shaping this decision:

Shipping’s fuel transition is usually discussed as a technology race: which fuel will win, when supply will scale and how quickly new engines can be deployed. Yet the transition will also shape the other end of a vessel’s life. As emissions rules become progressively more demanding, fuel choice and carbon performance will increasingly determine whether an older ship remains commercially viable or is sent for responsible recycling.

The choices facing owners are becoming more complex. LNG, methanol, lower-carbon drop-in fuels and other alternatives each carry different implications for vessel design, fuel availability, tank capacity, operating costs and emissions performance. For newer ships, these considerations can be addressed during the design stage. For older vessels, the decision is more difficult because any investment must be recovered within a much shorter remaining economic life.

This will not happen as a sudden wave. The effect will be gradual, uneven and closely tied to freight markets, but it will compound. For a growing portion of the fleet, the decision to trade on will no longer depend principally on age and earnings. It will depend on whether the vessel can continue to meet regulatory, chartering and financing expectations without absorbing disproportionate capital and operating costs.

The market effect

If fuel and emissions performance are becoming so important, why has recycling supply remained relatively constrained?

The answer lies partly in geopolitics. Longer and less efficient trading patterns have increased tonne-mile demand, while the expansion of the shadow fleet has allowed many older vessels to remain gainfully employed. Higher charter rates have also given owners more room to respond. They can reduce speed, improve voyage planning or fund modifications whose cost can be recovered while earnings remain strong.

That breathing space should not be mistaken for a permanent solution. Slow steaming cannot erase a vessel’s technical limitations, while retrofits become harder to justify when a ship has little remaining life.

Carbon costs

The EU Emissions Trading System has brought carbon directly into voyage economics. It covers 100% of emissions between EU ports and 50% of emissions on voyages between EU and non-EU ports. The phase-in reaches 100% of the 2026 emissions covered at the 2027 surrender deadline, while methane and nitrous oxide are also included from 2026.

Two apparently similar ships may therefore carry materially different compliance costs. A vessel operating on conventional fuel may face a higher carbon exposure than a modern ship using a lower-emission alternative, but converting an existing vessel to LNG, methanol or another fuel can require tens of millions of dollars, depending on its design and the scope of work.

The owner must then consider fuel availability, methane slip in the case of LNG, reduced cargo capacity, time out of service and whether the investment can be recovered before the vessel reaches the end of its commercial life.

The commercial test is therefore not whether a retrofit is technically possible. It is whether the retrofit produces a credible return across the vessel’s remaining economic life.

CII will affect employability

Outside Europe, the Carbon Intensity Indicator is steadily tightening the link between operational efficiency and commercial access. A ship rated D for three consecutive years, or E for one year, must develop an approved corrective action plan. The required reduction against the 2019 reference line rises from 11% in 2026 to 21.5% in 2030.

Owners can respond through speed management, routing, maintenance and energy-saving technologies. But for an older vessel, the cumulative cost and loss of operating flexibility may outweigh the value of another trading year.

The consequences extend beyond regulatory paperwork. Charterers, financiers, insurers and cargo interests increasingly scrutinise environmental performance. A vessel permitted to trade may nevertheless become harder to charter, finance or insure on attractive terms.

The global framework is coming, even if the timetable moves

The IMO’s draft Net-Zero Framework points towards a global fuel-intensity standard and emissions-pricing mechanism calculated on a well-to-wake basis. Formal adoption was adjourned in October 2025, with talks scheduled to resume in 2026. The precise timetable may therefore change, but the direction of travel is clear: lifecycle emissions will increasingly carry a financial value.

That uncertainty should not encourage owners to postpone planning. They must test scenarios covering fuel prices, carbon exposure, trading patterns, retrofit cost and residual life rather than rely on a single forecast.

Some sectors will move first

Container ships and car carriers are likely to feel the transition earlier than several other segments. Their trading patterns, customer visibility and fleet-renewal programmes create stronger pressure to adopt alternative fuels and demonstrate emissions reductions.

As newer dual-fuel vessels enter service, older conventional ships may find themselves pushed towards less attractive employment before being released for recycling.

The decisive period is likely to emerge towards the end of this decade, when tighter CII requirements, regional carbon costs and the prospective global framework begin to overlap. A weaker freight market could accelerate the process by removing the earnings cushion that currently supports older tonnage.

Transition planning

Ship recycling should not be viewed as evidence that decarbonisation has failed. Properly planned and responsibly executed, it is part of fleet renewal. The danger lies in waiting until compliance costs, poor ratings or declining employment leave an owner with limited choices and little negotiating time.

Owners should assess recycling alongside retrofit and continued-operation scenarios well before a vessel reaches that point. The fuel transition will not send every older ship to the recycling yard at once. It will, however, steadily redraw the boundary between assets worth upgrading and those whose steel, equipment and materials can contribute more through safe and environmentally sound recycling.

Photo credit: Wirana Shipping
Published: 3 September, 2026

Shipping’s decarbonisation ambitions are clear but turning that ambition into commercially viable emissions reductions at scale remains a challenge.

As regulatory requirements tighten and fuel markets remain volatile, Pekka Pakkanen, Executive Vice President, Shipping Solutions, NAPA, says operational efficiency is emerging as one of the most immediate and scalable levers available to shipowners, with digital tools increasingly helping to maximise the benefits of energy efficiency technologies: 

The shipping industry’s decarbonization drive does not lack ambition – that is visible in the pace of innovation and research we see around us. But translating that ambition into action at scale and in a commercially viable way remains a different challenge altogether. The International Maritime Organization’s MEPC 84, which concluded in April 2026, reminded us of both how far we have come and how much complexity still remains.

Discussions around the Net-Zero Framework continued, with delegates agreeing to seek further consensus on key adjustments later in October 2026, while progress was made across several other fronts. Separately, the adoption of amendments designating the North-East Atlantic as a new Emission Control Area for Sulphur Oxides (Sox), particulate matter and nitrogen oxides (Nox) is a significant achievement. At the same time, the second phase of the review of the Ship Energy Efficiency Management Plan (SEEMP) and the Carbon Intensity Indicator (CII) began, focusing mainly on enhancing the SEEMP.

Progress, though incremental, is still being made in an environment defined by mounting regulatory obligations, volatile fuel markets, and a clean technology landscape still maturing. All these factors create a backdrop of uncertainty. It’s a word used often to describe shipping’s operating environment and still stands the test of time.

Why energy efficiency technologies remain key

Despite knowing this, the argument I want to put forward is a simple one that can help cut through the uncertainty. The single most accessible, most immediate, commercially viable and scalable lever available to shipping today for managing decarbonization is operational efficiency. Not instead of alternative fuels or new vessel technologies, but as the foundation on which everything else must be built.

Fuel price volatility has made efficiency a financial necessity as much as an environmental one. The European Union Emissions Trading System (EU ETS) and FuelEU Maritime are already in effect and tightening year on year. Add to this the second phase of the CII and SEEMP review, which MEPC 84 formally commenced, and all signs point to the need for operational performance data, optimization and reporting.

In today’s market, efficiency is both a sustainability metric and a margin protection strategy. Every tonne of fuel saved reduces exposure to volatile fuel prices, emissions costs, and operational uncertainty. The question for shipping executives is, therefore, is how to maximize the impact of efficiency.

The answer increasingly lies in the intelligent combination of digital tools and energy efficiency technologies. One development that has captured significant industry attention is the growing integration of wind-assisted propulsion systems (WAPS) with voyage optimization software. Harnessing the power of the wind is not just about installing sails, wings, or kites – it is also about navigating the inherent challenges that come with wind propulsion, from complex and fast-evolving weather patterns to training crew. Operating wind-assisted propulsion vessels requires both careful pre-planning and adjustments throughout a ship’s journey. Fast-evolving wind speed and direction, as well as waves and currents, must be assessed and constantly re-assessed throughout the voyage to determine the best possible route. Wind-assisted vessels need to catch winds at the right speeds and angles to make the most of their wings, rotors, or sails, which demands continuous route and speed modelling throughout the voyage not just before it. Relying on traditional means and manual methods alone risks leaving a lot of savings on the table. Instead, understanding changes in wind patterns and using this to the vessel’s advantage requires advanced digital tools.

Classification societies have also been responding to the increase in WAPS on the market and have included specific stability rule checks, which digital tools can help comply with. WAPS typically add weight to a vessel’s upper structure, shifting its center of gravity and creating additional stability considerations to be managed. Digital tools, within NAPA Design, can be used to calculate vessel stability characteristics and help users check their design’s performance against multiple classification society rules as well. These are all essential considerations to ensure the solution continues performing optimally.

Whether the technology is wind-assisted propulsion or air lubrication technology, digital technologies can help maximize the savings they deliver. Users can measure performance, adapt operations continuously and make decisions based on reliable data, which can then inform future investments in energy efficiency technologies.

MEPC 84 makes progress on the foundations underpinning global decarbonization 

The expansion of ECAs at MEPC 84 – including the newly designated North-East Atlantic zone – adds another layer of complexity. Research has consistently shown that ECA avoidance through route deviation is rarely the optimal commercial or environmental response; the fuel costs and schedule implications of detours frequently outweigh the cost of sailing through the zone with compliant fuel. Voyage optimization tools model these trade-offs in real time to help make better decisions than human assumptions alone.

MEPC 84 also progressed a review of the SEEMP framework, which remains central to how vessels document and demonstrate their carbon intensity management. The direction of travel is towards increased expectations around the quality, granularity, and integration of performance data. As regulatory frameworks increasingly rely on verifiable performance data, the quality of operational data becomes just as important as the technologies being measured. Poor data quality can undermine both compliance confidence and optimization efforts. Shipowners who have already invested in the digital infrastructure to capture and act on operational data will find themselves significantly better positioned, both for compliance and for commercial advantage.

The case for integrated data systems – platforms that bring together performance analytics, voyage planning, regulatory compliance, and reporting in a coherent interface – is a response to genuine operational needs. When data from signals, noon reports, and logbook entries can be brought together on one platform to produce clear, actionable insights, crews spend less time managing information and more time using it. The same shared source of operational truth also supports better ship to shore collaboration to support real-time route and speed optimization, continuous hull performance monitoring, and integrated compliance management.

None of this diminishes the importance of the longer-term energy transition. Alternative fuels, new energy efficiency technologies, and next-generation vessel design all have a critical role to play in reaching net zero by 2050. But those transitions take time, capital, and regulatory frameworks that are still being finalized. In the interim, and complementing those transitions, operational efficiency represents a proven, scalable, and commercially viable path to meaningful emissions reduction. The industry does not need to wait for its decarbonization ‘golden ticket’ to arrive from future technology. It already holds one. The challenge now is not identifying opportunities for efficiency but capturing them consistently across fleets and voyages.

Photo credit: NAPA
Published: 28 August, 2026

The proposed expansion of the EU Emissions Trading System (EU ETS) must provide fair treatment for shipping and deliver meaningful emissions reductions, according to emissions compliance specialist EmissionLink on Wednesday (5 August). 

The European Commission’s proposals would extend the system to offshore activities from 2027 and certain vessels between 400 and 5,000 GT from 2029. 

While broader coverage may support Europe’s climate objectives, EmissionLink warned that it will also create new commercial, contractual and compliance challenges.

Philippos Ioulianou, Managing Director of EmissionLink, said: “Expanding the EU ETS will not automatically make it more effective. The system must be coherent, proportionate and capable of delivering practical decarbonisation.

“Shipping should not pay twice for the same tonne of emissions. If the EU ETS operates alongside a future IMO carbon-pricing mechanism, there must be an automatic and transparent way to recognise payments and reconcile liabilities.”

The inclusion of offshore activities will be particularly complex. Offshore vessels may remain at worksites for extended periods, with operational control, fuel consumption and emissions responsibilities divided between owners, charterers, contractors and project developers. This means ETS obligations will increasingly need to be addressed in charterparties and project agreements, including responsibility for emissions monitoring, purchasing allowances and managing carbon-price exposure.

Smaller operators entering the system from 2029 may also face disproportionate compliance demands, as many lack the specialist teams, established data systems and carbon-market expertise available to larger shipping companies.

EmissionLink has welcomed proposals to align EU Monitoring, Reporting and Verification requirements more closely with FuelEU Maritime reporting, as well as changes intended to prevent circumvention through transhipment. However, the company is also calling for at least 50% of the ETS revenues generated by shipping to be reinvested in maritime decarbonisation at national level.

Ioulianou added: “Carbon pricing must be matched by practical investment. A meaningful share of shipping-generated revenues should support sustainable fuels, port infrastructure, vessel retrofits and credible energy-efficiency technologies.

“The credibility of the EU ETS will ultimately depend not on how much money it raises, but on whether it treats shipping fairly and helps the industry reduce emissions.”

Photo credit: EmissionLink
Published: 6 August, 2026