The adoption of low-carbon technologies in the maritime sector and the construction of low/zero-emission vessels provide shipbuilders with a crucial role in meeting the evolving demands of this rapidly transforming industry. This chapter discusses how the shipbuilding sector can contribute to maritime net-zero efforts across a ship’s life cycle and assesses the progress in the adoption of alternative fuels and low/zero-emission technologies within the fleet and orderbook. It evaluates shipbuilders’ capacity for decarbonisation efforts by examining the number of active shipbuilders producing vessels capable of running on alternative fuels as well as the price differential between alternative fuel capable vessels and their conventional counterparts. Analysis on newbuilding is complemented by looking into retrofits and an assessment of key trends in alternative fuel conversions.
The Role of Shipbuilding in Maritime Decarbonisation
Abstract
This chapter discusses alternative fuel uptake in both newbuilding and retrofitting and capacity indicators of shipyards building alternative fuel vessels. The main findings are:
Reducing maritime emissions requires a lifecycle approach, as emissions from shipbuilding, operation, and end-of-life disposal are interconnected—choices made in design and material sourcing impact operational efficiency and recyclability, influencing the industry's decarbonisation potential.
Around 7% of the global fleet and 52% of the orderbook are alternative fuel capable: the maritime sector has increased the commission and delivery of vessels capable of using alternative fuels, corresponding to the growing incentives for decarbonisation driven by regulatory measures and industry efforts. At the same time, only 7% of the global fleet can currently operate with these technologies and maritime GHG emissions continue to rise.
Capacity for alternative-fuel capable vessels has increased but strong regional differences exist: there is a discernible uptrend in the number of shipyards that are active in the construction of vessels that can run on alternative fuels. This increase is observed both in absolute numbers and as a proportion of the total yards constructing vessels. The construction landscape for vessels using alternative fuels is heavily influenced by the builder country. LPG, methanol and ethane vessel construction is primarily dominated by Korea, China and Japan. In contrast, vessels designed for LNG or biofuels see a wider range of countries, in which these vessels are constructed, and in the number of builders.
Alternative fuel capability differs across ship types: large differences exist in the construction of alternative fuel capable vessels across different ship types. Specifically, bulk carriers and tankers have been relatively slow to adopt, with only 7% and 14% of active yards, respectively, engaged in constructing alternative fuel capable vessels in the past year. In contrast, a more substantial portion of shipyards building containerships (1/5 of yards) and cruise ships (over 1/3) are moving towards alternative fuel vessel capabilities.
LNG is the dominant fuel choice, but other alternative fuels are increasing: The transition to alternative fuel capable ships is not uniform, with significant differences between fuel types. LNG leads in terms of both the global fleet uptake and the number of active yards equipped having previously constructed LNG capable vessels (37 yards in 2024). The rise of methanol as an alternative fuel is notable, with an increasing number of shipyards starting to offer methanol capable vessel construction (8 yards in 2024).
Price premium for alternative fuel capable ships varies across ship types: A price premium exists for LNG capable and methanol capable ships across different ship types, averaging at around 12%. The extent of this premium varies significantly by ship type, with containerships, pure car carriers and cruise ships showing lower price premia than bulkers and different tanker types.
Alternative fuel conversions are increasing, especially in China and Europe: primarily for LNG and biofuels, which are mostly undertaken on passenger ships (45% of total conversions). China and Norway are leading alternative fuel conversions, with retrofits by Chinese yards focusing on LPG, alongside some LNG projects. Norway demonstrates the most comprehensive range of fuel conversions, including biofuels, LNG and hydrogen.
Maritime transport is central to global trade, facilitating around 80% of the world’s exchange of goods (UNCTAD, 2024[1]). Despite being the most carbon-efficient mode of transport on a per tonne basis, the shipping industry is responsible for almost 3% of global greenhouse gas (GHG) emissions, necessitating a response to mitigate its impact on climate change (International Maritime Organization, 2020[2]).
As the maritime sector becomes increasingly focused on reducing GHG emissions, the shipbuilding sector is undergoing a significant transformation to support climate change mitigation efforts and the advancement of low/zero-emission technologies, especially in the areas of alternative fuel and propulsion solutions, ship energy efficiency and digitalisation. To effectively reduce maritime emissions and identify potential areas for improvement or bottlenecks in decarbonisation efforts, it is important to consider shipbuilding within the broader lifecycle of the maritime industry.
A life-cycle assessment includes four phases of relevance to maritime decarbonisation: pre-production (upstream), production (the shipbuilding process itself), and post-production, including the operational and end-of-life phase (downstream) (Chatzinikolaou and Ventikos, 2015[3]).
In the pre-production phase, raw materials and components required for vessel construction are evaluated, including the extraction of raw materials, transportation and manufacturing of parts.
The production phase involves the construction of the vessel, including the assembly of parts, painting and other finishing processes. For this scoping paper, the shipbuilding process is defined as the construction of ships and assembly of key marine equipment and technologies in shipbuilding.
The operational phase includes fuel consumption, maintenance and retrofitting/ repair for maritime transportation.
Finally, the end-of-life phase involves the disposal, recycling and potential reuse of the vessel’s components.
Infographic 2.1. illustrates the key phases in the maritime life cycle as well as their relevant market trends, technology developments and recent policies and voluntary industry commitments. The diagram shows the critical role that shipbuilding plays in the delivery of decarbonisation in each of these phases and vice-versa how each of these phases is of relevance to shipbuilding decarbonisation itself.
Shipbuilding and the costs of ship construction are strongly impacted by market dynamics and regulations in upstream sectors, such as steel, equipment parts, energy or raw materials (Gilbert et al., 2017[4]). Many of these sectors are major contributors to global GHG emissions, for example, global steel production accounts for an estimated 8% of GHG emissions worldwide (International Energy Agency, 2022[5]). Research by UMAS and the LR Maritime Decarbonisation Hub suggests that international shipping could reduce cumulative CO2 emissions by around 776 million tonnes between 2024 and 2050 by progressively adopting hot rolled steel with lower embodied carbon— a reduction comparable to one year of international shipping’s operational emissions (UMAS, 2023[6]). The transition towards low carbon energy and steel in global markets is also expected to affect volumes, cargo composition and the geography of supply and demand, and hence maritime transport, which subsequently is of relevance to shipbuilding.
Shipbuilding also plays a critical role in enabling downstream efforts towards the transition to net-zero maritime transportation, which is where the strongest regulatory focus currently lies. Decarbonisation of maritime transportation and regulatory uncertainty over alternative fuel pathways is expected to affect ship replacement rates, the types of ships replaced and owner’s retrofitting decisions.
At the end-of-life phase, ship recycling has the potential to provide an important source of scrap to enhance capacities for low carbon secondary steel production, directly impacting the Scope 1 GHG emissions for steel (Sustainable Shipping Initiative, 2023[7]). However, challenges to the environmental safety of the process remain, as well as to the implementation of a cradle-to-cradle approach, i.e., the design and production of ships in such a way that at the end of their life, they can be recycled in a safe manner (Ismail et al., 2019[8]). To help address these concerns, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, adopted in 2009 and set to enter into force in June 2025, establishes regulations to minimise environmental, health and safety risks associated with ship recycling. The Convention covers regulations 1) for the design, construction, operation and preparation of ships to support safe and environmentally friendly recycling practices while maintaining operational performance, 2) for ship recycling facilities to operate in a secure and environmentally sound manner, and 3) for an enforcement framework to report certification and reporting obligations (International Maritime Organization, n.d.[9])
Maritime decarbonisation is strongly linked to wider changes in energy and raw material use in response to decarbonisation efforts, which may also impact shipbuilding and the quantity and quality of ship demand. The viability of low/zero-emission ships remains a significant challenge for maritime decarbonisation, and a price gap between conventional and alternative fuels risks limiting shipping demand for available onboard technological solutions. Consequently, bottlenecks for the uptake of low/zero-emission energy sources, both in terms of production cost and alternative energy supply chains, can pose challenges to shipbuilders (International Transport Forum, 2022[10]). Further technological and commercial innovation is required to unlock the necessary investment decisions for the global fleet ahead of 2030, with shipbuilders and marine technology suppliers being tasked to ensure that engines and ship design are fit to support this transition.
Alternative fuel capable vessels in global ship orders are increasing. By the end of 2024, over half (52%) of the global ship orderbook in gross tonnage (GT) terms could use alternative fuels or battery hybrid propulsion. This marks a significant increase compared to previous years (up from 33% in 2021 and only 10.9% in 2017) and reflects a growing commitment by shipowners to alternative fuels.
The pace of adoption within the global fleet currently in operation has been considerably slower. Only 7.2% of the fleet by tonnage can use alternative fuels or propulsion as of 2024, a rise from 4.6% in early 2022 and 2.5% in 2017. In terms of the number of vessels, the share is smaller, at approximately 1.8%, indicating that larger vessels are being prioritised for alternative fuel capabilities (Clarksons Research, 2024[11]). This disparity between tonnage and vessel count raises important questions about how to encourage smaller ships to adopt these technologies and ensure that the entire fleet transitions toward “greener” propulsion systems. Despite the growing uptake of alternative fuels, the maritime sector still faces significant challenges. Each fuel option comes with its own technical and economic hurdles. Additionally, uncertainty remains over which fuel or combination of fuels will become the long-term solution for maritime decarbonisation, adding complexity to the decision-making process for shipowners, shipbuilders, and policymakers.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
The global shipping fleet is aging, with the average age now at 13 years (on a GT weighted basis), up from a low of 9.7 years in 2013. This trend is consistent across several key sectors. Bulk carriers have an average age of 12.5 years, tankers average 13.5 years, and although the container fleet's age has started to decline slightly, it remains relatively high at 13.9 years (Clarksons Research, 2024[12]). Currently, 34% of the global fleet's tonnage is over 15 years old. This increasing age, combined with stricter environmental regulations under the guise of the IMO, suggests growing potential for fleet renewal through replacement or retrofitting to meet carbon intensity targets.
LNG has been considered a promising alternative fuel for shipping due to its potential to reduce onboard GHG, sulfur oxide (SOx), nitrogen oxide (NOx) and particulate matter emissions compared to conventional marine fuels. However, its long-term suitability for achieving net-zero emissions in shipping is uncertain.
Challenges to LNG as an alternative fuel: A key concern about the usage of LNG as an alternative fuel is methane slip— the unintentional release of methane during extraction, transport, and combustion—which significantly undermines LNG’s climate benefits. Methane has a global warming potential approximately 28–34 times higher than CO₂ over a 100-year period. Additionally, there is a risk of stranded assets, as investments in LNG capable ships may become economically unviable under increasingly stringent decarbonisation regulations. Projections indicate a risk of future oversupply of LNG shipping capacity. Under the IEA’s Net Zero Emissions (NZE) scenario, no additional LNG carriers are needed, yet current orders could push oversupply beyond 400 vessels by 2030. Even under the more conservative Stated Policies Scenario (STEPS), excess capacity is expected to reach 40% of the 2023 fleet.
Long-term fuel pathways: LNG capable vessels have the technical potential to transition to low-emission fuels, such as e-methane (synthetic methane produced using renewable energy) or bio-methane, enabling them to remain relevant in a future net-zero ecosystem if appropriate retrofitting and infrastructure investments are made. Further, the development of engine designs focused on reducing methane emissions can support the attractiveness of LNG as a transitional fuel in the maritime sector This adaptability could help mitigate some of the financial and environmental risks associated with LNG but requires clear policy frameworks and technological advancements to minimise methane leakage across the fuel’s lifecycle.
LNG dual-fuel technology continues to be the primary choice for new vessel orders. As of October 2024, LNG fuel capability accounts for approximately 6% of the global fleet in GT. With over 1,018 vessels, LNG capable ships also represent 37.0% of the orderbook tonnage. Furthermore, as of October 2024, there were over 532 LNG ready vessels in the fleet, with an additional 134 on order.1 The increased adoption of LNG fuel capability extends beyond LNG carriers, with around 597 non-LNG carrier vessels in the existing fleet and 628 more in the orderbook that are designed for LNG fuel use (Clarksons Research, 2024[11]).
Share in the fleet (top) and orderbook (bottom) in terms of GT
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
There is a growing uptake of alternative fuel and propulsion solutions (other than LNG), including methanol, LPG, biofuels, ethane, hydrogen, and increasing interest in ammonia, synthetic methane, and nuclear propulsion options (as seen in Figure 2.2). In particular, the construction of methanol and LPG capable vessels is accelerating, alongside the emergence of newbuilds capable of running on ammonia and hydrogen. By Q4 2024, around 9.3% of the orderbook (272 vessels) was dedicated to methanol capable ships, while 1.9% (125 vessels) were set to use LPG. Additionally, approximately 3.0% of the orderbook was allocated to vessels using other alternative fuels, making up around 448 vessels. This includes 31 hydrogen capable vessels, 61 ethane capable vessels, 28 ammonia capable vessels, 22 biofuel capable vessels, and approximately 410 vessels equipped with battery or hybrid propulsion systems (Clarksons Research, 2024[11]). Additionally, onboard carbon capture and storage (CCS) is considered a viable alternative to zero-emission fuels, and, by September 2024, carbon capture scrubbers were installed on 28 vessels. While onboard CCS technology is still in its early stages and requires significant advancements, first movers are driving adoption— as seen with Singapore’s Seatrium retrofitting a Norwegian-owned ethylene carrier with a full-scale carbon capture facility, with pilot testing poised to deliver key insights into feasibility and scalability (Offshore Energy, 2025[16]).
There are no ocean-going ammonia capable vessels in the fleet, as of October 2024, despite the orderbook showing increased ammonia readiness in future vessels (with 298 ammonia ready ships slated for construction). To ensure the uptake of ammonia, port-side investment projects, such as ammonia and hydrogen bunkering facilities, are also required. A significant milestone in advancing ammonia as a shipping fuel was achieved in 2024 with the world’s first ship-to-ship transfer of ammonia in a working port environment (Yara, 2024[17]). Various pilot initiatives for ships powered by clean ammonia are currently in progress, such as the West Australia-East Asia iron ore green corridor, which aims to have ships fuelled by clean ammonia servicing its iron ore shipping lanes by 2028, with an adoption target of 5% by 2030.
Fuel optionality continues to be preferred over fuel choice. Currently, there are 532 LNG ready ships in the global fleet and 134 more on order. In addition, 298 ammonia ready, 507 methanol ready, and 12 hydrogen ready vessels are on order. Alternative fuel ready vessels now account for approximately 20% of the tonnage ordered between January and September 2024, up from around 17% for the full year in 2023, signalling a clear shift toward greater flexibility and future adaptability in fuel choices across the industry.
(Hybrid) battery propulsion is gaining traction, while nuclear propulsion is being explored, as alternative methods of decarbonising the maritime sector. Battery and hybrid battery propulsion accounted for up to 1.88% of the orderbook in CGT by September 2024, up from just 0.34% in the global fleet. Battery propulsion and battery/diesel combinations are particularly gaining traction in smaller and coastal vessels, such as ferries, tugs, and offshore vessels, reflecting their suitability for short-range, lower-power maritime applications. Nuclear propulsion, while still a niche technology, also saw a slight increase from 0.02% of the fleet to 0.12% of the orderbook. While nuclear propulsion is primarily used for defence vessels, it is also being reconsidered for commercial ships, given its advantages of zero emissions, no need for bunkering, low weight, and the potential for high design speeds. These benefits must be weighed against significant challenges, including security concerns, complex monitoring requirements, high capital expenditure (CAPEX) and wider social and political risks (DNV, 2024[18]). New small modular reactors (SMRs) have the potential to introduce low-maintenance reactor technology that could meet the propulsion and energy needs of commercial vessels (Lloyd's Register, 2024[19]). In July 2024, Mokpo National University in Korea established the world’s first SMR Ship Research Institute, with the goal of becoming a leading global centre for research and education on SMR-powered ships (world nuclear news, 2024[20]).
Vessel types are emerging to seize opportunities of the net-zero transition, notably to support carbon capture and hydrogen transport (UNCTAD, 2024[1]). Liquefied CO₂ (LCO₂) carriers are being developed to facilitate large-scale CO₂ transport, with Chinese shipbuilder, Dalian Shipbuilding Industry Co. (DSIC), constructing the first LNG capable LCO₂ carrier for Northern Lights in 2024 (Nothern Lights, 2024[21]). Meanwhile, Japanese NYK Line, K Line, MOL, Imabari Shipbuilding, JMU Corp, and Mitsubishi Heavy Industries secured approvals for standardised LCO₂ carrier designs, aiming for deployment by 2028 (Mitsubishi Corporation, 2024[22]). Similarly, liquefied hydrogen (LH₂) carriers are advancing. In September 2024, DNV granted Approval in Principle (AiP) to HD Korea Shipbuilding & Offshore Engineering (HD KSOE) for its electric propulsion liquefied hydrogen (LH₂) carrier concept, designed to store and transport up to 80,000 cubic meters of LH₂ (DNV, 2024[23]).
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Across different vessel types, alternative fuel capability is increasingly adopted, with methanol featuring prominently in the containership orderbook, while LNG remaining the leading fuel choice in multiple segments. Bulk carriers show significant LNG adoption as well, with a smaller number of ammonia and hydrogen capable vessels. In the cruise ship sector, LNG is the predominant alternative fuel, though there are also some hydrogen capable newbuilds. For tankers, there is a diverse fuel mix, with increasing adoption of methanol and biofuels, particularly in product tankers. For vessels other than LNG carriers, alternative fuel capable tonnage accounted for 44% of total contracting in Q1-Q3 2024, up from 34% in 2023 (Clarksons Research, 2024[11]).
2.2.1. Differences in regional production capacities
There are notable differences in production capacities for alternative fuel capable ships across regions. As of September 2024, China accounted for 47% of the CGT in the orderbook for alternative fuel capable vessels. This is slightly below its 55% share of the overall orderbook, including both conventional and alternative fuel capable ships. Korea follows closely, making up 42% of the alternative fuel capable orderbook— substantially higher than its 25% share of the total orderbook— demonstrating a stronger specialisation towards alternative fuel capable vessels, particularly those capable of operating on LNG. Europe and Japan account for 6% and 3% of the alternative fuel capable orderbook in CGT, respectively.
The type of alternative fuel capable ships produced varies also significantly by region and country. Korea, China, and Japan lead in the construction of vessels capable of operating on LPG, methanol, ammonia, and ethane. China and Korea are also at the forefront of building vessels designed for LNG or biofuels; however, production in these segments is more widely distributed across multiple countries and shipbuilders.
Note: Data based on September 2024, global orderbook in CGT.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Another indicator for assessing major shipbuilding economies’ capacity for low/zero-emission shipbuilding is their specialisation in building alternative fuel capable ships. This can be measured by the percentage share of alternative fuel capable vessels in total shipbuilding by each country or region per year.
Korea shows the highest degree of specialisation in low/zero-emission capable shipbuilding, with 69% of its ship deliveries in 2024 being alternative fuel capable. This figure is expected to rise to nearly 80% by 2026, primarily driven by LNG capable vessels, along with a growing number of methanol capable ships. Europe and China have also seen significant increases in their production of alternative fuel capable vessels. Europe expanded from 4.4% in 2015 to 40% in 2024, while China grew from 1% to 22.5% over the same period, reflecting a broader industry shift toward low/zero-emission shipping technologies. Japan exhibits slower growth in alternative fuel capable shipbuilding activity, remaining below 10% throughout the studied period. This slower adoption is largely linked to the type of vessels Japan primarily produces, such as bulk carriers, which have seen a slower uptake of alternative fuels compared to vessel types like containerships, cruise ships, or carriers designed to transport alternative energy sources, like LNG carriers.
China, Korea and Japan, as dominant global shipbuilders, are well-positioned to benefit economically from the transition to zero-emission shipping, according to a study by the International Council of Clean Transportation (ICCT). The paper examines the shipbuilding market, government support, and potential revenue gains from alternative fuel capable shipbuilding Since zero-emission capable vessels are more expensive than conventional vessels, early movers could gain a competitive advantage. If all bulk carriers, tankers, and container ships built in 2030 were zero-emission capable vessels, global additional revenues could reach between USD 6.9 and 36 billion, increasing shipbuilder propulsion revenue by 86% to 452% (Cho, Ünalan and Meng, 2024[24]).
Note: Europe is EU27 as well as Norway and United Kingdom, studied period includes 10 years of completions and 2 years of orderbook, completions in CGT.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Alternative fuel capable vessel construction shows very high levels of concentration, with the top 10 yards globally accounting for 76% of production in the past 10 years. These yards are typically characterised by their large scale, advanced technological capabilities, and extensive experience in complex vessel construction. Primarily based in Korea, China and Japan, these companies benefit from considerable investment in research and development (R&D), allowing them to advance the adoption of new fuel technologies such as LNG, methanol, and ammonia. Korean shipbuilders, such as Hyundai Heavy Industries and Samsung Heavy Industries, are prime examples, recognised for their ability to construct large, high-value ships like LNG carriers and ultra-large containerships, which are increasingly being equipped with alternative fuel capabilities. These yards often have strong relationships with marine engine manufacturers and other suppliers, facilitating the integration of cutting-edge fuel systems.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Beyond ship construction, marine engine development is a critical factor in the transition to alternative fuels, determining the feasibility and scalability of new fuel types across vessel segments. Advancements in engine technology enable compatibility with low/zero-emission fuels, while dual-fuel and retrofit solutions help bridge the transition from conventional fuels. The development and deployment of these technologies vary by region, making the distribution of marine engine manufacturing capabilities an interesting indicator of technological leadership and industrial readiness for alternative fuel adoption.
Marine engine design for alternative fuel capable vessels is dominated by European designers. German marine engine designers, primarily M.A.N. Energy Solutions, account for over half (51%) of all engines in the global fleet and orderbook of alternative fuel capable ships worldwide (in terms of numbers of vessels). Following Germany, Chinese marine engine designers account for 21% of engines for alternative fuel capable vessels, reflecting its expanding role in marine technology and upstream equipment sectors. Finland ranks third with 14.5%, while Japanese engine designers make up 4%. In North America, engine design is also noteworthy, although smaller in scale. The US represents 1.5% of global engines for alternative fuel capable vessels, reflecting its presence in the alternative fuel marine technology space. This regional variation in engine production highlights the differing levels of specialisation and market focus across the global marine equipment industry.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
2.2.2. Deep dive on methanol and ammonia
Methanol and ammonia have been selected for a closer examination of their respective orderbooks due to their distinct growth trajectories and strategic importance in the future of maritime decarbonisation.
Methanol is currently experiencing the most rapid increase in ship orders, with the share of methanol capable vessels increasing from 0.12% in the global fleet to 9.33% in the orderbook by September 2024, highlighting its rising prominence as an alternative fuel (Clarksons Research, 2024[11]). Green methanol can be classified into bio-methanol, derived from biomass or biogas, and e-methanol, produced by combining green hydrogen with CO₂ from direct air capture or biogenic sources. Both have minimal lifecycle emissions, making them viable for net-zero shipping. Further, methanol’s chemical properties make it an attractive fuel alternative. Despite its lower energy density, it shares combustion characteristics with heavy fuel oil, simplifying storage and handling compared to ammonia or LNG. Additionally, methanol's 'drop-in' capability allows modern dual-fuel marine engines to operate on both methanol and heavy fuel oil (Methanol Institute, 2023[25])
Ammonia, on the other hand, is being prioritised for its long-term potential, with the International Energy Agency (IEA) projecting that it will account for 44% of final energy consumption in the shipping sector by 2050 (International Energy Agency, 2023[26]). Ammonia can be produced entirely carbon-free using renewable energy. Its higher energy density compared to hydrogen and its ability to be stored in liquid form at manageable temperatures make it a more viable long-term solution for deep-sea shipping. However, the widespread use of ammonia as a marine fuel presents safety challenges. Due to its toxicity and corrosiveness, increased handling frequency will require strict safety measures and operational protocols to minimise risks during storage, bunkering and ship operations (Global Centre for Maritime Decarbonisation, 2024[27]).
Given the significant increase in methanol capable vessels in the orderbook, it is relevant to assess the differences between the current maritime fleet and orderbook projections up to 2028. The economies showing the highest orderbook growth relative to their current fleet of completed vessels are of particular interest. As can be seen in Figure 2.8, this comparative assessment underscores the remarkable increase in methanol capable orders, as the orderbook projections indicate a substantial increase, reaching up to 2000% of the present completed fleet in China. Notably, the methanol capable vessel segment has not only seen orderbook expansion but also the diversification in the countries engaged in constructing these vessels, with Türkiye, Philippines, India, Norway, Germany, France, the Netherlands, Romania and Spain having received methanol capable ship orders. China and Korea maintain their prominence as major suppliers and China is projected to surpass Korea in terms of the highest number of orders.
Note: Data as of September 2024.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
The orderbook of ammonia capable vessels in CGT is concentrated in China, Korea and Japan, which show clear differences in the scale and diversification of production (Figure 2.9). China has the largest orderbook for ammonia capable vessels, with approximately 400,000 CGT. This reflects a highly diversified portfolio, spanning bulk carriers, LPG carriers, crude tankers, containerships, and tugs. This broad mix of vessel types underscores China’s strategic approach to establishing a strong presence across multiple segments of ammonia capable shipping. Korea’s ammonia capable vessel production is more concentrated, with a total of about 150,000 CGT, the majority of which are LPG carriers. Japan, with around 50,000 CGT, primarily focused on bulk carriers and a smaller proportion dedicated to LPG carriers. The limited diversification in ammonia capable vessel production in Korea and Japan suggests a narrower focus, likely driven by their traditional shipbuilding capacities in these specific vessel types.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Assessing active shipyards provides valuable insights into the annual capacity of shipyards to construct alternative fuel capable vessels (OECD, 2023[28]). Examining the number of yards that have produced at least one alternative fuel capable vessel each year over the past decade, the analysis further stratifies the data by vessel type, builder country, and alternative fuel type. This approach enables a clear comparison between shipyards constructing alternative fuel capable vessels and the overall industry activity, which includes all shipyards building ships, whether conventional fuel capable or not. The ratio of “alternative-to-total active yards” highlights the proportion of active yards contributing to alternative fuel vessel construction relative to the total number of active yards. The “built date” of a ship, as recorded in Clarksons World Fleet Register (WFR), is used to track annual output, including vessels delivered in 2024, providing an assessment of the shipbuilding sector’s capacity to support decarbonisation efforts.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
To better understand shipbuilding capacity for different vessel types, it is of interest to analyse active yards constructing different vessel and fuel types separately.
For bulk carriers, the number of shipyards constructing alternative fuel capable vessels remains relatively modest. In 2024, only around 7.5% of shipyards involved in bulker construction—equivalent to 8 out of 94 active yards—were identified as building ships capable of operating on alternative fuels. This indicates that, while the capacity for constructing such vessels exists, it is still highly concentrated among a few shipyards. However, there has been a notable expansion in this area over the past five years (see Figure 2.11). A closer look at the data reveals a discernible shift in the type of alternative fuels being adopted for bulkers. The initial surge in the construction of alternative fuel capable bulkers between 2017 and 2019 was predominantly driven by the introduction of biofuel capable ships. Subsequently, the continued increase in the number of shipyards venturing into the construction of alternative fuel capable bulkers has been primarily associated with LNG.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Active yards constructing containerships show a high share of alternative fuel capable production. Notably, 20% of shipyards involved in containership construction are producing vessels capable of operating on alternative fuels in 2024. This growing trend begins to gain momentum in 2020. In line with the overall number of yards constructing containerships, the total and relative number of yards building alternative-fuel capable vessels has experienced fluctuations in studied period but has seen a general increase since 2015 (Figure 2.12). This growing trend is primarily attributable to two factors: a substantial rise in the construction of LNG capable containerships and an increase in the construction of methanol capable vessels. The latter see a particular surge in 2024, with five shipyards actively involved in constructing methanol fuel capable containerships.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
In the tanker segment, the proportion of shipyards engaged in building alternative fuel capable vessels remains relatively low. Yards having constructed at least one alternative fuel capable ship represent 14% of the total active yards, indicating a lower rate of construction compared to other ship types. Interestingly, while the total number of yards producing tankers has seen a decline—from a peak of 179 in 2018 to 103 by 2024—the count of shipyards constructing alternative fuel capable tankers has experienced a gradual but consistent rise. This number grew from just four active yards in 2018 to 14 by 2024 (see Figure 2.13).
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
For cruise ships, the percentage of shipyards engaged in building alternative fuel capable ships has consistently been the highest among all ship categories. In 2024, this figure reached a peak of 36%, underscoring the significant share of the shipyards capable of constructing low-carbon cruise vessels. This trend can be largely attributed to a decrease in the number of shipyards exclusively manufacturing conventionally fuelled ships (Figure 2.14). This increase in the number of shipyards building alternative fuel capable cruise ships became particularly pronounced after 2019. As in other segments of ship construction, the increase in yards specialising in alternative fuel technologies for cruise ships linked to the rise in the construction of LNG capable vessels. LNG, a transition fuel, highlights the importance of the maritime industry’s ongoing efforts to adapt and prepare for a future that increasingly relies on alternative fuel sources (DNV, 2023[29]).
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Analysis by fuel type confirms LNG predominant position, with most shipyards focusing on constructing LNG capable vessels (37 yards). Concurrently, there is a noticeable increase in the number of shipyards expanding into the construction of methanol capable ships (8 yards), reflecting a diversification in fuel alternatives being pursued (Figure 2.15). Yards constructing biofuel capable ships present a contrasting picture. After peaking in 2017, constructing biofuel-powered vessels has seen a decline. This shift can partially be attributed to the growing prominence of other alternative fuels, such as LNG, which has seen a rapid increase in adoption since 2019. Shipyards that previously focused on building biofuel capable tankers and containerships up until 2020 might have shifted towards LNG (and methanol), driven by the growing industry uptake of these fuels. The apparent decrease in biofuel capable ship construction, particularly among tankers and containerships, might also reflect a selection bias towards ship types that traditionally have not favoured biofuels as much. For instance, trends in active yards might be different for ferries, where biofuel capable vessels could represent a larger percentage.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Determining the price premium for alternative fuel capable vessels offers insight into the additional capital required to adopt zero/low-carbon maritime technologies. It can therefore help assess the economic viability of alternative fuel options, enabling stakeholders to forecast long-term operational costs. By identifying the financial disparity between conventional and alternative fuel capable vessels, it can also help inform the development of targeted policy incentives, aiming to narrow the cost gap and accelerate the maritime industry’s shift towards zero/low-carbon technologies and practices.
To identify the price difference for alternative fuel capable vessels, the analysis employs a matching method to identify comparable vessels based on year of contract, country of origin, and size—with a degree of tolerance for variations. Due to data limitations, the analysis is focused on the pricing premium for LNG capable and methanol capable ships compared to conventionally fuelled vessels. The final output contextualises the price premia by three comparison pairs: 1) LNG capable and conventional fuel vessels, 2) methanol capable and conventional fuel vessels, and 3) LNG capable and methanol capable vessels. Data on prices for LNG capable vessels was available from 2019 to 2024, and for methanol capable vessels from 2022 to 2024. Price data were sourced from Clarksons WFR and the author’s data collection.
Table 2.1 provides an overview of results. While no ship segment yielded a match for every year within the study period, most contained multiple data points. For bulk carriers, containerships, pure car carriers, and various types of tankers, it was possible to generate estimates within specific builder countries. When this was not feasible, cross-country comparisons were explicitly stated. However, several limitations should be considered. In most categories, the data is based on fewer than five price observations per fuel type, meaning that in a given year, builder country, and ship size, fewer than five individual price points were available for both alternative and conventional fuel vessels. This limited sample size reduces the robustness of direct comparisons and may introduce variability in the estimates. Additionally, differences in market conditions, regulatory frameworks, and contract structures across countries and ship types further constrain the generalisability of the findings.
Analysis in prices indicates a noticeable price premium for LNG capable (on average 12.8%) and methanol capable ships (11.4%) across vessel types. The extent of this premium varied significantly by ship type, with bulkers showing the highest price premium for both LNG and methanol capable ships. This observation aligns with previous findings, such as the DNV GL estimates, which suggest the construction costs of new LNG-powered ships are approximately 10-20% higher than those of conventional ships (DNV GL, 2020[30]). Similarly, A.P. Moller – Maersk A/S, one of the largest shipping companies in the world, has indicated that for methanol capable vessels, this capability adds approximately 10-15% to the total CAPEX of each vessel (MAERSK, 2021[31]). For certain ship categories such as containers and bulk carriers, the premium appeared to be on a downward trend, despite year-on-year price fluctuations being a common occurrence across all types. Although the higher CAPEX can pose a financial burden for shipowners, it creates additional revenue streams for shipbuilders and shipbuilding economies. Since vessels designed for alternative fuels are more costly than conventional ships, this shift presents a significant economic opportunity— particularly for early adopters, who can establish a competitive edge in the market.
Interestingly, the analysis revealed that several vessel types (bulkers, containerships, crude tankers, pure car carriers) exhibit a lower price premium for methanol capable ships than for LNG capable counterparts. Further, the price comparison between methanol and LNG indicates that methanol capable ships are more cost-effective for pure car carriers, crude tankers and containerships (with a price difference of -2.6%, -4.3% and -1.5%, respectively). As with other price premia calculations, the analysis is limited due to the low number of individual prices available for comparison.
Note: *based on <5 prices per fuel capability **compares cross-country data
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
An alternative fuel conversion is defined as the retrofit of a fuel engine, enabling it to operate using a chosen alternative fuel. This process involves adapting or upgrading existing engine components and fuel systems to ensure compatibility with fuels that offer environmental benefits over conventional options, such as reduced greenhouse gas emissions. The integration of comprehensive fuel systems into existing vessels is complicated by the need for larger fuel tanks to accommodate fuels with lower energy density, which must be placed without affecting the ship’s structural integrity or cargo capacity. Additionally, retrofitting ships requires finding space for fuel preparation equipment near the engine room, installing costly and larger double-walled fuel piping with minimal disruption to the ship’s structure, and enhancing safety measures for venting, purging, ventilation and fire and gas leak detection (Lloyd's Register, 2023[32]).The alternative fuels included in this analysis are LNG, LPG, methanol, biofuel, ammonia and hydrogen.
For alternative fuel conversions, LNG appears as the predominant choice, accounting for 28 of the 64 total conversions identified, as of February 2024. This is followed by conversions to LPG and biofuels, with 19 and 12 conversions respectively. The data also reveals a nascent adoption of ammonia and methanol as alternative fuels (2 conversions each), and a single case of hydrogen fuel conversion (Clarksons Research, 2024[11]). Looking to annual trends, fuel conversion activities fluctuated between 1 and 4 occurrences per year between 2011 to 2019. A notable increase was observed in 2020, with the count increasing to 14 conversions, and peaking at 16 in 2021. This uptick can be principally attributed to an increased frequency of LPG conversions. The first ammonia conversions were recorded in 2023 but they were not applied to oceangoing vessels (Figure 2.16).
The increase in conversion activities, particularly from 2020 onwards, appears to align with the growing presence of alternative fuels (beyond LNG) in the orderbook. While this trend highlights the shipbuilding industry’s growing contribution to support GHG emissions reduction from shipping and the evolving regulatory environment supporting these shifts, alternative fuel conversions still represent a small fraction of total conversions and a relatively small number compared to increase of alternative fuel newbuilds. Although alternative fuel conversions are expected to increase in the future as the industry looks to replace and retrofit the existing fleet, concerns remain about potential bottlenecks in the conversion process, which could hinder progress toward net-zero goals.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
Examining the geographical distribution of retrofits, China emerges as the leader in cumulative alternative fuel conversions (21 total), with Norway following just after, and other European shipbuilding economies such as the Netherlands, Poland, and Portugal also making significant contributions. In China, the focus of conversions predominantly lies on LPG, alongside some LNG projects. Norway demonstrates the most comprehensive range of fuel conversions, including biofuels, LNG and hydrogen. Both the Netherlands and Poland have carried out LNG and methanol conversions (Figure 2.17). It is noteworthy that several countries (and territories) are actively participating in the fuel conversion market despite not having a large ship construction industry, such as Qatar, which had 134 vessels in the orderbook from 2011 to 2023. This seems to suggest that retrofitting activities are not necessarily contingent on a country’s shipbuilding capacity. The main Shipbuilding Committee members involved in fuel conversions are Norway, the Netherlands, Poland, Portugal, Denmark, France, Japan and Sweden.
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
The predominant vessel type for alternative fuel conversions, with the exceptions of LPG and ammonia, are passenger vessels. These are the only type of vessels for which the data indicates biofuel or hydrogen conversions. For containers, chemical carriers and LNG carriers, the conversions recorded are exclusively for LNG. LPG conversions have been documented solely for LPG carriers. Meanwhile, ammonia conversions have been uniquely undertaken on a tug and a platform supply vessel (Figure 2.18).
Source: OECD calculations based on data from World Fleet Register, Clarksons Research, https://www.clarksons.net/wfr/fleet (2024).
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← 1. Alternative fuel capable vessels are defined as dual fuel vessels designed to run on fuel oil and an alternative fuel (e.g., LNG, methanol, ammonia, etc). Alternative fuel ready vessels are designed to be more easily retrofitted to future alternative fuel use but are currently not capable of running on the designated alternative fuel. Vessels can be both capable of running on one alternative fuel and ready to run on another, e.g. LPG capable vessels that are ammonia ready.