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LNG Carrier Fleet Splitting as EU Emissions Costs Rise, Wood Mackenzie Says

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LNG carriers are increasingly being divided into regulatory winners and losers as Europe tightens maritime emissions rules, with engine type now the key determinant of future compliance costs, Wood Mackenzie analysts said in a Monday note.

The consultancy said modern vessels fitted with ME-GI engines, which are high-pressure gas-injection systems with low methane emissions, are benefiting from lower compliance costs, while older steam turbine and dual-fuel diesel-electric vessels face growing financial pressure under emerging carbon regulations.

The shift is being driven by a combination of emissions measures, including the European Union's Emissions Trading System, FuelEU Maritime rules and the International Maritime Organization's proposed Net-Zero Framework.

Since January 2026, the EU ETS has covered 100% of shipping emissions and now includes methane and nitrous oxide alongside carbon dioxide. For LNG vessels with higher methane slip, particularly DFDE ships, emissions are becoming a direct operating cost.

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

Wood Mackenzie estimates that by 2030, the combined cost of EU ETS and FuelEU Maritime compliance could reach about $1,256 per tonne of very low sulfur fuel oil, compared with around $705 per tonne under the IMO framework.

Steam turbine vessels have already emerged as leading scrapping candidates, although strong charter rates have delayed retirements. DFDE vessels could face a similar trajectory unless operators invest in upgrades, with conversion into floating storage and regasification units increasingly seen as an alternative.

The industry is now focused on an IMO vote scheduled for December 2026. Wood Mackenzie said the outcome could determine whether shipping operators face a more streamlined global emissions regime or continue navigating overlapping international and European regulations.

Despite the regulatory pressure, LNG is expected to remain the most cost-effective compliant marine fuel through the mid-2030s, the consultancy said.

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