Journally Speaking: Reshaping the tanker industry
The International Maritime Organization (IMO) has long led efforts to improve environmental performance across the shipping sector. Milestones include the implementation of double-hull requirements, mandates for ships to switch to cleaner gasoil while in port, and the Energy Efficiency Design Index applied to new vessels to encourage the construction of more efficient ships.
In 2020, the global sulphur cap of 0.50% on bunker fuels dramatically reduced emissions but also increased operational costs.
Building on earlier efforts, 2023 saw the introduction of two IMO measures targeting existing ships: the Energy Efficiency Existing Ship Index and the Carbon Intensity Indicator. These require vessels to meet minimum energy performance thresholds and report emissions intensity. As a result, many shipowners have been compelled to implement technical retrofits, adopt slow steaming, or retire older tonnage earlier than planned.
A tipping point
The year 2025 marks a significant escalation in shipping decarbonization efforts.
From May 1, the Mediterranean Sea officially became a Sulphur Emission Control Area (SECA) reducing permissible fuel sulphur content to 0.10% – a tightening that aligns with existing SECAs in Northern Europe and North America and directly impacts tankers transiting the Suez Canal or discharging in key Mediterranean ports.
Simultaneously, California expanded its shore power regulations to include oil tankers calling at major terminals such as Los Angeles and Long Beach. Vessels must now plug into shore-based electricity or deploy alternative emissions reduction technologies while at berth.
Europe also has tightened maritime regulations. The FuelEU Maritime regulation, enacted in January 2025, mandates a gradual reduction in the greenhouse gas (GHG) intensity from a 2020
baseline – starting with a 2% cut in 2025 and rising to 80% by 2050. In parallel, the EU Emissions Trading System is being expanded to cover 70% of CO2 emissions from voyages involving EU ports by 2026.
Looking ahead, even more impactful changes loom. In April 2025, the IMO approved a landmark Net-Zero Framework that includes the phased implementation of a global carbon pricing mechanism starting in 2027. This framework aims to achieve net-zero GHG emissions from international shipping by or around 2050.
Strategic impacts
These regulatory shifts are altering tanker fleet dynamics. They are accelerating the retirement of older, less efficient vessels, narrowing the pool of compliant tonnage, and tightening available supply and supporting freight rates. Meantime, the cost of marine fuel is rising as demand shifts further toward MGO and alternative low-carbon fuels.
As the regulatory tide rises, the tanker industry stands at a crossroads between compliance and competitiveness. Shipowners are now compelled to weigh near-term retrofit costs and fuel premiums against long-term viability in an increasingly carbon-constrained market. While the shift imposes financial and operational burdens, it also presents opportunities for early adopters.
Going forward, the pace of regulatory enforcement, the availability of scalable low-carbon fuels, and investment in fleet renewal will be decisive in shaping the industry’s trajectory. For an asset class long driven by cyclical fundamentals, structural decarbonization may become the defining market force of the next decade.
Conglin Xu | Managing Editor-Economics
Conglin Xu, Managing Editor-Economics, covers worldwide oil and gas market developments and macroeconomic factors, conducts analytical economic and financial research, generates estimates and forecasts, and compiles production and reserves statistics for Oil & Gas Journal. She joined OGJ in 2012 as Senior Economics Editor.
Xu holds a PhD in International Economics from the University of California at Santa Cruz. She was a Short-term Consultant at the World Bank and Summer Intern at the International Monetary Fund.
