Cyprus-linked shipowners face fresh uncertainty over the future of liquefied natural gas (LNG) as a marine fuel, as governments prepare to reopen negotiations on global emissions rules that could reshape operating costs and investment decisions across the shipping industry.

At the centre of the dispute is the International Maritime Organisation’s (IMO) proposed Net-Zero Framework, which would introduce new emissions standards and financial obligations for vessels that fail to meet them.

However, the disagreement has become increasingly complicated, with the US seeking greater recognition of LNG and other transitional fuels while challenging plans to establish an international fund financed through emissions-related payments.

For shipowners, the consequences extend well beyond environmental policy. Companies have already committed substantial capital to vessels designed to operate on LNG, and the treatment of that fuel under the eventual regulations could determine whether those investments remain commercially attractive.

Indeed, the industry’s appetite for LNG has continued despite the uncertainty.

According to the latest figures from classification society DNV, 200 LNG-capable vessels were ordered during the first nine months of 2026, an increase of 52 per cent compared with the corresponding period last year.

Of the 69 alternative-fuelled vessels ordered in September alone, 48 were designed to use LNG, with container ships and car carriers responsible for most of the activity. Overall, orders for alternative-fuelled vessels reached 311 between January and September, up 53 per cent year on year, according to the DNV figures.

These investments help explain why the future of LNG has become one of the most commercially sensitive aspects of the negotiations.

IMO secretary-general Arsenio Dominguez has acknowledged the difficulty of expecting an industry with substantial existing investments in LNG to abandon the fuel immediately.

Speaking about the negotiations, Dominguez indicated that the revised framework could accommodate LNG as a transitional fuel, according to maritime publication TradeWinds on October 21.

Nevertheless, recognising LNG’s contribution to reducing certain emissions is not the same as classifying it as a zero-emission fuel.

Although LNG generally produces less carbon dioxide when burned than conventional marine fuel oil, its overall environmental performance depends partly on methane emissions throughout the fuel supply chain.

This includes methane released during production and transportation, as well as unburned gas escaping from marine engines, commonly known as methane slip.

Consequently, the method used to calculate emissions could be just as important to shipowners as the decision to permit LNG itself.

Under the proposed framework, fuels would be assessed across their entire life cycle, from extraction and production to consumption on board ships, rather than simply measuring exhaust emissions.

The IMO adopted updated guidelines for measuring methane and nitrous oxide emissions from marine diesel engines earlier this year. However, the wider methodology needed to implement its proposed global emissions framework has yet to be finalised.

Meanwhile, the financial implications remain substantial.

The draft framework, approved in April 2025 but not formally adopted, combines progressively stricter greenhouse gas fuel-intensity limits with a system requiring ships exceeding those limits to purchase compliance units or obtain credits from better-performing vessels.

Under the original proposal, the initial prices for remedial units were set at $100 and $380 per tonne of carbon dioxide equivalent, depending on the extent of non-compliance, for the 2028–2030 reporting periods.

Those charges would apply to emissions-related shortfalls against the prescribed thresholds, rather than automatically to every tonne emitted. The amounts and implementation dates remain subject to negotiation.

The framework would initially cover ocean-going ships above 5,000 gross tonnage, a category responsible for more than 85 per cent of international shipping emissions.

The US has challenged both the proposed financial arrangements and restrictions that could make LNG less attractive.

In August, Federal Maritime Commission chairman Laura DiBella signalled that Washington could consider supporting a revised framework recognising LNG and bio-LNG, provided the rules reflected the commercial availability of alternative fuels.

A further opening emerged during September’s negotiations, when the US delegation reportedly expressed willingness to examine alternatives to an IMO-administered fund, including a temporary financing facility similar to one proposed by Brazil.

Nevertheless, opposition to the fund itself remained a firm American position.

The dispute over the money is particularly difficult because the proposed mechanism would not merely penalise ships with higher emissions.

Its revenues would also finance cleaner marine fuels, infrastructure, technological development and assistance for developing countries facing higher transition costs.

Removing or substantially reducing those payments could therefore ease financial pressure on some operators while weakening incentives for investment in low-emission fuels.

According to an assessment of September’s negotiations by University College London’s Shipping and Oceans Research Group, 38 countries spoke in favour of greenhouse gas pricing and a centralised fund, compared with 17 opposed. These figures reflected interventions during discussions, not a formal vote.

For Cyprus, the outcome carries additional significance because the island’s shipping industry already operates within an increasingly demanding European regulatory system.

The EU’s FuelEU Maritime regulation, introduced in January 2025, requires a gradual reduction in the greenhouse gas intensity of energy used by ships calling at European ports, starting at 2 per cent in 2025 and increasing to 6 per cent by 2030.

At the same time, shipping has been incorporated into the EU Emissions Trading System, with methane and nitrous oxide emissions joining carbon dioxide within its scope from 2026.

Companies will also have to surrender allowances covering 100 per cent of their applicable 2026 emissions in 2027, following the system’s phased introduction.

These measures apply according to vessels’ operations and port calls, regardless of whether they sail under a European flag. A future global agreement would therefore raise further questions about how international and regional obligations should operate alongside one another.

That uncertainty matters particularly to Limassol’s shipmanagement industry, where companies make fuel-purchasing, technical and commercial decisions for vessels operating worldwide.

It also comes as Cyprus continues expanding its international maritime presence.

Shipping Deputy Minister Marina Hadjimanolis announced in Tokyo on October 15 that the Cyprus Ship Registry had grown by 27 per cent since September 2023, reaching its highest level in 25 years.

Cyprus has also strengthened its cooperation with Greece, Malta and Italy, with the four maritime nations agreeing in September to coordinate their positions on international and European shipping regulation.

Their common approach emphasises practical, globally applicable and cost-effective measures that protect the competitiveness of international shipping while supporting the transition towards cleaner fuels.

However, the difficulties facing shipowners are not limited to regulatory charges.

The commercial case for an LNG-powered vessel depends on future fuel prices, bunkering infrastructure, engine technology, methane performance and the availability of lower-emission alternatives such as bio-LNG.

For a vessel expected to remain in service for two decades or longer, even relatively small differences in future compliance costs can influence decisions over newbuildings, retrofits and chartering arrangements.

In addition, rising operating expenses may ultimately be reflected in freight rates, adding another commercial dimension to the negotiations.

The next opportunity to narrow the differences will come during the IMO’s intersessional working group meeting on November 23 – 27, followed by the Marine Environment Protection Committee’s 85th session from November 30 to December 3.

The extraordinary meeting originally adjourned in October 2025 is scheduled to resume on December 4, subject to confirmation by the committee.

However, the previous round of negotiations in September concluded without agreed legal text, while further work on implementation guidelines and life-cycle emissions assessments was postponed.

As a result, neither the final structure of the framework nor the prospect of adoption in December can be taken for granted.