CDR in shipping, what is happening today?

A couple of weeks ago, I published an independent analysis of what role carbon removal may play in net zero shipping. The shipping sector is one of today's biggest emitters and is considered hard-to-abate since long-range trips are not possible to electrify and require new, more expensive fuels to decarbonize. 

The fuel options include biofuels and electrofuels like e-ammonia, e-methanol, and hydrogen. Onboard CCS (capturing the emissions onboard the ship) and carbon removal are other mitigation options. My analysis showed that using permanent CDR to offset fossil fuel oil will likely be cheaper than the use of electrofuels, and will sometimes be cheaper than biofuels as well. This is likely to remain the case unless we get access to large amounts of cheap electricity. 

Despite this, most shipping companies and policy proposals focus only on fuel substitution. This follow-up article takes a closer look at corporate and policymakers' plans and at how CDR could be integrated into shipping net zero strategies.  

Shipping companies roadmaps Looking at some of the world's biggest shippers, we see most have net zero commitments by mid-century. They all have plans for alternative fuels, but with slightly different bets. Danish Maersk is investing heavily in green methanol, while French CMA CGM and Swiss MSC focus on liquefied natural gas (LNG) as a transitional fuel, alongside methanol and biofuels. Japanese NYK Lines and Mitsui OSK Lines talk about ammonia as a long‑term solution while deploying LNG and initial methanol tonnage as transition steps.

Few shippers explicitly mention CDR as a mitigation alternative. The two companies that have purchased durable CDR so far are NYK Lines and Mitsui OSK Lines.

NYK entered a three-year agreement with Climeworks to purchase CDR credits from a portfolio of durable removal technologies, including direct air capture, biochar, BECCS, and enhanced rock weathering. They also signed a five-year collaboration for marine fuel that includes CDR credits sourced from a 1PointFive DAC facility in Texas, and this week, they made a second DAC purchase from 1Point5. 

Mitsui OSK Lines has purchased around 25,000 CDR credits in total from Alt Carbon, Climeworks, Exomad Green and Captura (Source CDR.fyi), and has an explicit aim to remove 2.2 million tons of CO₂ by 2030. 

Policy initiatives

There are two main policy actors affecting shipping decarbonisation right now: The International Maritime Organisation (IMO) and the EU. The IMO agreed in April 2025 on a draft Net Zero Framework, which is due for final adoption later this year and is expected to enter into force around 2027. It will apply to large ships (>5000 GT) and require stepwise cuts in the emission intensity of fuels from 2028, with penalties for non-compliance and rewards for using zero- and near-zero GHG fuels. Only the lifecycle-based carbon intensity of the fuel counts toward the target, so efficiency upgrades that reduce fuel use do not contribute. 

In parallel, the EU’s FuelEU Maritime Regulation is already in force, covering large ships calling at EU ports. It mandates a 2% cut in fuel GHG intensity by 2025, which tightens to 80% by 2050 on a full well-to-wake basis (all life-cycle emissions). Neither regime currently recognizes CDR as a compliance option.

The EU has also brought shipping into its Emissions Trading System (ETS). Since 2024, large ships calling at EU ports must surrender allowances for their CO₂ emissions, with coverage expanding to 100% of emissions from voyages within the EU and 50% of emissions from that only start or end within the EU  by 2026. The number of allowances in the ETS is on a pathway to reach zero around 2039, which means emissions from voyages covered by the system would need to be fully abated. 

CDR is likely to be included in the ETS from 2031, but FuelEU Maritime effectively forces ETS-covered ships to decarbonize via fuel shifting, rather than CDR. So even if ETS allows durable removals to be used to abate emissions, FuelEU will still require reductions in fuel-intensity(1). This may lead to a future in which decarbonized fuels are more expensive than efficiency upgrades and CDR, but shipping companies will be forced to pay more for an equivalent environmental impact, just to comply with FuelEU Maritime.  

In general, FuelEU is expected to have a much bigger impact on the shipping sector than EU ETS. This type of double policy coverage, also known as policy stacking, is a way to ensure decarbonization, but it has also been criticized for making the ETS less cost-effective. A similar thing happens with the EU ReFuel Aviation legislation, which stipulates 70% sustainable aviation fuel. 

A way forward for CDR

Permanent carbon removal is neither better nor worse than other mitigation solutions. Given sufficient guardrails on quality and safety, using CDR for the emissions where it is the cheapest option makes net zero cheaper and easier to achieve. But to make this possible, we need technology-neutral rules.

The IMO rules under consideration have set targets for reductions in fuel intensity until 2035 and it seems unlikely CDR could come in before then. But after 2035, a parallel removal/neutralisation mechanism could be added. For example, the rules could allow a defined share of residual emissions to be covered with durable removals, complementing the carbon intensity rules. Discussions about this should start now, as the rules need to be specified far ahead of the actual implementation dates. 

FuelEU Maritime requires an 80% emission intensity reduction by 2050, making the integration of CDR into this regulation more challenging. The most straightforward way may be to allow permanent CDR credits to indirectly lower the carbon intensity of fuel. This would take a large revision of the FuelEU Maritime directive, though. The concept of lowering the well-to-wake carbon intensity of fuels using CDR also needs to be established elsewhere first, for example, through certification with the ISCC. 

Permanent CDR should also be included in the EU ETS, and the commission is expected to come with a proposal regarding this in 2026, but as discussed above, this may not have a major impact if the FuelEU Maritime regulations are singly focused on reductions in emissions-intensity. 

There are also synergies between biofuels and carbon removal that can be explored further. For example, pyrolysis produces both biochar and bio-oil that can be upgraded to work in today's ship engines. One company doing this is Mash Makes (supported in the Milkywire Climate Transformation fund since 2021), but they are currently quite alone in exploring the dual pathway of biochar and biofuels. The co-production also opens the door for carbon-negative biofuel when the biochar production is considered (if not sold as credits). 

What can shipping companies do today?

Most carriers have advanced strategies for alternative fuels, but they know scaling production will be slow. Biofuels are constrained by sustainable feedstocks and electrofuels face high costs and limited know-how. Even if low-carbon fuels were cheap and plentiful, the fleet cannot turn over quickly. Over 95% of ships today are only certified for high-flash-point fuels, such as diesel or fuel oil. Running on methanol or ammonia requires major retrofits, new tanks, pumps, engines,  and can only be done in dry docks, which are already a scarce resource. Realistically, most conversions will happen through the gradual replacement of old vessels with newbuilds designed for alternative fuels, but this will take many decades. Onboard CCS would face the same bottleneck.

One thing shippers can do immediately is to start buying durable CDR alongside their fuel transition. For companies with net zero pledges or customers demanding carbon-neutral freight, permanent removals offer a way to neutralise emissions today. Given current economics, durable CDR may in fact be the most cost-efficient option for a large share of shipping’s decarbonisation. Early demand also helps grow the removal market so that the option exists at scale when the sector needs it most.

Conclusion

The shipping industry’s decarbonisation story is still almost entirely about fuels. But fuels alone may not deliver net zero fast enough given cost barriers, slow production scale-up, and hard physical limits on retrofitting the fleet. Carbon removal remains a side note, mentioned by only a handful of carriers and excluded from regulation, yet the economics suggest it deserves far more attention. If integrated properly into certification systems and eventually into policy frameworks, durable CDR could become an essential part of the toolkit: covering residuals, offering a faster path to net zero operations.

Milkywire is interested in talking to shipping companies and their customers about CDRs role in net zero shipping strategies. Reach out if you want to discuss. We are also planning a webinar to explore these topics with shipping companies, stay tuned. 

Footnotes

1. The remaining 20% in FuelEU Maritime may look like an opening for CDR in the EU ETS but it’s not. Since FuelEUMartime covers well-to-wake emissions, but EU ETS only tank-to-wake, meeting the 80% emission intensity reduction in Fuel EU Martime may mean that you meet 100% of the ETS requirement.