The shipping industry is betting big on alternative fuels for its energy transition. Based on the 2024 orderbook, over 1700 vessels have been ordered with alternative fuel propulsion capabilities (with a more than 50% increase in 2024).
These ‘future fuels’, which serve as alternatives to fossil fuels, are critical if the International Maritime Organization (IMO) is to deliver on its 2023 GHG Strategy of reaching net‑zero GHG international shipping emissions “by or around 2050.”
But using these fuels poses a new challenge: the main IMO liability conventions that protected coastal States and affected parties from oil spills do not adequately protect them against spills or leaks of alternative fuels as these new substances behave very differently compared to fossil fuels.
From Torrey Canyon to net-zero: drivers of liability regimes
The current IMO liability and compensation regime for spills of persistent oil from ships is a product of disaster. Before the 1969 Torrey Canyon disaster, victims of marine pollution had limited legal recourse. After Torrey Canyon, States adopted the 1969 Civil Liability Convention (CLC) and the 1971 Fund Convention (Fund).
The CLC imposed strict liability on shipowners, up to a prescribed limit, for oil pollution damage arising from a spill involving their tankers within the territory, territorial sea or exclusive economic zone (EEZ), or equivalent area of a CLC State Party.
Further, shipowners of tankers carrying more than 2,000 tons of oil in bulk as cargo are required to maintain compulsory insurance or security to cover their potential liability. A dedicated liability fund (International Oil Pollution Compensation Funds) was later set up under the Fund Convention to provide additional second-tiered compensation where victims could not obtain full compensation under the CLC.
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A serious incident involving a new alternative fuel – absent a fit-for-purpose and adequate liability and compensation framework – could undermine public confidence and potentially derail the long-term prospects of that decarbonisation option altogether.
Two later conventions closed other legal gaps: (1) the 2001 Bunkers Convention (Bunkers) broadened the strict liability and compulsory insurance model to the bunker fuel oils on any ship, not just tankers, as they became the most common source of oil pollution from ships; (2) as chemicals and other dangerous cargoes became more prevalently carried by sea, the Hazardous and Noxious Substances (HNS) Convention was adopted to address pollution concerns through a similar two-tiered system.
However, the Bunkers Convention does not have a second-tier international fund from which supplementary compensation in excess of the shipowner’s liability under the first tier can be obtained, unlike the CLC and HNS Conventions.
Hence, there is no exclusive channelling of liability to the registered shipowner under the Bunkers Convention—the shipowner’s liability is shared jointly and severally with the bareboat charterer, manager or operator of the ship.
The HNS Convention, while more comprehensive in principle than the CLC, Fund, and Bunkers (i.e. it also covers personal injury and property damage), never entered into force due to administratively burdensome reporting requirements for the vast range of packaged goods received.
Thus, with the rise in alternative fuels being transported both as cargo and used as bunker fuel, the present issues are threefold: (1) existing IMO liability conventions that are in force do not apply to alternative fuels, (2) the HNS Convention is not in force, and (3) even if it were in force, and although alternative fuels are often defined as HNS falling within the HNS Convention, the Convention only applies if they are transported as cargo, but not as bunker fuel.
Alternative fuels such as hydrogen, biodiesel, methanol, ammonia, or liquefied natural gas (LNG) are not persistent fossil-fuel oils (Article 1(5), 1992 CLC) within the meaning of “oil” in existing conventions (i.e. they are, as their name suggests, non-oil in nature to address climate change).
The result is an incoherent patchwork of regulations applicable to these new alternative fuels, which would result in lack of liability and compensation in the event of an accident or disaster, potentially undermining the industry and IMO’s decarbonisation efforts.
How alternative fuels behave – and harm – differently
From a legal perspective, the specific type of fuel matters because their physical behaviour dictates both the scale of harm and the ease of establishing causation and attribution. These two aspects are significant especially for underwriting insurance cover and determining a compulsory insurance limit (which is crucial for derisking such new technologies).
However, there could be many permutations of alternative fuels with different lifecycle characteristics (see the IMO-envisaged pathways here). Unlike liquid oil, some liquefied fuels such as ammonia and LNG are gaseous but kept highly pressurised and cryogenically and have a fundamentally different risk profile.
As they are comparatively less well studied compared to fossil fuel oils, newfound studies have shown that supposedly ‘clean/green’ fuels could also generate byproducts, including nitrous oxide which has a global warming potential of 265-298 times that of CO₂. New magnitudes and types of harm could thus emerge from alternative fuels in terms of risks to human health and safety, property, and the environment.
Ammonia, for example, is highly soluble in seawater and acutely toxic to marine life—exposure to a concentrated vapour cloud can be fatal within minutes. The cloud can also travel by air across neighbouring regions on land and sea. Methanol is flammable and poisonous if ingested.
LNG can cause accidental leaks of methane, a greenhouse gas 80 times more potent than CO₂ in a 20‑year timeframe. Hydrogen is difficult to contain and highly explosive, while biofuels can cause eutrophication or smothering of marine life. None of these risks were contemplated when the IMO regimes were drafted decades ago, although a recent advisory opinion by the International Tribunal for the Law of the Sea clarified that GHG emissions constitute “marine pollution” under the United Nations Convention on the Law of the Sea (UNCLOS).
Considering these risks, stakeholders may eventually have to clarify the legal consequences of pollution from such alternative fuel substances in a more holistic, ‘across the whole of supply chain’, manner.
Possible ways forward
The distinct risk profiles posed by alternative fuels—particularly in terms of human health, environmental harm, transboundary impacts, and property damage—underscore the limitations of existing IMO liability and compensation regimes.
These instruments predominantly address economic loss to coastal States and exclude coverage for pollution on the high seas, personal injury, and property damage, except under the 2010 HNS Convention to a limited extent (but it is nevertheless not in force).
While the development of a new instrument specifically tailored to alternative fuels may offer a comprehensive solution, the failure to bring the HNS regime into force casts serious doubt on the political viability of such an endeavour—especially if it were expanded to include complex dual-use fuel ship systems.
A more pragmatic path may lie in incrementally amending existing, widely ratified instruments such as the Bunkers Convention, as a starting point. Its compensation limit is lower as a single rather than dual-tier model, and definitions could be amended to accommodate alternative fuels.
However, this approach is not without legal and technical challenges, including issues of definitional clarity, fuel classification, dual-fuel operations, and enforceability across diverse jurisdictions.
In tandem, a dedicated liability and compensation component under the IMO Net-Zero Fund for alternative fuels could be created and financed through the IMO’s mid-term carbon pricing mechanism. Consistent with the aims of the mechanism’s mandate and related proposals by IMO States, the fund could support interim transitional needs such as security of compensation in the absence of insurance cover for trial deployments and reduce first-mover risks.
It is important to note the benefits and intended purpose of liability and compensation regimes and their funds. They channel liability onto specific actors to allow for claims to be made for specific heads of claim (e.g. only damage by contamination applies under the CLC).
A balance is purportedly struck between the interests of the shipping industry to reduce their exposure to unlimited liability as well as facilitate adequate and prompt compensation to victims of pollution damage. For instance, the main conventions are designed to impose liability limitations (e.g. only costs of reasonable measures of reinstatement are recoverable and not loss of profits; see Article 1(6), 1992 CLC) but also require compulsory insurance to be taken.
Therefore, in the absence of a liability and compensation regime for alternative fuels, any claims for damage would be subject to national procedures which are unharmonised and uncertain. This was clearly expressed by the IMO Legal Committee in LEG 112/13/2:
“Liability would have to be established under relevant national law, perhaps with the need to prove negligence or some other fault on the part of the shipowner before compensation could be considered, and the shipowner may not be entitled to limit their liability. This could lead to a fragmented patchwork of liability and compensation regimes, contrary to the preference for international uniformity of maritime law.”
Further, it is unclear that claims for damage from alternative fuels will fall within the Convention on Limitation of Liability for Maritime Claims (LLMC) Conventions, and shipowners may not be entitled to limit their liability under private maritime law.
The ongoing review by the IMO Legal Committee is a critical and promising opportunity to proactively fill these emerging liability gaps. However, it must act swiftly and draw lessons from the past. By the time substantive discussions on liability for alternative fuels begin, new fuels and vessel types will likely be in operational trials or early commercial deployment.
A serious incident involving a new alternative fuel—absent a fit-for-purpose and adequate liability and compensation framework—could undermine public confidence and potentially derail the long-term prospects of that decarbonisation option altogether. For these reasons, this issue should be given the utmost priority and attention by the IMO and the shipping community and addressed as soon as practicably possible.
This op-ed was first published on NUS Centre for International Law’s blog. It was written prior to the author’s study in the US on 31 July 2025 and is part of the conference paper the author presented at the CIL-CLIMA Conference on the Decarbonization of Shipping and Alternative Fuels and is supported by the MPA-CIL Oceans Governance Research Programme funded by the Singapore Maritime Institute (SMI-2023-MA-03).
