The heating, ventilation, and air conditioning (HVAC) system's function on a Navy ship is to provide the required ventilation, heating, and cooling to the occupants and equipment on board. HVAC systems for Navy ships are designed to operate in areas that are diverse and extreme in their ambient environmental conditions, from sub-Arctic winter conditions to humid, hot coastal desert conditions. The HVAC system is sized for these extreme conditions, resulting in oversized systems for the more moderate environments these ships mostly encounter throughout the year. This leads to low efficiency, high energy consumption, and increased CO2 emissions. This paper proposes options for improving the energy efficiency of HVAC systems by incorporating on-demand air conditioning, free cooling, energy recovery, and the use of more efficient chilled water plants. On-demand variable airflow control is utilized to regulate the temperature and airflow in each compartment by automatically controlling dampers in supply and exhaust ducts, based on occupancy profiles and CO2 levels. In conjunction with this, variable-speed fans react and lower the fan speed, thereby reducing electrical consumption. A variable chilled water system equipped with a magnetic bearing variable-speed chilled water plants contributes to a considerable reduction in energy consumption under moderate ambient conditions. Energy recovery is implemented in the ventilation system to transfer heat and humidity between the HVAC system exhaust and the fresh air inlet. Engine waste heat is harnessed to provide heat to the hot water system through plate heat exchangers, resulting in significant energy savings and increased system efficiency. Finally, an HVAC system model simulation for Arrowhead 140 is used as a case study to quantify the energy savings and reduction in CO2 emissions after implementing the proposed system efficiency improvements.