Shipping decarbonization and the challenges of the green transition
 

Shipping decarbonization is crucial, but it cannot be approached as a simple process. Rather, it depends on a wider ecosystem where energy production, port infrastructure, shipbuilding capacity for newbuilds and retrofits, financing, regulatory requirements and shipping’s commercial operating models intersect.

With over 80% of global trade by volume - and approximately 45% by value - transported by sea, shipping remains essential for supply chain continuity and economic resilience. Despite its relatively limited share of global greenhouse gas (GHG) emissions - only 2%-3% of total GHG emissions and approximately 11% of transport-sector emissions - the scale and role of shipping require a meaningful transition to alternative fuels, without disrupting maritime transport and international trade flows.

The key challenge is that compliance obligations are largely imposed at vessel level, while many of the factors that determine the success of the transition lie outside shipowners’ direct control. In this context, critical variables include the availability and cost of alternative fuels, the development of bunkering infrastructure, the ability of shipyards to deliver newbuilds or retrofits, and the willingness of charterers and cargo owners to absorb higher costs.

The regulatory environment is radically changing the way shipping evaluates its emissions. Frameworks such as the IMO regulations, FuelEU Maritime and the EU ETS integrate carbon considerations into the day-to-day operations of shipping, affecting not only investment decisions, but also transport costs and market functioning.

As requirements become stricter, exposure to non-compliance costs increases, while the transition to alternative fuels remains expensive and constrained. Demand for such fuels in shipping could increase by as much as 25 times by 2030, without total supply growing at a similar pace.

The challenge, therefore, is not only regulatory, but also economic. Alternative fuels are currently three to seven times more expensive than conventional marine fuels, while total transport costs may increase significantly by 2050, reshaping competition between markets and sectors.

The availability of alternative fuels is one of the first and most important constraints. Alternative fuels currently account for less than 1% of global shipping energy demand, while their production depends on renewable electricity, green hydrogen and sustainable biomass feedstocks. As a result, shipping will need to compete with other sectors, such as aviation, power generation and heavy industry for access to the same limited resources.

At the same time, the development of port and bunkering infrastructure remains uneven. Liquefied natural gas (LNG) currently has the most developed bunkering infrastructure, while methanol remains geographically concentrated and ammonia and hydrogen infrastructure is still at an early stage. As a result, access to low-emission fuels is initially expected to be concentrated around specific hubs and predictable routes.

The third bottleneck is shipbuilding and repair capacity. Today, only 2.4% of the existing global fleet can operate on alternative fuels. Despite growing interest in the construction of new “green” vessels, fleet transition to alternative fuels cannot move faster than the pace at which shipyards can deliver newbuilds and retrofits. The significant decline in the number of large active shipyards, their geographic concentration and delivery times that often exceed three years act as additional constraints.

There is no single solution that can lead the sector toward decarbonization on its own. Instead, the transition requires a combination of energy efficiency, operational improvements, transitional fuels, technological flexibility and the gradual deployment of zero- and near-zero-emission solutions, as these become available at scale.

In the near term, energy efficiency represents the most realistic pathway to decarbonization, with improvement potential of up to approximately 40% by 2030. Measures such as speed and route optimization, AI-enabled digital solutions, technical vessel upgrades and waste heat recovery can reduce fuel consumption and emissions, regardless of which fuel ultimately prevails.

At the same time, transitional fuels and technological flexibility enable gradual emissions reductions, leveraging existing infrastructure and limiting the risk of technological lock-in until zero- and near-zero-emission solutions become available at scale.