Context and industry reaction
The shipping industry’s major operators are continuing substantial investments aimed at cutting emissions even after a one-year postponement of a global carbon-price decision. In October, the U.S. and Saudi Arabia led efforts to defer a decision by the International Maritime Organization on a proposed levy of $380 per metric ton by one year. The sector, which accounts for nearly 3% of global greenhouse gas emissions, faces pressure from several jurisdictions - including the European Union and Brazil - to reduce its carbon footprint.
Interviews with 15 shipping companies, ports, bunker suppliers and marine technology firms revealed that 10 of those participants intend to press ahead with planned green investments. An analysis of vessel delivery data through 2028 corroborates that new orders for ships capable of using alternative fuels remain dominant in the newbuilding pipeline.
Why companies are staying the course
Company officials and industry observers point to several factors that support continuing investments despite the temporary delay in a global carbon price: regional regulations that create near-term commercial incentives, the multi-decade investment horizon for ships and the expectation that decarbonisation remains the prevailing long-term direction for the sector.
Hakan Agnevall, chief executive of Wartsila, an engine and exhaust gas cleaning equipment manufacturer, framed the issue in investment-horizon terms. He noted that customers generally evaluate decisions on the basis of a 30-year perspective and said: "It’s not bold to say that regulations will change during those 30 years." That long view underpins purchases of vessels and technologies designed to be adaptable as regulations evolve.
Newbuilding trends and investment scale
Most of the nearly 50,000 commercial ships currently operating worldwide continue to run on fuel oil or gas oil. Yet in 2023, IMO member states adopted a unanimous target of net-zero emissions by or around 2050, and shipowners have begun ordering dual-fuel vessels able to burn both conventional fuel oils and lower-emission alternatives such as liquefied natural gas (LNG), methanol and ammonia.
At the end of December, companies had invested more than $150 billion in dual-fuel vessels, according to an industry data analysis. In total, 1,126 dual-fuel container ships and vehicle carriers have either been delivered or are currently on order. That represents a 28% increase from the previous year, indicating that newbuilding orders for lower-emission fuel-capable vessels continued even after the IMO delay. Dual-fuel vessels now account for 74% of the overall container ship and vehicle carrier orderbook, outpacing orders for traditional single-fuel ships.
There are exceptions. Pacific Basin, a substantial dry bulk ship owner, purchased four newbuild vessels that will run only on oil-derived fuels and cited the postponement of the proposed IMO carbon price in its rationale. The company’s decision, however, is an outlier compared with the broader trend among large owners and charterers.
Owners and suppliers describe coordinated moves toward fuels and bunkering
Shipowners and fuel suppliers described parallel investments aimed at both ships and fuel infrastructure. Alexander Saverys, chief executive of Belgian shipowner CMB.Tech, said his company will continue to invest in ammonia bunkering and production capacity. A spokesperson for Mitsui O.S.K. Lines said the IMO postponement extends the transition timeline to low and zero-carbon fuels but that the firm remains focused on LNG-fuelled vessels and early-stage adoption of ammonia and methanol.
Maersk - an early mover into alternative fuels - initially chose methanol but has since ordered LNG-fuelled ships and begun testing ethanol as another potential fuel. NYK Group reconfirmed its emissions reduction strategy after the IMO decision and characterized the one-year delay as an opportunity for further discussion and refinement of regulatory design.
From a consultancy perspective, Jason Stefanatos, decarbonisation director at maritime consultancy DNV, said: "While recent regulatory uncertainties might lead some operators to take a more cautious approach, the overall direction of maritime decarbonisation has not changed significantly. The commercial drivers still remain."
Regional rules and market incentives
Regional regulatory schemes and incentive structures are major drivers of investment decisions, according to industry participants. The European Union’s FuelEU Maritime rule, which imposes penalties on vessels that fail to achieve lower emissions, creates a direct business case for greener fleets. The EU Emissions Trading System and various voluntary initiatives add further commercial pressure.
Shipowners that operate dual-fuel vessels can deploy them on voyages to and within Europe to avoid FuelEU Maritime penalties and may obtain rewards for over-compliance, as noted by Kenneth Tveter, an analyst at shipbroker Clarksons. He observed: "The case for low-carbon fuels such as ammonia and methanol is still alive if you have a trade concentrated around Europe."
Outside Europe, momentum for localized measures is also building. Major Horn of Africa port Djibouti and OPEC member Gabon have adopted levies on maritime emissions. The current trend could see similar punitive regulations and incentive mechanisms introduced in other important shipping hubs.
Britain has proposed extending its emissions trading system to include international shipping from 2028, and Turkey is considering a scheme similar to the EU’s. These national and regional moves are cited by bunker suppliers as reasons to anticipate stronger near-term demand for LNG, bio-LNG and biofuels.
Nacho de Miguel, head of alternative fuels at bunker supplier Peninsula, said: "Whilst the IMO’s net-zero framework has been postponed, this does not change our strategy." He added that such factors should drive demand for LNG, bio-LNG and biofuels over the next five years.
Commercial implications and outlook
From a commercial and capital-allocation standpoint, the shipping sector’s continued appetite for dual-fuel ships and fuel infrastructure reflects a calculation that regulatory and market incentives will converge toward lower-emission operations. Long lead times for ship design and construction, and the desire to avoid being locked into stranded assets, are shaping decisions today even as the international governance timeline slips.
That said, the absence of a global carbon price for at least another year introduces planning complexity for some operators and may influence a subset of firms to adopt more cautious near-term postures. Overall, however, the evidence from interviews and delivery data indicates the industry is largely pressing forward with investments to support a transition to lower-carbon fuels and technologies.
Key points
- Regional regulation and long investment horizons are motivating continued investment in dual-fuel vessels and fuel infrastructure, despite a one-year postponement of a proposed global carbon levy.
- Dual-fuel vessels dominate new orders for container ships and vehicle carriers, with 1,126 delivered or on order, a year-over-year increase of 28%, and representing 74% of that orderbook.
- Expanding regional measures - including the EU's FuelEU Maritime, national levies by Djibouti and Gabon, and proposed extensions of emissions trading in Britain and potential schemes in Turkey - are creating near-term commercial incentives for lower-emission fuels.
Risks and uncertainties
- The one-year postponement of a global carbon price increases regulatory uncertainty and could complicate multi-jurisdiction planning for shipowners and fuel suppliers - impacting capital allocation in shipbuilding and bunkering sectors.
- Variability in national and regional policy adoption may lead to uneven demand for alternative fuels and could create operational complexity for vessels trading across different regulatory regimes - affecting ship operators and charterers.
- Some firms may choose traditional fuel investments in the near term, as illustrated by Pacific Basin's purchase of oil-fuel-only newbuilds, introducing the risk of a fragmented transition and potential competitive imbalances in freight markets.