The shipping industry stands at a pivotal moment in its journey toward sustainability. As global pressure mounts to reduce carbon emissions, maritime stakeholders face a complex challenge: how to decarbonise one of the world’s most essential yet emissions-intensive sectors. From fuel transitions and regulatory hurdles to infrastructure gaps, high retrofit costs and an increasingly turbulent political undercurrent, the path forward is anything but simple.
Over the coming months our marine experts will highlight both the challenges and the innovations shaping the future of sustainable shipping - aiming to raise awareness, inspire action and foster collaboration.
This article highlights the complexities of decarbonising shipping and the importance of robust regulatory frameworks in shaping a more sustainable future for maritime transport and the marine insurance industry which supports it.
Navigating change: The shipping industry’s road to net-zero
The shipping industry is a lifeblood of the global economy. There are many statistics to support this, such as 12.6 billion tonnes of cargo being shipped in 2024 (a figure growing year on year), which amounts to 90% of the world’s trade. Or it enabling $14 trillion worth of goods to be traded annually, approximately 70% of global trade by value. It is also the cheapest mode of transport per tonne – for every £2.50 cup of coffee, the shipping costs were just 0.3p. Or a bottle of wine, is just 20p for every £5. However, whilst those figures might be impressive, there is another cost – the environmental one. That does not read so impressively.
International shipping emits approximately 3% of global CO2, over 1 billion tonnes annually - if it were a country, it would rank 6th globally in emissions, the same as Germany and Japan (or the entire African continent). In 2022, in the EU alone maritime transport emitted 137.5 million tonnes of CO2, accounting for 14.2% of EU's transport emissions. Furthermore, methane emissions doubled between 2018 – 2023, constituting 26% of the transport sectors total methane emissions. According to a study by M.I.T, methane has 80 times the planetary warming potential as compared to CO2. To that end, it is clear why September 2025's London International Shipping Week (LISW) had this issue at the forefront of many discussions.
Given the global economy's reliance on the shipping industry, it's here to stay. However, at the same time, the world has been demanding change. At present, MARPOL is the International Maritime Organization's (IMO's) principal international convention that governs the shipping industry's impact on the marine environment. There is reason to be optimistic because the regulations that they impose are having an effect across the board. For example, ships sulphur emissions have reduced by 80% since 2014. In addition, fleets are becoming more efficient, evidenced by a 10.3% drop in carbon intensity from 2016 to 2023. Meaning that less Green House Gas (GHG) emissions are produced per unit of energy generated. We have the increased use of alternative-fuel-capable vessels to thank for this increase in efficiency, currently 1,794 are in operation, with this set to double by 2028.
Despite this success, GHG emissions in the shipping industry have been increasing year-on-year, now 9.6% higher than a decade ago. It is clear, drastic change is necessary if the shipping industry is going to reduce its carbon footprint to keep pace with the ambitious climate change goals set by the Paris Agreement.
What are the targets?
The shipping industry has been rising to the climate change challenge, and a major sustainability drive can be seen in the industry. Indeed, the start of the change can be dated back to 2006 when the IMO designated a number of key areas to be Emission Controlled Areas. Since then, the number of regulations and initiatives has been ramping up, something we will consider in later articles in this series.
Notable recent announcements are:
- In April 2025, the Marine Environment Protection Committee of the IMO approved the IMO Net-zero Framework, the first in the world to combine mandatory emissions limits and GHG pricing across an entire industry sector. However, this will need to pass a vote in October 2025 in order to be formally adopted. If it is, it will apply to large ocean-going vessels over 5,000 gross tonnage.
- In 2025, the FuelEU Maritime Regulations were formally adopted, requiring ships over 5,000 tonnes to reduce the GHG intensity of their fuel by 80% by 2050.
However, change is always divisive. Some would say that this has not moved quick enough; others take the view that too much is happening too quickly given the financial cost that will be faced in an industry that often operates on fine margins.
Major countries across the globe are buying into the decarbonisation of the shipping industry, at present, Australia, Japan, and the Middle East are fully aligned with the IMO's Net Zero strategy. However, the Trump administration unequivocally rejects the IMO's proposals. The United States exited the IMO talks in April labelling their proposals "a global carbon tax", and they have even gone so far as to threaten retaliation against other countries supporting the proposals. This has had serious ramifications and it seems to have galvanised other leading shipping companies to declare that the IMO's proposals need revisions because the cost to the global shipping industry would be too large. The shipping lines, who represent more than 1,200 large vessels, have estimated that industry costs could rise to a compound $300 billion by 2035 if the global fleet missed its targets by as little as 10%.
The vote to determine whether the IMO's Net Zero Framework will be formally adopted will be held in October 2025. It will require a two-thirds majority, equating to 108 of the 176 IMO members. At the April vote, 69 voted in favour and just over half as many either voted against or abstained. Therefore, there is now serious doubt as to whether the framework will be formally adopted. The IMO Secretary General Arsenio Dominguez, speaking at the London International Shipping Week, remained confident that the framework would be adopted, stating: "I base that on the track record of the organisation, on the co-operation that we all have, [and] the understanding that we still have some challenges and concerns."
Look out for our article where we will be doing a deep dive into the IMO's proposals and the upcoming October vote.
How are sustainability targets going to be achieved?
A combination of technological innovation and new regulations are necessary if the ambitious targets are going to be achieved. The following key developments will enable the industry to meet the IMO's goals:
- Alternative fuels – switching to cleaner fuels, such as, ammonia, hydrogen, and wind-assisted propulsion.
- Vessel design – improving ships' energy efficiency by reference to the IMO's Energy Efficiency Existing Ship Index (EEXI).
- FuelEU Maritime Regulations – regulations that require ships to reduce their annual GHG fuel intensity, i.e., how much GHG is emitted for each unit of energy used.
- EU Emission Trading System – has applied to the shipping industry since 2024, by 2026, 100% of emissions from vessels will be covered under this regulation.
- Routing optimisation – using artificial intelligence to improve operational efficiency, thereby, reducing fuel consumption and cutting carbon emissions.
- Ports and infrastructures – the development of green fuel bunkers, the electrification of equipment and increased shore power efficiency
In later briefings, we will examine these developments in greater detail.
What does this mean for shipping companies?
These targets, innovations, and regulations, are, in essence, requiring the shipping industry to revolutionise. These measures sound great on paper, but what practical challenges do they pose for shipping companies?
- Charterparty contracts – A big challenge from a commercial point of view will be how parties allocate the responsibilities and inevitable large costs that will flow from making vessels greener. A charterer would reasonably say the vessel is the owners and so it is for them; owners might say, however, that these efforts will have the benefit of saving the charterers fuel (in cases where charterers are obliged to provide the fuel). Clauses will need to be inserted into charterparties to allocate the costs and responsibilities for complying with new regulations. For example, BIMCO, have drafted a boilerplate EU ETS clause that allocates the costs and responsibilities for obtaining, transferring and surrendering emission allowances for ships operating under the scheme.
- Financial penalties – Shipping companies face severe financial penalties if they fail to comply with new regulations. The less energy efficient a vessel, the greater the cost to the shipping company and ultimately, their bottom line.
- Commercial strategy – Green shipping, is a new revenue opportunity driven by consumers. In a 2024 BCG study, 80% of customers said they were willing to pay a premium for lower-carbon transport. It also opens up a wealth of opportunities for existing and new technology companies to innovate solutions for the industry.
What does this mean for marine insurers?
- Underwriting risks – Alternative marine fuels introduce novel risk. Ammonia and methanol are two fuels that have been postulated as an alternative to fossil fuels. However, they both pose their own unique problems. Ammonia is extremely toxic; methanol burns with invisible flames. Without the data it will be challenging for underwriters to grapple with these technological unknowns. They will need to consider what additional safety precautions a vessel will need to take to ensure they get coverage to use these alternative fuels. This in turn could lead to higher premiums for vessels using alternative fuels. Then it begs the question: are we penalising those who adopt change early; Or should the knock-on costs of early adoption be subsidised?
- Evolving liability and legal exposures – environmental rules mean ship owners will face significant penalties for non-compliance, but who foots the bill? For example, could a vessel be deemed "unseaworthy" (possibly prejudicing insurance cover) if it fails to meet emission standards? Or will marine insurers cover the knock-on costs of a ship's breach of environmental regulations? For example, claims under Delay in Hire or Charterer's Loss of Use covers.
The decarbonisation of the shipping industry is a monumental undertaking filled with unknowns. This article is the first in a multi-part series, in which we will delve into the aforementioned topics in more detail and shed some light on the uncertainty surrounding the sector. Look out for our next article on IMO's Net Zero Framework, looking at what has happened and what is ahead.
Should any of the above matters affect you and you require any assistance, please do not hesitate to contact the authors of this article or any of the Marine team.
