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Shipping's transition being hampered by policy uncertainty

Shipping's transition being hampered by policy uncertainty

The maritime sector faces a widening gap between its climate commitments and current investment patterns. New research from the UCL Energy Institute and the Getting to Zero Coalition shows that shipping's shift toward zero-emission fuels is slowing precisely when it needs to accelerate. This matters for any UK business that depends on international supply chains, because the cost and reliability of goods movement in the next decade will partly depend on whether the industry can close that gap.

The International Maritime Organization set a clear benchmark three years ago. By 2030, scalable zero-emission fuels should account for at least 5% of the sector's total energy use, with an ambition to reach 10%. That milestone was designed as a stepping stone toward net-zero emissions by mid-century. However, the latest data suggests the industry is now moving in the wrong direction.

Vessel orders tell the story most clearly. The proportion of zero-emission-capable ships in the global orderbook has fallen from 9.5% to 5.7% of total gross tonnage on order. Meanwhile, shipping-specific sustainable debt issuance dropped from $3.4 billion in 2024 to $3.0 billion in 2025. These are not marginal shifts. They indicate that shipowners, financiers, and fuel suppliers are all stepping back from commitments they made only months earlier.

The report estimates that under current ordering patterns, the global fleet will be capable of consuming only around 0.45 exajoules of scalable zero-emission fuels by 2030. That figure falls well short of the level needed to meet the IMO's 5% target. Consequently, the sector risks entering the next decade without the infrastructure, vessel capacity, or fuel uptake required to maintain credibility on its net-zero pathway.

Regulatory uncertainty stalls capital decisions across the supply chain

The root cause is not technology. Methanol, ammonia, and other low-carbon marine fuels are already in use on commercial routes. Similarly, fuel production infrastructure is expanding in several regions. The constraint now lies elsewhere: in policy, finance, and demand signals.

The IMO's Net-Zero Framework has been agreed in principle but remains unadopted in formal terms. Shipowners need that regulatory certainty before committing to expensive new builds. Fuel suppliers need confirmed vessel orders before scaling production. Financiers need both before releasing capital. The result is a standoff in which each group waits for the other to move first.

This dynamic is now visible in orderbook data. Vessel ordering is one of the clearest forward indicators in shipping, because it reflects long-term expectations about fuel availability, regulatory direction, and customer demand. The recent decline in zero-emission-capable orders suggests that shipowners do not yet see enough certainty on any of those fronts to justify the investment.

Furthermore, the IMO's current rulebook does not penalise conventional fuel use heavily enough to shift commercial behaviour at scale. Without a clear price signal or mandatory uptake requirement, shipowners face little immediate pressure to move beyond incremental efficiency measures. As a result, the industry continues to order dual-fuel and LNG-capable vessels that can hedge regulatory risk but do not deliver the emissions reductions needed by 2030.

Cargo owners and financial institutions remain cautious

Demand from cargo owners has softened over the past year. In 2023 and early 2024, a number of large retailers and manufacturers made public commitments to decarbonise their shipping emissions. However, those pledges have not yet translated into binding contracts or freight premiums at the scale needed to move the market.

Part of the reason is cost. Zero-emission fuels currently carry a significant price premium over conventional marine fuel oil. For businesses operating on tight margins, that premium is difficult to absorb without regulatory backing or competitive pressure. In addition, many cargo owners are still working through their own Scope 3 reporting and reduction strategies. Until those frameworks are finalised, shipping emissions often remain a secondary consideration.

Financial institutions are taking a similar approach. Sustainable debt issuance for shipping fell by roughly $400 million between 2024 and 2025. That decline reflects broader caution in green finance markets, but it also signals that lenders are waiting for clearer policy direction before backing large-scale fuel transition projects.

Moreover, banks and investors are increasingly focused on transition risk. If the IMO adopts stricter rules in 2027 or 2028, vessels ordered today on the basis of current regulations could face early obsolescence or stranding. That uncertainty makes it harder to justify long-term capital commitments, particularly for smaller shipowners who lack the balance sheets to absorb regulatory volatility.

Why this matters for UK businesses and supply chains

Shipping accounts for around 3% of global greenhouse gas emissions, but it moves roughly 90% of international trade by volume. Consequently, any delay in the sector's decarbonisation will affect the cost, carbon intensity, and resilience of supply chains that UK businesses depend on.

If the 2030 milestone is missed, several consequences follow. First, fuel prices are likely to become more volatile as the industry scrambles to meet later deadlines without adequate infrastructure. Second, shipowners may pass transition costs onto cargo owners through higher freight rates or fuel surcharges. Third, businesses that rely on maritime transport for Scope 3 emissions reporting may find it harder to demonstrate credible reduction pathways.

There are also implications for public procurement. UK government buyers are required to evaluate carbon reduction plans under Procurement Policy Note 06/21. Suppliers who cannot show a clear path to lower shipping emissions may face disadvantage in tenders, particularly as scope 3 reporting requirements become more stringent. For manufacturers and importers, that means supply chain decarbonisation is no longer optional.

In addition, the EU's FuelEU Maritime regulation took effect in January 2025. It sets a declining limit on the greenhouse gas intensity of energy used by ships calling at EU ports. Ships that exceed those limits face penalties, which can be passed through to cargo owners. UK businesses trading with the EU need to understand how their carriers plan to comply, because non-compliance costs will ultimately feed into freight pricing.

The risk is compounded by insurance and finance. Banks are starting to apply environmental criteria to shipping portfolios, and insurers are adjusting risk models to account for transition and physical climate risks. Vessels that cannot demonstrate a credible decarbonisation plan may face higher borrowing costs or insurance premiums, which again flow through to freight rates.

Five key points for UK businesses to understand

What businesses should be considering now

The first step is visibility. Businesses that rely on international freight should be asking their logistics providers and carriers how they plan to meet upcoming emissions regulations. Specifically, you need to understand whether your carriers are ordering zero-emission-capable vessels, which fuels they intend to use, and how transition costs will be allocated.

This is particularly important for Scope 3 emissions reporting. Shipping often represents a significant share of supply chain emissions for importers and exporters. If your carriers cannot provide credible decarbonisation plans, you may struggle to demonstrate progress against your own net-zero targets or to meet the requirements of ESG reporting frameworks.

Procurement teams should also review contract terms. Freight agreements increasingly include clauses that allow carriers to pass through regulatory costs, such as FuelEU Maritime penalties or carbon pricing. Understanding those terms now will help you forecast cost exposure and negotiate more effectively when contracts come up for renewal.

For businesses that supply the public sector, the implications are more immediate. PPN 06/21 requires suppliers to demonstrate carbon reduction plans, and those plans must cover supply chain emissions where material. If your business relies on maritime transport, you need to show how you intend to reduce shipping emissions over time. That means engaging with carriers on their transition plans and building those commitments into your own supplier documentation.

There is also an opportunity here. Early movers who secure capacity on zero-emission routes may gain a competitive advantage in tenders and customer negotiations. As demand for low-carbon shipping grows, that capacity will become scarcer and more expensive. Businesses that lock in access now, through long-term freight agreements or direct investment in fuel supply chains, may be better positioned when regulatory pressure intensifies after 2027.

Finally, consider broader supply chain resilience. The transition to zero-emission fuels will not be smooth. Fuel availability will vary by region, and some routes may face temporary capacity constraints as older vessels are retired and new builds come online. Diversifying your carrier base and building flexibility into logistics planning can help manage those risks.

We support businesses with sustainable procurement strategies and supply chain carbon reporting. Our net-zero program includes guidance on Scope 3 emissions and supplier engagement, designed to help UK businesses meet compliance requirements and manage transition risks in a pragmatic way.

Where to find authoritative guidance and data

The International Maritime Organization publishes updates on its regulatory framework, including the Net-Zero Framework and upcoming rule changes, at imo.org. The Department for Transport provides UK-specific policy guidance on maritime decarbonisation and its implications for domestic businesses.

The Getting to Zero Coalition, a partnership between the Global Maritime Forum, the World Economic Forum, and university researchers, publishes annual progress reports on the shipping transition at globalmaritimeforum.org. These reports track orderbook data, fuel production, and policy developments across major shipping markets.

For businesses navigating EU regulations, the European Commission's FuelEU Maritime page at ec.europa.eu sets out compliance requirements, intensity limits, and reporting obligations. UK businesses trading with EU member states should review this guidance alongside their carriers' compliance plans.

The UCL Energy Institute publishes research on shipping decarbonisation pathways, fuel economics, and policy analysis. Their work provides evidence-based context for understanding the technical and commercial challenges facing the sector. This material is particularly useful for businesses developing long-term supply chain strategies or engaging with investors on climate risk.

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