The fight against climate change is at the top of the global agenda. Governments and institutions around the world are joining forces to find ways to limit global warming. And a key part of the quest to make this happen is the energy transition. But what exactly is the energy transition, how can the shipping industry play its role in helping it happen, whilst also reducing its own emissions, and what does it mean for businesses?
What is the energy transition?
The energy transition describes the move away from using fossil fuel-based energy (e.g. coal and oil) and towards alternative renewable fuels (e.g. wind and solar). It is already influencing a range of industries and everyday processes – from the introduction of electric vehicles on our roads to replacing gas ovens with electric ones in millions of our homes. As pressures build globally to find solutions to moderate climate change, the energy transition will cause fundamental changes to shipping, trade, offshore and energy too.
Global shipping plays a critical role in daily life for billions of people around the world – facilitating the availability of consumer goods, food, energy, industrial raw materials, and technology. 85% of world trade is carried by sea. That means nearly all of the structures we build, fuel we burn, and items we buy have needed global shipping to either help create them or transport them from their place of origin to their destination.
5.4bn tonnes of seaborne trade is energy. Offshore renewable energy is a rapidly expanding sector that will play a vital role in energy transition and may supply 9% of global energy supply by 2050. To lessen the world’s reliance on fossil-fuels, availability and commercial viability of alternative fuels and e-fuels must improve and be deployed in the most effective way possible.
The impact of the energy transition on the maritime industry will be deep and long-standing, requiring huge investment, technological change and innovation.
How are ships becoming greener?
At the heart of reducing shipping’s 2.3% contribution to global CO2 emissions will be a fuelling transition. Demand for eco-friendly vessels is gaining pace, prompting an uptick in newbuilding as well as the phasing out of older higher polluting vessels. As a result, there’s been a decline in the non eco fleet in recent years as a new generation of fuel efficient ‘eco’ vessels take to the seas. But with the average age of the world fleet now 13 years, there is a super cycle of renewal due to begin. So, what sets these new ‘eco’ ships apart?
- New vessel designs
2023 saw new ship designs emerge on an almost-monthly basis: in January, Approval in Principle (AiP) was received for an ammonia floating storage and regasification barge (designed to store liquid ammonia and connect to onshore pipelines). This was followed in May by the publication of a design for a battery transport vessel, which would complement existing inter-regional grid transmission lines and transport energy from offshore wind farms. And June saw another design published, this time for an ‘e-bunker’ vessel capable of delivering electricity to ships in ports with insufficient shore-side power infrastructure. - Different fuel types
Currently Marine Diesel Oil (MDO), Marine Gas Oil (MGO), or Low-Sulphur Fuel Oil (LSFO) is used as standard in the maritime industry. However, these produce high amounts of Greenhouse Gases (GHG), Particulate Matter (PM), and Nitrogen Oxides (NOx). Now, alternative fuels like LNG, LPG, Methanol, Biofuels, Hydrogen, Ammonia, Batteries, Synthetic Methane, and Nuclear are gaining traction. Alternative fuel vessels now make up over 49% of global tonnage on order and 51% of all orders since early 2022. - New energy saving technologies
Various new energy saving technologies are becoming available, including solar panels and hull skating systems. There is also short-term interest in equipping vessels with SOx scrubbers to reduce Sulphur Dioxide emissions and control pollution.
How is Clarksons supporting shipping’s green transition?
There’s no doubt that environmental regulation is driving change in shipping. While this is a positive step towards decarbonisation, it also brings hugely challenging strategic decisions for shipowners and cargo interests. Clarksons is actively investing in its services to provide market-leading support to clients looking to develop, validate, execute, finance and monitor their policies and strategies in relation to freight, carbon, fleet renewal decisions and voyage operations. Clarksons provides a range of services that combines commercial opportunities with the meeting of environmental targets, including;
1. Consultation
Clarksons’ Green Transition team advises clients on their freight, carbon and fleet renewal strategies. Clarksons is uniquely placed to understand and explain the economic impact of new regulations and policies, and leverage this insight to develop and execute shipping decarbonisation strategies.
2. Finance
There is significant demand for capital to finance the renewal and growth of the world fleet. Financing requirements are expected to pick up, with Clarksons Research predicting annual newbuild investment will increase from ~$90bn (2012-2022) per year to ~$150bn per year (2023-2033). Clarksons’ Financial teams are active in green financing initiatives, with extensive experience in supporting clients to raise finance across capital markets, project finance, debt markets and through leasing structures.
3. Carbon offsets
Increasingly, companies are purchasing voluntary offsets to compensate for the carbon footprint of their operations. Clarksons’ partners can help assess Scope 1, 2 & 3 emissions and offset these. In addition its Carbon Broking team can provide access to carbon market prices, perform exposure calculations, guide clients through the administrative and documentation process, and execute transactions for both voluntary offsets and the regulated EU ETS market.
4. Insight and data
Clarksons’ Research produces wide-ranging data, authoritative insight and intelligence, coverage of green technology on board ships, alternative fuels, CO2 emissions benchmarking, vessel speeds and bunkering facilities. Through availability of leading, reliable data, clients are able to make more informed decisions.
5. Fleet evolution
Clarksons is uniquely placed to advise, execute and finance fleet renewal strategies with market-leading Sale & Purchase teams operating across the full asset lifecycle and across every ship type in the world fleet. This could range from new engine designs to retrofitting existing ships with innovate ESTs.
6. Technology
Clarksons is actively investing in proprietary technology and digital tools to provide solutions that harness data and promote better, cleaner decision making. We also partner with third parties who can provide insight on operational efficiencies.
7. Data-driven chartering brokers
Clarksons chartering brokers play a crucial role in informing cargo owners on ways they can ship their cargos effectively: what is the shortest distance to travel, how fast should the ship go to burn fuel effectively, how will ECA zones impact the voyage, what fuel-type is the ship and how will that impact emissions, will the voyage incur fines as a result of regulation, and importantly, is it commercially viable and meet buyer/production timings.
Accelerating shipping’s green transition
Despite being one of the most carbon-efficient modes of transportation, the shipping industry continues to progress towards a more sustainable future. To help drive lower emissions, there are numerous measures in place which will incentivise cleaner decision-making in shipping over time, including the top-down goals set out by the IMO for 2028, 2030, and 2040.
Numerous “green shipping corridors” have been proposed, including Australia to Japan, Gulf of Mexico, Rotterdam to Singapore, and US to UK. These specific maritime routes see various stakeholders collaborating to achieve a shared goal of significantly reduce greenhouse gas emissions and other environmental impacts associated with shipping.
The energy transition is triggering an urgent need for new ‘eco’ facilities (i.e. ports with LNG bunkering, gas cleaning systems, ballast water discharge, carbon capture, or alternative fuel bunkering etc.). According to Clarksons Research, currently, only 11% of global ports have existing or proposed eco ports (ranging from 3% in South and Central America, to 12% in North West Europe, and 17% in Asia Pacific).
With the IMO aiming for net-zero GHG emissions by or around 2050, policy around a reduction in carbon intensity is ramping up. Regulation already in play across the maritime industry will continue to evolve further over the coming decades, for example:
EEXI and CII
The MEPC is due to review how effective CII and EEXI have been by 1 January 2026. Depending on its findings, the organisation may make further amendments to meet reduction targets and/or introduce other ‘mid-term measures’ to strengthen or replace the CII.
Part of the EU’s “Fit for 55” package of key climate policies, this proposed regulation would introduce increasingly strict limits on the GHG intensity of the energy used by commercial vessels of +5,000 GT at EU ports and on voyages between EU ports. This would likely drive the increased use of alternative fuels.
The IMO introduced a stronger, revised version of its 2018 strategy in 2023. It also set expectations for the sector and policy measures to strive for 30% GHG reductions by 2030, 80% GHG reductions by 2040, and an overall ambition of reaching net-zero as close to 2050 as possible.
Launched in June 2019, these encourage financial institutions to include climate considerations in lending decisions. Future reporting is likely to include additional trajectories, aligned to UN targets, to be net zero by 2050 and could extend into recycling, demolition, and biodiversity to cover shipping companies' corporate finance, not just loans for vessels.
Article 3gc came into force in 2024, giving ship owners the right to recover EU ETS compliance costs from the entity that is ultimately responsible for a ship’s operation. The revenue raised by this will accelerate decarbonisation by supporting projects that focus on the uptake of renewable energy and zero/near zero carbon fuels.
Aiming to minimise ships’ airborne emissions, ECAs are already established in various locations (e.g. Baltic/North Sea ECAs, North American ECAs). We can expect to see new ECAs in other parts of the world soon (e.g. Australia).
Sustainable businesses and supply chains
More than ever before, the end-consumer cares about the environmental impact of their purchases. That means sustainability credentials are evolving from a ‘nice to have’ to a ‘must have’ across the entire supply chain. While it’s obvious that sustainable shipping is good for the planet, it may surprise you that it can be good for business too, helping companies:
- Attract and retain customers
As public awareness of climate change grows, consumers are increasingly seeking out brands that prioritise sustainability – and actively avoiding those which don’t. Adopting sustainable shipping practices and other ‘green’ initiatives could help your business attract new customers. It may also drive customer retention, with research showing consumers are more likely to be loyal to brands that care about sustainability.
- Demonstrate your brands commitment to sustainability
Showing a commitment to environmental responsibility can strengthen your brand image and provide a point of difference from the competition. It shows that your business purpose stands for more than simply commercial gain, and that it has a moral compass – factors that are becoming increasingly more important to consumers.
- Make cost savings
Making more sustainable shipping decisions can be more cost-effective. Some alternative packaging is cheaper than plastic, plus, ‘greener’ shipping could avoid increased charges/fines that some older vessels must pay due to regulation like EU ETS. This helps lower costs, increase profit margins and contribute towards a healthier bottom line.
- Achieve sustainability certifications
A commitment to sustainable shipping practices shows your customers that your business is dedicated to being more environmentally friendly. You could even reference your shipping practices to strengthen applications for sustainability certifications/accreditations. Holding an environmental accreditation can be a point of difference, helping you to market your business to customers, as well as prospective employees who want to work for a responsible and ethical company.
The energy transition is already revolutionising global shipping and impacting businesses – and it’s here to stay. As eco-friendly vessels and alternative fuels become standard, businesses across the supply chain must adapt. Sustainable shipping practices not only help combat climate change but also offer benefits like cost savings, improved brand image, and customer loyalty. With companies like Clarksons informing positive change at one end of the supply chain, businesses can leverage these insights to enhance their operations and remain competitive in a greener global market.
