Vessel and cargo insurance has been a cornerstone of the Lloyd’s model since its foundation in the 17th century. Marine cover remains imprtant to the London market today, so this article is timely as the global cargo sector faces challenges in 2026;
The International Maritime Organization’s (IMO) net-zero emissions target by 2050 is challenging. Today, the industry accounts for 3% of the world’s total emissions – matching the output of the aviation sector. Growth in global trade and production have seen emissions surge in recent years. The industry is predicted to grow at 2% year on year to 2028, a trend which, if continued, will contribute to a 10% rise in global emissions by 2050.
There is a global push to reduce the impact of the maritime industry on global emissions. For instance, the EU Emissions Trading System (ETS), which was extended to maritime in 2024, requires polluters to pay for greenhouse gas emissions. There is now a financial incentive for shipping companies to improve monitoring, reporting and verification (MRV) of ships’ emissions in any ETS affected route.
Reducing emissions is just one challenge for an industry already grappling with escalating geopolitical unrest and climate-related weather events. In this context, where does green shipping fit into the overall strategy? Is there an appetite for costly investments in new ‘clean fuel’ vessels? Will the burgeoning ‘blue economy’ deliver the next generation of technologies required to quickly and effectively reduce emissions? Innovation is compelling but, argues Saleem Khan, Chief Data & Analytics Officer at Pole Star Global, there are steps that can be taken immediately to reduce emissions within the existing fleet to reduce the carbon footprint now.
Fuel Innovation
The shift towards greener shipping is raising a number of commercial considerations for ship owners – including the relationship between owners and charterers. Who benefits from investments in clean propulsion technology? Which company takes responsibility for the investment? When the current model typically demands charterers pay for fuel, there are conversations to be had regarding both CAPEX and OPEX implications of changes to any fleet. Charterers need to consider and assess their options to influence and accelerate the decarbonisation and energy efficiency of ships.
The shift towards alternative fuels is a key consideration and an area that is undergoing continuous and rapid evolution. Liquified Natural Gas (LNG) is gaining ground, with the number of ships using LNG up 33% in 2024. There are 638 LNG-fuelled ships in operation today, rising to 1,200 by the end of 2028. While LNG has the lowest carbon content of any fossil fuel, its downside is the level of methane content – which is a concern since methane is driving a third of current global warming. Alternatives, including Liquid Petroleum Gas (LPG), Ammonia, Methanol, Hydrogen and HPO all have pros and cons. LPG, for example, offers a 17% decrease in Greenhouse Gas (GHG) emissions and is also easier to handle than LNG because it doesn’t require cryogenic storage to cool the fuel to -163 °C.
Both Ammonia and Methanol are highly toxic, demanding very careful handling. Hydrogen, while carbon free, is very expensive and demands additional storage space due to its low density, impacting ship design and cargo capacity. Biodiesels, including Fatty Acid Methyl Ester (FAME) and hydrotreated vegetable oil (HVO), have compelling sustainability credentials, with promises of 90% less ghg emissions but are more expensive than fossil fuels. Availability for marine use is also limited due to high demand from the road transport sector.
Expanding Blue Economy
A sustainable shipping future will require more than a change in fuel. Technology innovation will be the foundation for far reaching changes to efficiency and performance that will contribute significantly to both addressing climate change and the overall level of investment required by both shipping owners and charterers. The positive news is that the blue economy is gaining momentum, with incubators in all of the main shipping areas, from Florida to Europe and South East Asia.
Many innovations are aimed at reducing pollution through greater efficiency of the existing fleet. The use of air lubrication, rotor sail, hard sail and kites, among others, is designed to improve energy efficiency and reduce fuel consumption and emissions. Port infrastructure is increasingly being fuelled through the use of solar, while adding solar panels to shipping containers facilitates the generation of additional power to be used on board. Research continues into small modular reactors, SMR-powered ships and floating SMR power generation platforms is also exciting. With a generating capacity up to 300 Mwe, SMRs do not require the large storage tanks demanded by other fuels such as hydrogen.
Furthermore, shipping owners have the chance to leveraging the existing fleet to broaden the reach of climate improvement technologies, for example to remove methane from the atmosphere, further helping to reduce the rate of global warming.
Practical Steps
While exciting, the viability for specific fleets and vessels requires extensive investment and assessment. Claims regarding the potential emissions reductions need to be robustly examined. As such, change will take time. In the interim, however, there are many practical steps that can be taken to improve the performance of the existing fleet. Indeed, in addition to the implications of ETS, the maritime industry is likely to come under greater pressure from supply chain partners to provide information to support scope 3 and scope 4 (also known as avoidance emissions) reporting.
As organisations look to understand their complete environmental impact, the growing push to record emissions reductions achieved through the use of a company’s products or service is driving interest in any steps taken by the maritime industry to mitigate its ghg emissions. In addition to new fuels and the use of innovative technologies, shipping routes can also be optimised to conserve energy and cut down on carbon emissions. Leveraging route metrics, optimisation options include reducing the distance travelled, minimising the total time ships are running and managing ship speed. Improving real-time monitoring can also avoid exposure to bad weather, thus avoiding events that can contribute to emissions spikes.
There is also a growing trend away from the largest vessels towards smaller, more agile ships and the adoption of trans shipping. This model allows shipping owners to use large vessels powered by fossil fuels to undertake the heavy work but then use a trans-shipment port to transfer goods to smaller, more environmentally efficient vessels for delivery to areas where there is an ETS requirement. In addition to adding routing flexibility, smaller vessels can more easily support alternative fuel designs. Fuel accessibility is also easier to maintain for shorter, consistent routes, while short sea and inland waterway routes also present an opportunity to explore evolving battery-powered shipping technology, including a battery swapping concept using containerized battery solutions.
Conclusion
Whether the maritime industry can meet net zero targets remains questionable and will demand a very significant breakthrough in one or more areas of technology innovation. In the meantime, the industry needs to understand its current position. Creating a baseline is key, supported by robust monitoring and reporting to track and understand progress. This insight will be vital as pressures grow to understand and potentially report on Scope 3 and 4 emissions but also to support complex negotiations between shipping owners and charterers regarding investment strategies.
The challenge is steep, but the rapid development of the blue economy, with solutions to improve performance and reduce emissions is exciting. In the meantime, effective route optimisation can begin to deliver small but incremental improvements.
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