PRACTICAL PATHWAYS TO 2035
2026 SUSTAINABILITY OUTLOOK
CONTENTS EXECUTIVE SUMMARY:
PRACTICAL PATHWAYS TO 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PART 1:
REGULATORY AND MARKET TRAJECTORY . . . . . . . . . . . . . . . . . .
7
1.1 The Decarbonization Landscape, 2026 – 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.2 Market and Competitive Pressures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PART 2:
TECHNOLOGY AND DEVELOPMENT PATHWAYS . . . . . . . . . . . . . .
27
2.1 Practical Pathways to Better Maritime Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.2 Ready to Deploy: Energy Efficiency Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.3 Weather Routing: From Forecast Avoidance to Vessel-specific Voyage Decision Support . . . . . . . . . . . . . . . . . . . . . . . 37 2.4 Predictive Maintenance and Fleet Reliability Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.5 Digitalization as Performance Visibility Infrastructure: Energy and Emissions Monitoring and Management . . . . . . . . 51
PART 3:
RETROFIT AND EXECUTION REALITY . . . . . . . . . . . . . . . . . . . . .
53
3.1 Turning Decarbonization Ambition into Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 3.2 Shipyard Readiness and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.3 Key Trends in Shipyard Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3.4 Retrofitting Pathways and Decision Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
PART 4:
IMPLICATIONS AND STRUCTURED DECISION SUPPORT . . . . . . . . 73 4.1 From Compliance to Competitiveness: Making the Right Strategic Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 4.2 The Capital Question — Financing the Transition Under Fragmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.3 Risk Landscape and Decision Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
PART 5:
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 . . . . . . . . .
93
5.1 A Strategic Outlook for Maritime Industry Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 5.2 Fleet Strategy Starts with How Vessels Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 5.3 The Design-to-operations Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 5.4 Concrete Design Decisions that Preserve Optionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.5 The Trade-Pattern Question Shapes Everything Else . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 5.6 The Retrofit Business Case for the In-service Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 5.7 Carbon Cost Exposure is Now an Operating Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 5.8 Data as the Foundation for Future Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 5.9 Execution Constraints are Real and Underestimated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 5.10 The CEO Decision Framework — Six Questions for the Boardroom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 5.11 Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
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E X EC U T IVE SUMMA RY:
PRACTICAL PATHWAYS TO 2035
A Decade Defined by Execution, Not Prediction The question facing shipping is no longer whether the industry will decarbonize. That transition is already underway. The defining question is whether organizations can navigate the transition while strengthening competitiveness, protecting asset value, and maintaining access to capital. There is no single pathway to a lower-carbon future. The optimal strategy for a liner operator on fixed routes will differ significantly from that of a spot-trading bulk carrier or tanker owner. Vessel type, trade pattern, regional exposure, fuel availability, regulatory obligations, and commercial realities will shape different decarbonization strategies. The organizations best positioned for success will not necessarily be those that correctly predict a single winning fuel or technology, but those that align their decisions with the operational realities of their business while preserving flexibility in an uncertain environment. What was once viewed primarily as an environmental challenge has evolved into a fundamental business and investment decision. Decarbonization now influences capital allocation, fleet renewal, chartering opportunities, regulatory
Two themes underpin the analysis:
compliance, access to finance, and longterm asset competitiveness. While regulatory policy uncertainty remains, waiting for complete clarity is no longer a viable strategy. The vessels being ordered, financed, retrofitted, and chartered today will operate well into the 2040s, requiring decisions to be
1
made against a backdrop of evolving
Trade pattern matters
regulations, technologies, and market
more than ship type.
conditions.
The right fuel and
2
The central conclusion of this Outlook
investment strategy is
Technology maturity
is clear: competitive advantage will be
determined by how a
does not guarantee
defined less by the ability to predict the
vessel trades, not simply
deployability.
future and more by the ability to execute
by whether it is a tanker,
effectively in the present. Success will
bulker, or containership.
come from pursuing actions that create value across multiple future scenarios, including improving energy efficiency, reducing fuel consumption, enhancing emissions performance, building digital and AI-enabled capabilities, preserving fuel flexibility where commercially
Yard capacity, fuel availability, workforce capability, vessel design constraints and infrastructure readiness often determine which solutions can be implemented successfully.
justified, and securing the organizational capacity to implement change at scale. Those who act decisively today will be best positioned to navigate uncertainty, capture emerging opportunities, and maintain competitive relevance through 2035 and beyond.
EXECUTIVE SUMMARY | 2
Fragmented Regulation is the New Reality The regulatory environment is becoming more complex rather than more harmonized. While the International Maritime Organization (IMO) remains the anchor for global decarbonization efforts, regional initiatives have accelerated and now significantly influence investment decisions. The European Union (EU) has fully operationalized the EU Emissions Trading System (ETS) and FuelEU Maritime regulations, while the United Kingdom, China, California and other jurisdictions are developing parallel frameworks with differing requirements, enforcement mechanisms and carbon pricing structures. As a result, shipowners are no longer planning against a single regulatory trajectory. Instead, they must navigate multiple overlapping regimes simultaneously. The report highlights three important implications: 1. Regulatory fragmentation is likely to persist throughout the coming decade. 2. Carbon costs are becoming a material and recurring operating expense. 3. Decarbonization policy is increasingly linked to industrial policy, energy security, trade policy and finance.
3 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Carbon has effectively become a new operating cost variable. For vessels with significant European exposure, carbon-related costs are expected to grow materially through 2035, making fuel efficiency and emissions performance increasingly important determinants of profitability and asset value.
Energy Efficiency is the Most Immediate and Universal Opportunity A key message throughout the Outlook is that energy efficiency investments create value regardless of which fuel pathway eventually prevails. While fuel selection may account for the majority of long-term decarbonization outcomes, efficiency technologies and operational improvements offer immediate and measurable returns helping to reduce compliance exposure. Several commercially available technologies demonstrate meaningful potential: • Wind-assisted propulsion systems • Air lubrication systems • Waste heat recovery systems • Power take-in/take-off management technologies
• Advanced weather routing • Predictive maintenance solutions • Digital performance monitoring and optimization tools These technologies can reduce fuel consumption, improve
This publication emphasizes that digitalization serves as critical infrastructure for performance management. Better measurement, analytics and benchmarking enable organizations to identify inefficiencies, track emissions, optimize operations and make more informed investment decisions.
Carbon Intensity Indicator (CII) performance, lower carbon-cost exposure and enhance asset competitiveness. Importantly, many can be applied without requiring commitment to a specific future fuel. This makes them particularly attractive in an environment where fuel pathways remain uncertain.
The carbon-cost component of operating expense for a conventional-fuel containership trading EU routes trends toward roughly $20 million per vessel per year by 2035 under a base price path.
EXECUTIVE SUMMARY | 4
Retrofit Capacity and Execution Will Become Strategic Constraints One of the Outlook’s strongest messages concerns execution risk. The primary barriers to decarbonization are increasingly practical rather than technological. Shipyard capacity, skilled labor availability, engineering resources, equipment lead times and project execution capability are emerging as major bottlenecks. Demand for retrofits is expected to increase substantially as owners seek to improve efficiency, extend asset life and comply with tightening regulations. However, this publication projects potential shipyard capacity shortages before 2030, particularly for more complex retrofit projects requiring extended dock time. Owners that secure yard access and begin planning early are likely to gain a significant advantage. Those who delay may face higher costs, longer lead times and reduced optionality. The report argues that retrofit planning should no longer be treated as a procurement exercise but as a strategic capital allocation decision requiring long-term preparation.
Capital Allocation Requires a New Framework The financial implications of decarbonization are becoming increasingly material. Carbon costs, charter market expectations, financing conditions and residual asset values are all being reshaped by emissions performance.
5 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
The report identifies four primary strategic pathways: • Conventional newbuilds • Retrofit-ready vessels • Dual-fuel newbuilds • Retrofit programs for existing assets The critical question is not which pathway is universally correct, but which is most appropriate for a vessel’s trade pattern, operational profile, remaining service life and commercial role. Fuel flexibility carries value, but only when alternative fuels are realistically available along a vessel’s trading routes. As a result, the business case for dual-fuel capability is substantially stronger in predictable liner trades than in globally traded spot-market segments such as bulk carriers and tankers. The report repeatedly stresses the importance of preserving optionality. Fuel-ready designs, modular architectures, adaptable machinery arrangements and retrofit-friendly configurations all provide flexibility while limiting the risk of committing prematurely to pathways that may not ultimately prevail.
Leadership Priorities Through 2035 This Outlook is structured around six strategic questions that every shipping executive team and board should be addressing today:
1
Which vessels justify retrofit investment?
2
Which assets should be retained or replaced?
3
What is the fleet’s true carbon-cost exposure?
4
How much fuel flexibility is worth paying for?
5
Are we embracing the digital and AI capabilities that will define future competitiveness?
6
Can the organization execute at the pace required?
Ultimately, the winners through 2035 will not necessarily be those that make the boldest fuel bets. Rather, they will be the organizations that systematically improve efficiency, invest in data and verification capabilities, preserve strategic flexibility, secure execution capacity early and align capital deployment with how vessels actually trade. Decarbonization is increasingly a question of business execution, operational discipline and organizational readiness. The industry’s challenge is no longer identifying possible pathways but converting those pathways into commercially viable actions at scale.
EXECUTIVE SUMMARY | 6
PA R T 1 :
REGULATORY AND MARKET TRAJECTORY
1.1 The Decarbonization Landscape, 2026 – 2035 1.1.1 Resetting the Frame Last year’s Outlook described a regulatory landscape moving toward convergence. The International Maritime Organization (IMO) was on track to adopt a global midterm measure in October 2025; the European Union’s (EU’s) market-based instruments were entering force; and the prevailing thesis was that compliance costs would soon function as a relatively uniform variable across the global fleet. The first half of 2026 has required us to revise that assumption. Despite recent deferrals at Marine Environment Protection Committee (MEPC) sessions, the IMO Net-Zero Framework (IMO NZF) remains the central reference point for maritime decarbonization policy, with the focus now shifting to its final design and timeline for entry into force. Concurrently, the European Commission has issued three substantial communications — the EU Industrial Maritime Strategy and the EU Ports Strategy on March 4, 2026, and AccelerateEU on April 22, 2026 — that collectively reposition maritime as a vector of European industrial, security and energy policy, not solely an environmental policy. The United Kingdom’s (UK) domestic Emissions Trading Scheme (ETS) extended to maritime from July 1, 2026. The Carbon Border Adjustment Mechanism (CBAM) transitioned from its initial reporting phase into its definitive phase of financial enforcement from January 1, 2026 in the EU, with the UK CBAM following on January 1, 2027. The United States’ (U.S.) federal environmental architecture has scaled back during 2026, while California’s regulatory agenda continues to advance independently. The strategic picture has shifted. Shipowners and capital providers no longer plan around a single global trajectory with regional overlays. They now plan under five to seven concurrent regimes — each with its timeline, metric, price level and enforcement posture. The remainder of this section maps that fragmentation and quantifies the exposure it creates over the 2026 to 2035 planning horizon.
The strategic picture has shifted.
REGULATORY AND MARKET TRAJECTORY | 8
1.1.2 The IMO Track After MEPC 84
fuel availability, infrastructure readiness and compliance
MEPC 84 did not deliver final adoption of the IMO NZF, but neither did it alter the industry’s long-term decarbonization direction. Instead, the meeting highlighted that important technical, economic and implementation issues remain unresolved. ABS characterizes this stage as a policy inflection point, with further work needed on regulatory architecture, fuel accounting methodologies, life cycle assessment and implementation guidelines before a durable global framework can be finalized. Through the discussions, the central debate has increasingly shifted
flexibility across a highly diverse global fleet. The alternative proposals advanced at MEPC 84 reflect these different priorities, with some emphasizing technological neutrality and operational flexibility, others focusing on fuel availability, affordability and scalability, and others raising concerns about levies, governance and centralized funding mechanisms. Collectively, they indicate that the pathway to implementation is likely to evolve through refinement of the framework rather than through a fundamental change in the IMO’s decarbonization objectives.
from ambition to practicality: how to balance fuelintensity requirements, energy-efficiency improvements,
Three substantive workstreams are advancing in parallel, regardless of NZF timing.
The IMO LCA Guidelines (Resolution MEPC.391(81)) now provide Life Cycle Assessment (LCA)
the methodology for calculating well-to-wake (WtW) emission factors across 128 fuel pathways in 14 fuel groups. At MEPC 84, the committee progressed default emission factors, fuel pathway developments and methodological treatment of carbon capture technologies, with the Working Group on Life Cycle GHG Intensity of Marine Fuels (GESAMP-LCA) instructed to continue technical refinements and report to MEPC 85. Any future regulatory metric — global or regional — depends on this framework to differentiate between green and fossil versions of the same molecule. Without it, a ship operating on green fuel carries the same compliance signature as one operating on the same fossil fuel version.
MEPC 84 approved a technology-neutral work plan for OCCS Onboard Carbon Capture
guidelines covering testing, certification, traceability and
and Storage (OCCS)
accounting methodology. Completion is targeted for 2028. Several alternative NZF proposals assume OCCS deployment as a bridging technology from the late 2030s; until the regulatory framework matures, owners cannot rely on OCCS as a primary compliance pathway in pre-2030 capital decisions.
MEPC 84 continued Phase 2 of the review of the short-term GHG Carbon Intensity Indicator (CII)
reduction measures and recorded significant progress on guidelines
Phase 2 and the Greenhouse Gas
for the calculation of attained GFI, draft amendments to fuel-
(GHG) Fuel Intensity (GFI) Track
oil consumption data verification to incorporate GFI elements, guidance for energy derived from wind propulsion and certification and Fuel Lifecycle Label (FLL) circulation. The current CII measures only tank-to-wake (TtW) carbon dioxide (CO₂) and has no enforcement teeth beyond corrective action planning; the direction of travel — visible across multiple proposals — is toward exclusion of idle-time fuel consumption, incorporation of WtW intensity, and stronger enforcement under an enhanced Ship Energy Efficiency Management Plan (SEEMP) framework for all ships, not only those rated D or E.
9
| DECISION POINT: PRACTICAL PATHWAYS TO 2035
The Analytical Signal The trajectories under public discussion at MEPC working groups span from a one percent annual reduction rate (in alternative proposals advanced by industry coalitions and several member states) to a two/three/five percent step-up across successive phases in the original NZF architecture.
intensity metric architectures — is that the choice of trajectory dominates the choice of metric in determining whether the regulation is implementable against realistic fuel-supply curves. Calibration of ambition against fuel-supply reality is the binding constraint for the intersessional discussions.
Modeling presented to and around the working-group
For owners and capital providers, the operative conclusion
process indicates that under baseline zero- and near-zero
is that MEPC outcomes are not paused. The CII framework
(ZNZ) fuel availability scenarios, a one percent trajectory
is being materially upgraded in parallel to NZF negotiations.
keeps the global fleet within reach of compliance, while
Even in the absence of a mid-term economic measure, a
a two/three/five percent trajectory drives systemic
CII regime that incorporates life-cycle emissions, excludes
compliance failure from approximately 2030. The structural
idle time and carries enforceable consequences would be a
finding — robust across both fuel-intensity and carbon-
materially different instrument from what exists today.
REGULATORY AND MARKET TRAJECTORY | 10
1.1.3 The EU as De Facto Pacesetter Since the 2025 Outlook, the EU has moved from preparing regulations to operationalizing them. From January 1, 2026, the EU ETS reached full 100 percent allowance surrender obligation for in-scope maritime emissions, having phased in at 40 percent for 2024 emissions and 70 percent for 2025. The scope of covered gases expanded from CO₂ only to include methane (CH₄) and nitrous oxide (N₂O), with the cap adjusted upward by 2.4 million allowances for 2026 to reflect this. EU Allowance (EUA) prices stood at
The Industrial Policy Layer What materially distinguishes 2026 from prior years is not the operationalization of the EU ETS for maritime — which had been long anticipated — but the layered industrial strategy that is now emerging around it.
a.
The EU Industrial Maritime Strategy This strategy sets the explicit objective
approximately €82 on July 31, 2026, having traded through
of supplying or retrofitting between
the year in a range of roughly €75 to 85 supported by
7,000 and 10,000 sustainable vessels by
tightening supply, higher energy prices and the European
2035 through a combination of public
Commission’s July 2026 proposal to overhaul the ETS. The
procurement aggregation, targeted non-
Linear Reduction Factor stands at 4.3 percent through
price requirements in selected strategic
2027 and 4.4 percent thereafter. Independent market
public tenders, a dedicated maritime
analyses now project EUA prices toward €138 by 2030 and €191 by 2035.
call under the Innovation Fund in 2027, a
The first FuelEU Maritime compliance cycle for the 2025
support shipping companies’ uptake of
monitoring period is running through 2026 against fixed
sustainable fuels and clean propulsion, and
regulatory milestones: ship-specific reports filed with
a revised EU Sustainable Finance Taxonomy
verifiers by January 31, 2026, verified reports recorded
with updated criteria for the waterborne
in the FuelEU Maritime database by March 31, 2026,
sector expected in Q2 to Q3 2026.
forthcoming ETS-funded mechanism to
compliance balance and pooling arrangements confirmed by April 30, 2026, and Documents of Compliance issued by June 30, 2026. Independent market analyses now project EUA prices in
b.
The EU Ports Strategy The EU ports Strategy complements the shift by repositioning ports as energy and
the €400 to 500 range by the 2040s under current cap
industrial hubs, accelerating onshore power
trajectories.
deployment, prioritizing electrification, and introducing economic-security screening of foreign control of port infrastructure. The forthcoming revision of the Alternative Fuels Infrastructure Regulation will accelerate alternative-fuels bunkering capacity in line with FuelEU Maritime demand.
c.
AccelerateEU Triggered by the Middle East energy disruption and the closure of the Strait of Hormuz in early 2026, AccelerateEU overlays a near-term energy-security imperative onto the decarbonization agenda. For maritime, the most consequential elements are the explicit acceleration of sustainable maritime fuels (SMF) — including a possible ETSfunded mechanism for EU-produced SMF analogous to the existing electrosustainable aviation fuel (eSAF) support — and a targeted review of renewable hydrogen production criteria to unlock electro-fuel production at scale.
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| DECISION POINT: PRACTICAL PATHWAYS TO 2035
The ECB Extends Climate Factors to Corporate Loans
however, no review is expected to take effect before 2028 at the earliest, and any reconciliation will be partial — most
On July 24, 2026, the European Central Bank (ECB)
modeling indicates that even with a global measure in
extended climate factors in the Eurosystem collateral
force, a significant residual EU-specific layer would remain
framework to corporate credit claims; a segment
to preserve the EU’s higher ambition.
representing around 29 percent of pledged collateral, compared with under two percent for the corporate
CBAM: A Cross-cutting Mechanism with Maritime
bonds already covered. The adjustment reflects sector-
Second-order Effects
level transition stress, the debtor’s own emissions,
CBAM entered its definitive phase of financial enforcement
decarbonization targets and disclosure quality and the
on January 1, 2026. EU importers of cement, iron and
residual maturity of the loan; it is capped at five percent
steel, aluminum, fertilizers, electricity and hydrogen must
and expected from end-2027 at the earliest. For shipping,
now surrender CBAM certificates covering the embedded
the significance is structural rather than quantitative:
emissions in those goods, with the first surrender (covering
transition risk is now assessed loan by loan, transportation
2.5 percent of 2026 embedded emissions) due by
is among the most exposed sectors, and borrowers unable
September 30, 2027. The CBAM phase-in runs alongside
to evidence their position may be assessed on sector assumptions.
the gradual phase-out of free allowances in the equivalent
The Double-payment Clause
exposure on imports. The UK will introduce its own CBAM
EU ETS sectors, further tightening the carbon price from January 1, 2027, legislated through the Finance Bill
Both EU ETS Maritime and FuelEU Maritime contain
2025-2026, with initial scope limited to direct emissions
commitments to be reviewed in light of any global measure
and embodied precursor emissions; indirect (electricity-
adopted at IMO, with the explicit aim of avoiding double
related) emissions are deferred to 2029 at the
payment. This is the principal channel through which the
earliest.
IMO and EU regimes are intended to reconcile. In practice,
CBAM is not in itself a maritime instrument. However, it produces three second-order effects that owners and capital providers should plan for.
1
2
Trade-flow Reshaping:
Emissions Documentation as a
Strategic Response from
Commercial Role:
Major Export Economies:
of carbon-intensive imports
CBAM-covered goods require
China’s announced shift from
from countries with weaker
verified emissions data along
intensity-based to absolute-
carbon pricing, and, over
the supply chain. Shipping
cap ETS allocation by 2027 is
time, it is expected to shift
companies, terminals and
explicitly framed as a response
CBAM raises the landed cost
3
some sourcing toward EU-
ports are increasingly being
to CBAM, designed to keep
produced alternatives or other
positioned (formally or
carbon revenues within China
suppliers that demonstrate
informally) as nodes in this
rather than ceding them to
equivalent carbon costs. For
documentation chain.
the EU. This is the principal
the dry bulk and break-bulk
mechanism by which CBAM is
segments carrying iron ore,
expected to drive convergence
steel, aluminum, fertilizer and
in global carbon pricing
cement, demand patterns are
over the medium term, with
likely to adjust over the 2026
consequential implications for
to 2030 horizon. The scale of
the relative cost positioning of
this shift remains uncertain
vessels trading across these
and will depend largely on the
jurisdictions.
adoption of reciprocal carbon pricing regimes.
For shipowners and charterers, the practical effect is that
action concentrated on local air quality but increasingly
the EU is operating today at full carbon-pricing intensity,
intersecting with GHG accounting.
with four additional policy layers (industrial, ports, energy security and border adjustment) actively reshaping the operating environment — and that no near-term relief from a successful IMO outcome should be assumed in capital planning. 1.1.4 The Fragmentation Map: UK, China, the U.S. and Singapore Beyond the IMO and EU, four further regimes now require active management. United Kingdom
Singapore and the Green Corridor Model Singapore is a regulatory pacemaker blazing trails in the governance-mechanism space. Through five green and digital shipping corridors (with Rotterdam, Los AngelesLong Beach and others; the trans-Pacific corridor was renewed in April 2026), methanol bunkering licenses and ammonia readiness from the Maritime & Port Authority, Singapore is operationalizing bilateral and multilateral supply-side coordination rather than waiting on multilateral regulatory consensus. For owners and charterers, the relevance is practical: corridors are where the early
UK ETS maritime obligations commenced on July 1, 2026,
commercial pilots of green fuels at scale are happening,
following a voluntary phase. The launch scope is narrower
and where preferential commercial terms and offtake
than the EU’s — covering only domestic UK-to-UK voyages
arrangements are taking shape.
by vessels of 5,000 gross tonnage (gt) and above, with all emissions on those voyages (at sea, at anchor and at berth) in scope — but the UK ETS Authority’s main response of November 25, 2025, confirmed the intention to consult on extending coverage to a portion of international voyages from 2028, broadly mirroring the EU ETS 50 percent scope on international legs. The Auction Reserve Price is £28 for 2026, with annual inflation-linking thereafter. The 2026 compliance year runs from July 1 to December 31, with a one-off “double surrender” for both 2026 and 2027 emissions due April 30, 2028. The UK CBAM follows on January 1, 2027. In May 2025, the EU and UK formally agreed to work toward linking their respective ETSs with mutual recognition of allowances; negotiations are ongoing, with a joint statement in December 2025 stating an aim to conclude by the next UK-EU summit. Until linkage is finalized, EUAs and UK Allowances (UKAs) must be managed as separate instruments, with separate Monitoring, Reporting and Verification (MRV) plans and separate registry accounts. United States and California In early 2026, the U.S. Environmental Protection Agency moved to revoke the 2009 endangerment finding, dismantling the statutory basis for federal greenhouse gas regulation under the Clean Air Act. California, however, continues to act independently. The California Air Resources Board (CARB) At-Berth Regulation now covers container, refrigerated cargo, cruise, roll-on/ roll-off and tanker vessels at major California ports, with capture-and-control or shore-power compliance and per-violation penalties of up to $37,500. CARB held a workshop in February 2026 on the developing OceanGoing Vessel In-Transit Regulation, which would extend emissions controls to vessels transiting, maneuvering and anchoring in California coastal waters. The U.S. picture is, therefore, one of federal-state divergence, with state-level
13 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
The fragmentation map is not symmetric. The EU sets the price ceiling; China sets a lower floor that will rise; the UK currently sits adjacent to the EU and is expected to link; the U.S. splits federal-state; Singapore offers a parallel governance model. Arbitrage risk — vessels rerouting to lower-cost jurisdictions, transshipment shifting outside EU and UK waters — is real, has been documented in EU ETS impact assessments and is being actively monitored in the EU ETS review underway in 2026.
1.1.5 Forward Carbon Exposure: A Transparent View The cumulative effect of these layered regimes is most cleanly understood at the archetype-vessel level. The figures that follow are built from publicly available parameters and standard industry average vessel profiles; all assumptions are explicitly stated.
Methodology Annual EU-related carbon-cost exposure is calculated as the sum of:
a.
EU ETS allowance surrender costs; and
b.
FuelEU Maritime compliance costs under a conventional very low sulfur fuel oil (VLSFO) equivalent pathway.
Common Assumptions: • VLSFO carbon emission factor 3.114 tonne (t) of CO₂ per tonne of fuel; • Vessel operates with a 50 percent EU-trade voyage share; • Blended EU ETS scope coverage of 45 percent of total annual emissions (reflecting the typical mix of intra-EU 100 percent-in-scope legs, EU to non-EU 50 percent-inscope legs, and out-of-scope legs);
• EUA price path €76 (2026, observed) rising to €95 (2028), €115 (2030), €170 (2035) based on consensus forward curves; • FuelEU Maritime compliance gap on conventional VLSFO equivalent to an effective per-tonne penalty rising from approximately €30 (2026) to €330 (2035) as the intensity glidepath steepens; • $ to € conversion rate at 1.08.
REGULATORY AND MARKET TRAJECTORY | 14
1.1.6 Key Observations First, the carbon-cost component of operating expense for a conventional fuel containership trading EU routes (14,000 twenty-foot equivalent unit (TEU) archetype, ~150 t/day fuel consumption, base-case EUA and FuelEU Maritime penalty stack — see methodology above) is already in the range of mid-single-
1.1.7 The Compliance Window: Emissions Intensity Trajectories Three trajectories now impact the planning horizon for the 2026 to 2035 decade.
digit millions dollars per vessel per year in 2026, and trends toward roughly $20 million per vessel per year by 2035 under a base price path. For an operator with a fleet of 20 such vessels, this is a strategic line item comparable in magnitude to dry-docking provisions or bunker hedging programs — and must be managed actively rather than passed through opportunistically. Second, the introduction of UK ETS from July 2026, and proposed extension to international voyages from 2028, adds a parallel exposure for vessels with UK trade. Until the EU-UK linkage is finalized, allowances cannot be substituted between schemes; the administrative load roughly doubles, with separate MRV plans, verifier engagements and registry accounts.
1 The EU ETS cap continues to tighten at a Linear Reduction Factor of 4.3 percent through 2027 and 4.4 percent thereafter, with maritime integrated into
Third, fuel choice is no longer marginal to the carbon-cost equation.
the unified industrial cap.
The compliance cost differential between a vessel operating on
The overall trajectory points
a compliant alternative fuel pathway (for example, bio-methanol
toward materially higher
or bio-liquefied natural gas (LNG) with verified WtW credentials)
EUA prices through the
and the same vessel on conventional fossil equivalent is now of the
late 2020s.
same order of magnitude as the green premium on the alternative fuel itself. For the first time, the economic case for fuel transition is being materially driven by carbon-cost avoidance rather than green premium tolerance. This is examined in detail in the financial implications section that follows.
15 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2
3
FuelEU Maritime sets a
The IMO trajectory remains
The convergence point:
fleet-average GHG-intensity
the principal open variable.
Across all three trajectories,
reduction trajectory:
The existing CII reduction
the period 2028 to 2030
−2 percent from 2025
factors are scheduled for
marks the operational
(versus a 2020 reference of
replacement under Phase 2.
closing of the compliance
91.16 grams CO2 equivalent per megajoule (gCO₂e/ MJ), −6 percent from 2030, −14.5 percent from 2035, accelerating to −80 percent by 2050. The trajectory is relatively moderate in the near term but steepens sharply from 2035.
Based on the technical proposals advanced through MEPC 83 and MEPC 84, the most plausible direction of travel is convergence with FuelEU’s WtW framing, exclusion of idle time fuel consumption from calculation and enforcement
FuelEU Maritime is the first
that applies continuously
major maritime instrument
rather than only at D/E
structured on a full WtW
rating thresholds. Whether
intensity basis with explicit
this is delivered through
window for conventional fuel pathways. By 2030, EU ETS allowance costs combined with FuelEU Maritime intensity penalties on conventional fuel result in compliance costs that exceed the green premium on most second-generation alternative fuels under the price paths currently modeled by independent forecasters.
reward factors for renewable
an upgraded CII, a parallel
By 2035, the gap widens
fuels of non-biological origin
GFI instrument, or a hybrid
materially. For asset planning
(RFNBOs) and wind-assisted
framework remains the open
purposes, the binding
propulsion. The compliance
architectural question for
constraint shifts from “Is
balance mechanism allows
MEPC 85.
alternative fuel available?” to
pooling and banking, partly
“What is the cost of delay?”
mitigating early-period
— a question explored
exposure.
further in the financial and asset implications section.
1.1.8 Three Strategic Implications For boards, Chief Executive Officers and capital providers reading the landscape from a 2026 vantage point, three implications follow. The implications for fleet financing, charter structures and asset value are explored in the following sections of the Outlook.
1
2
3
Fragmentation is the new
The cost of inaction is now
The regulatory architecture
planning environment — not
quantifiable and rising.
is moving from carbon
a temporary phenomenon.
Carbon costs are no longer
Even a successful IMO
a tail risk but a recurring
outcome in December 2026
operating expense item,
pricing toward industrial policy. The EU Industrial Maritime
would not consolidate the
scaled to vessel size and
Strategy is the clearest
five to seven concurrent
trade pattern, with a clear
articulation of this shift, but
regimes into a single
forward-price trajectory.
the same logic is visible in
trajectory. EU layered policy
The strategic question is no
CBAM’s design intent, China’s
(ETS, FuelEU Maritime, CBAM
longer whether to engage,
vertical integration of fuel
and industrial strategy),
but at what pace and
production and shipbuilding,
UK ETS, evolving Chinese
with what level of capital
Singapore’s corridor-based
carbon pricing, U.S. state-
deployment.
supply-side coordination
level action and bilateral
and U.S. state-level industrial
green corridor arrangements
action. Financiers should
will persist alongside any
expect the next phase of
global instrument. Fleet
maritime decarbonization
and trade decisions must
to be shaped as much by
be made under conditions
industrial and economic
of persistent multi-regime
security policy as by
exposure.
environmental policy.
17 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
1.2 Market and Competitive Pressures
of VLSFO consumed has increased from roughly $91 in 2024 to about $319 in 2026, reflecting the combined effect
1.2.1 Data-Driven Carbon Cost Insights
of higher surrendering obligations, broader gas coverage
The Carbon Cost Cliff
and firmer carbon prices. This section quantifies where the
2026 is the year carbon stopped being an externality and became a profit and loss (P&L) line. Three cost escalators have converged simultaneously: the EU ETS at 100%
costs are landing, who is absorbing them and what the data reveals about the industry’s response. EU ETS: Phase-in Complete, Costs Accelerating
surrendering, the inclusion of methane and nitrous oxide alongside CO₂, and the first enforcement cycle of FuelEU
Maritime shipping received no free allowances. The phase-
Maritime. On an intra-EU voyage, the carbon cost per tonne
in has now reached its terminal state:
Year
Obligation
Gases
Est. ETS Revenue
Milestone
2024
40%
CO₂
~€1.8 billion (B)
Entry into force; 89.8 million tonnes (Mt) CO₂ verified; >99% compliance rate
2025
70%
CO₂
~€3.5–4.2B
FuelEU begins; ~18.8 Mt CO₂ under ETS accounting
2026
100%
CO₂ + CH₄ + N₂O
~€6–8B
Full scope; ~26.9 Mt CO₂e requiring allowances
2027+
100%
CO₂ + CH₄ + N₂O
~€9.5B+
Offshore vessels (>5k gt) added; scope review to 400 gt+
Table 1: Estimated ETS revenue.
REGULATORY AND MARKET TRAJECTORY | 18
The broader EU ETS generated €38.8 billion in auction revenue in 2024, with cumulative proceeds exceeding €250 billion since inception. European Commission reporting shows the maritime industry’s share is growing fast, and Transport & Environment projects a €2 billion carbon bill in 2026. For dry bulk, EU-exposed cost increases reach up to €1.3 million per vessel annually. Major carriers have announced EU ETS surcharge increases of about 45 percent year-on-year for 2026 versus 2025, reflecting the move from 70 percent to 100 percent surrendering obligations. EUA Pricing: Where Carbon Sits Today
Period
Range (€/tCO₂)
Average
Driver
2023
€80–105.73 (all-time high: Feb.)
~€85
Fit-for-55 finalized
2024
€51–76
~€65
Weak demand; +15% REPowerEU auction supply
H2 2025
€63–94
~€73–80
Recovery; full maritime phase-in priced in
YTD 2026 (to May 14)
€68–78
~€75
Market Stability Reserve (MSR) tightening; tariff-driven macro uncertainty
Table 2: EUA pricing range.
19 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Observed EUA pricing in 2026 has remained below some
For VLSFO consumed on an intra-EU voyage, the EU ETS
earlier bullish forecasts, but the medium-term outlook
compliance cost per metric tonne of fuel rises by 72.6
is still widely seen as supportive. EUA prices averaged
percent year-on-year in 2026 versus 2025, driven by the
€76.66 over the prior six months, while longer-term market
move from 70 to 100 percent ETS coverage, firmer EUA
outlooks continue to point to tighter conditions later in
prices, broader gas coverage and euro/dollar effects.
the decade. BloombergNEF sees EUA prices approaching €146/t by decade-end and potentially €200/t by 2035, while other analysts also project materially firmer pricing beyond 2026. In parallel, the expanded gas scope increases the CO₂e basis used for VLSFO compliance calculations by roughly one to two percent, adding a further layer of cost
Who is Exposed: Vessel Segments, Routes and Fuels Approximately 22.9 percent of all containership voyages in 2025 were EU-exposed, and 80 percent of those were carried by smaller Feeder and Panamax vessels.
exposure even before any change in EUA prices.
Segment
% of EU Emissions
Speed Change vs. 2023 (knots)
Annual Carbon Cost (2026)
Key Risk
Containers
~35
−1.8
€4.5–11.4 million (M)/vessel
Highest surcharge sensitivity; Asia-Europe most exposed
Tankers
~18
−0.5
€0.5–2.5M/vessel
Seasonal volatility; product tankers at upper end
Dry Bulk
~13
−1.2
€0.5–1.3M/vessel
Commercial obsolescence risk for older tonnage
General Cargo
~8
Minimal
Lower absolute
Under review for 400–5k gt inclusion from 2028
Table 3: Percentage of EU emissions by segment.
While containership routes provide the clearest
The inclusion of CH₄ and N₂O from 2026 changes the
illustration of carbon exposure, the same competitive
fuel economics of EU-exposed voyages. For LNG-fueled
logic is increasingly relevant to tanker and bulk owners,
vessels, part of the historical compliance advantage versus
particularly where fuel cost exposure, charter scrutiny
conventional fuels is reduced once methane slip is captured
and financing conditions leave little room to absorb
under the EU ETS and under FuelEU Maritime’s WtW
avoidable inefficiencies.
accounting framework. The impact is route-dependent, since both regimes apply only to emissions and energy use within their regulatory scope.
Emissions regulations are reshaping how the industry thinks, but not yet how it transacts. REGULATORY AND MARKET TRAJECTORY | 20
Fuel
WtW Intensity (gCO₂e/MJ)
FuelEU Status
EU ETS Status
Heavy Fuel Oil (HFO)
91.74
Deficit (above 89.34 limit)
High EUA demand
LNG (Dual-Fuel Diesel Electric [DFDE])
~68–76
Surplus, but sensitive to methane slip assumptions
Lower direct ETS exposure than oil fuels, but CH₄ inclusion from 2026 reduces the net compliance advantage
Bio-LNG
~25–45
Large surplus
Potentially zero-rated
Green Methanol
~8–15
Large surplus + RFNBO 2x multiplier
Zero-rated
Waste Cooking Oil
~16.4
Large surplus
Zero-rated
Table 4: FuelEU and EU ETS status based on fuel type.
FuelEU Maritime Pooling: A Compliance Market is Born April 30, 2026 marked the first FuelEU Maritime pooling deadline, the point at which verified 2025 compliance balances were settled through banking, borrowing or
is marginally cheaper in the near term, while biofuels become structurally favored after 2030 as surplus supply tightens. • RFNBO multiplier (2025 to 2033): For FuelEU Maritime
pooling. The regulation has effectively created a secondary
compliance purposes, each MJ of eligible RFNBO energy
market for carbon performance.
(such as e-methanol or e-ammonia) is counted twice.
Vessels burning conventional fuels typically generate a compliance deficit; absent pooling, that deficit must be addressed through a FuelEU Maritime penalty based on the vessel’s verified compliance shortfall, with higher exposure
Combined with favorable treatment under the EU ETS, this can make RFNBO fuels disproportionately valuable from a compliance perspective relative to conventional marine fuels such as marine gas oil (MGO).
in cases of consecutive non-compliance. In practice:
Owner–charterer Dynamics: Who Pays for Carbon?
• Oversupply characterizes the current market, driven by
The regulatory design embeds a fundamental asymmetry:
LNG and biofuel-blended vessels. • Indicative third-party market commentary suggests that FuelEU Maritime pooling is currently priced well below the cost of direct non-compliance, making it an attractive near-term compliance option. As FuelEU Maritime targets tighten toward 2030 and surplus availability narrows, the value of compliance surplus is expected to rise. • “Pooling-as-a-service” has emerged as a viable business model. Third-party managers broker compliance transfers at 60 to 80 percent of the penalty cost. A single, methanol-retrofitted vessel can effectively cover five to 10 conventional ships. • Pooling vs. biofuels vs. penalty: A Sustainable Ships case study (four-ship fleet, 2026 to 2040) found that both pooling and biofuel blending outperform paying the penalty by five to eight percent. Pooling
21 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
the shipowner or more precisely the document of compliance (DOC) holder and bears regulatory liability, while the charterer controls fuel choice, speed, route and EU trading exposure. This has turned charterparty negotiations into a battleground for carbon cost allocation.
The Baltic and International Maritime Council (BIMCO) Clause Stack
Clause
Type
Default Cost Bearer
Key Mechanism
ETS Allowances (2022)
Time Charter
Charterer — monthly EUA transfers
Owner may suspend performance on nonpayment
ETS Freight (2023)
Voyage
Embedded in freight — owner retains compliance duty
Clean: once freight paid, no recourse
ETS Surcharge (2023)
Voyage
Charterer — separate line item
Post-voyage reconciliation
ETS BARECON (2026)
Bareboat
Charterer by default
Indemnity in favor of owners
FuelEU Time Charter (2024)
Time Charter
Charterer — surcharge at penalty rate
Charterers may instruct pooling/banking for full-year charters
ETS Memoranda of Agreement (MoA (2025)
Sale & Purchase
Seller pre-delivery; Buyer post-delivery
Verified partial emissions report at point of sale
Table 5: Relevant BIMCO clauses.
What’s Actually Happening • Voyage charters: The dominant approach is to embed ETS cost into freight. Clauses such as “Freight is inclusive of all costs arising from the surrender of Emission Allowances” provide charterers with cost certainty, while allowing owners to reflect the estimated ETS liability associated with the voyage’s expected fuel consumption and emissions in the freight rate. • Time charters: Charterers routinely push to defer EUA settlement to final hire, leaving owners exposed to €500K+ in unsecured carbon liabilities over a
• FuelEU Maritime surcharges: Under the BIMCO FuelEU Maritime Clause for Time Charter Parties 2024, the surcharge is linked to the owner’s penalty exposure, effectively the full €2,400 per tonne of VLSFOequivalent deficit. This is owner-friendly but may not hold in negotiations if pooling enables compliance at 60 to 80 percent of that cost. • Delivery/redelivery ports now carry carbon consequences: A vessel delivered mid-voyage from an EEA port incurs 100 percent EUA coverage for that leg; from a non-EEA port, 50 percent.
charter period.
REGULATORY AND MARKET TRAJECTORY | 22
CII: The Market-imposed Penalty CII carries no regulatory fine, but the market has created its own penalty. D-rated vessels face five to 15 percent charter rate discounts; E-rated ships are effectively un-charterable in certain trades. E-rated tankers show materially lower sales and purchase turnover, with only about four percent of the E-rated fleet traded annually, compared with roughly 13 percent for B-rated vessels. They also carry a 12 to 15 percent purchase price discount. CII thresholds tighten by around two percent per year: a comfortable 2023 C rating is on track to become a D by 2025 to 2026 without intervention.
Targeted optimization is real. Sea-Intelligence analysis indicates carriers reduced aggregate ETS-chargeable sailing distance by 11 percent in new Asia-Europe networks. The Gemini Cooperation and Ocean Alliance each achieved reductions of about 20 percent through strategic port rotation, using non-EU ports near the EU to “reset” the ETS distance calculations. The UK emerged as a first-call arbitrage hub (Felixstowe, Southampton) before EU ports — a loophole addressed at the May 2025 EU-UK summit through a commitment to work toward linking both ETS regimes. The Red Sea factor remains the largest exogenous cost multiplier. Diversions via the Cape of Good Hope add approximately 9,000 nautical miles (NM) (80 percent) to Asia-Europe routes. Combined with roughly 25
Behavioral Shifts: Evasion, Re-routing and the Red Sea
percent speed increases to maintain schedules, bunker
Multiplier
consumption has roughly tripled on affected routes. For
The European Commission’s first monitoring report found no systemic evidence of widespread ETS evasion, no generalized increase in non-EU port calls, no modal shift and no uptick in sub-5,000 gt vessel usage. Average first/last leg distances into EU ports actually increased, attributed to Red Sea diversions.
a 14,000 TEU ship, EUA requirements per voyage jumped from 1,800 to 5,200 at 40 percent coverage, fully realized at 100 percent in 2026. As an early indicator of the impact of Red Sea rerouting on EU-bound shipping, EU maritime CO₂ emissions rose by 14 percent year-on-year in the first months of 2024, reflecting the longer distances and higher fuel burn associated with Cape of Good Hope diversions. The effective carbon tax on a diverted voyage has doubled.
23 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Green Finance: Capital is Pricing Carbon Performance The Poseidon Principles, whose 36 signatories represent approximately 75 percent of global ship finance, reported an eight percent year-over-year improvement in portfolio climate alignment. The gap to the IMO minimum trajectory narrowed from 19.4 to 11.7 percent misaligned, while cargo vessel scores improved from 14 percent to just
The divergence in cost of capital is now measurable: banks offer 10 to 30 basis points margin reductions for CII A/B or Poseidon Principles-aligned vessels. D/E-rated ships face higher margins, shorter tenors and increased covenant risk. The CII rating is now treated as a comparable attribute alongside age, size and technical specifications in sale and purchase valuations.
six percent misaligned. Signatories are now embedding
1.2.2 Voice of the Industry: What the Market Is
emissions-linked incentives directly in loan agreements. In
Actually Saying
December 2025, the Principles expanded to include private equity, hedge funds and capital market underwriters as associate members. Green maritime debt issuance is accelerating. Evergreen Marine issued Asia’s first international containership green bond in April 2026 ($300M, aligned with EU Taxonomy shipping criteria), which was 6.3 times oversubscribed. MPC
Based on anonymized interviews with senior decisionmakers across owners, charterers and operators spanning tankers, containers, bulk carriers, gas carriers, LNG and very large gas carriers (VLGC)/liquefied petroleum gas (LPG) carriers conducted May 2026. The headline:
Container Ships placed a $200M sustainability-linked bond
“Emissions regulations are reshaping how the industry
in 2024 alongside green term loans from Deutsche Bank
thinks, but not yet how it transacts. Across the interviews,
and Société Générale. NYK secured a $300M transition
one paradox emerged clearly: stakeholders widely
loan (21 lenders) for dual-fuel newbuilds. Mitsui O.S.K.
acknowledge that decarbonization is redefining the rules
Lines executed Japan’s first transition-linked loan with
of the game, yet day-to-day commercial decisions remain
government-backed interest subsidies tied to GHG targets.
overwhelmingly driven by market fundamentals. The gap between awareness and action is where the next wave of competitive disruption is likely to emerge.”
REGULATORY AND MARKET TRAJECTORY | 24
Five Signals that Matter:
1
2
3
CII Is Watched, Not
Data Demand Is Expanding
EU ETS and FuelEU Maritime
Weaponized — Yet
— Ahead of Full
— Costs Are Real, Behavior
Commercial Impact
Change Remains Limited
that CII ratings are now part
A striking pattern across
Carbon costs are now
of commercial discussions.
interviews is the sharp
a material line item in
However, in practice, their
increase in demand for
voyage economics for
influence remains highly
emissions data from
EU-related trades.
All respondents confirmed
dependent on market
charterers, cargo owners
context. In spot markets, the
and financiers, driven by
impact is still described as
sustainability reporting
limited or negligible.
requirements, the
In time-charter decisions, emissions performance is receiving greater attention,
Poseidon Principles and corporate decarbonization commitments.
One owner quantified EU ETS costs at approximately $340/tonne of fuel on intraEU routes and $170/tonne on EU-origin/ destination voyages, equivalent at times to a
as it now translates into
Third-party emissions
50 to 80 percent surcharge
direct cost exposure under
tracking is increasingly
on bunker costs depending
EU ETS and FuelEU Maritime.
standard. Yet this data is
on market conditions.
In some segments, CII is also
still being used primarily
Another respondent
becoming relevant in sale
for monitoring, reporting
estimated EU ETS and
and purchase discussions
and risk assessment rather
FuelEU Maritime combined
around vessel attractiveness.
than for systematic pricing
costs can add roughly 15
decisions. One emerging
to 20 percent to a U.S.-EU
exception is in finance,
voyage cost in the VLGC
The implication: while not yet a consistent pricing lever, CII is becoming relevant where cost exposure is explicit.
where some lenders are
segment. Despite these
beginning not only to
costs, respondents across
assess portfolio emissions
segments reported little
impact, but in limited cases,
to no significant change in
to offer marginally better
deployment, trading patterns
financing terms for stronger
or operating profiles so far.
emissions performance. The foundation for commercial differentiation is being established, even if the pricing premium has yet to fully materialize.
Carbon costs are now being reflected in voyage economics, but they are not yet driving systematic fleet reallocation. For example, broad redeployment of the most efficient or alternativefuel-capable vessels into EU trades remains limited. The money is moving; the ships, largely, are not.
25 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
4
5
There Is Still No True
The Tipping Point Is
“Green Premium”
Coming but It’s Regulatory,
Perhaps the most sobering
Not Voluntary The Bottom Line
finding: not a single
Across the interviews, the
respondent has identified
direction was consistent:
a customer willing to pay
the real inflection is
above the direct regulatory
expected to come from
cost for green credentials.
IMO’s NZF and tighter
One owner stated outright:
Phase 2 CII requirements,
“We have not been able to
which together could make
identify a single customer
emissions performance a far
over the past three years
more direct driver of asset
who is willing to pay for
competitiveness.
reduces costs, improves CII,
Global applicability is
positions assets for incoming
expected to remove the
global rules. Owners investing
regional arbitrage that
in technical efficiency today are
currently limits EU-only
not doing so for Environmental,
rules. Multiple respondents
Social and Governance (ESG)
noted that in a weaker
positioning; rather, they are
freight market, emissions
doing it because the economics
green fuel/decarb in excess of the direct effect of EU ETS/FuelEU Maritime.” In spot markets, there is no green premium whatsoever. In time charters, the premium is limited strictly to the calculable EU ETS/FuelEU Maritime savings from better fuel efficiency, nothing more.
The industry is in a transitional phase; emissions compliance is becoming universal, but emissions-based competition is not yet. The commercial signal is clear: fuel efficiency is the bridge. It simultaneously lowers EU ETS exposure and
performance could shift from
work on EU trades and are
“nice to have” to a genuine
likely to extend globally as
competitive differentiator.
regulation evolves.
One respondent noted: “I do not expect significant changes in the next five to six years under current market conditions, but in a downturn these factors become very relevant.”
The key question is no longer whether emissions performance will become a competitive differentiator, but how soon, in which segments first, and who will be best positioned to benefit.
REGULATORY AND MARKET TRAJECTORY | 26
PAR T 2 :
TECHNOLOGY AND DEVELOPMENT PATHWAYS
2.1 Practical Pathways to Better Maritime Performance The pressure on the maritime industry has never been greater. Shipowners and operators are being asked to improve efficiency, reduce emissions, manage rising costs and maintain reliability, all while navigating an increasingly complex regulatory and commercial landscape. While much of the industry’s attention is focused on future fuels and long-term decarbonization strategies, meaningful opportunities exist today through technologies and operational solutions that can deliver immediate and measurable improvements. These solutions are helping organizations get more value from existing assets, make smarter operational decisions and build greater resilience into their fleets. This section explores a range of technologies and digital capabilities that are shaping the next generation of maritime operations. From proven energy-efficiency technologies — such as wind propulsion technologies (WPT), air lubrication systems (ALS), waste heat recovery systems (WHRS) and power take-off/take-in (PTO/ PTI) arrangements — to advanced weather routing, predictive maintenance, fleet reliability analytics and digital performance monitoring, each offers a different approach to improving vessel performance. They have been included not only because of their potential to reduce energy consumption and emissions, but also because they demonstrate how technology is increasingly enabling better operational visibility, more informed decision-making, and stronger commercial outcomes across the shipping industry. Together, they provide a practical view of the tools and strategies available today to support both short-term performance goals and longer-term transition ambitions.
Technology is increasingly enabling better operational visibility, more informed decision-making, and stronger commercial outcomes.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 28
2.2 Ready to Deploy: Energy Efficiency Technologies
2.2.1 Key Energy Efficiency Technologies: Impact and
Energy Efficiency Technologies (EETs) are becoming
These technologies examined in this section have been
increasingly important in the maritime industry, particularly in relation to operational performance, cost management and long-term sustainability. As energy prices remain volatile and environmental expectations continue to rise, the industry is looking for solutions that can reduce energy consumption without compromising operational effectiveness. In this context, EETs are gaining attention not only for their environmental benefits, but also for their potential to improve day-to-day performance
Limitations
selected because they show different ways of improving vessel efficiency. Examining them together gives a clearer picture of both their potential benefits and the practical challenges associated with implementation. 2.2.1.1 Wind Propulsion Technologies WPT use the wind encountered during sailing to generate a forward force that allows the vessel to maintain the same speed with lower main engine power, or in some cases
and efficiency.
increase speed without additional engine output.
At the same time, not all EETs are at the same stage of development or market adoption. Some can readily be deployed with relatively low risk, while others remain in earlier stages of development or lack sufficient real-world validation. Furthermore, some EETs are best suited to large oceangoing vessels, while others are most effective on vessels with variable propulsion and auxiliary power demands. It is, therefore, important to look at theoretical
Several types of WPT are being developed and applied for ocean-going vessels. While these systems differ in design and operation, all these technologies share the same objective: to use wind as a supplementary source of propulsion and reduce reliance on conventional engine power.
efficiency gains while also considering technology readiness as a key factor in the selection process. Understanding where each option stands enables decisionmakers to focus on solutions that are not only technically viable, but also practical to implement and align with operational needs.
WPT Type
Operational Philosophy
Flettner Rotors
Rotating vertical cylinders generate thrust via the Magnus effect
Rigid and Soft Wing Sails
Operate like airfoils
Suction Wing Sails
Enhance lift through controlled airflow
Towing Kites
Fly at higher altitudes to harness stronger, more stable winds
Table 6: Types of WPT.
29 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
3.5
Orderbook (%)
3.0
Existing Fleet (%)
2.5 2.0 1.5 1.0 0.5 0
WPT
ALS
WHRS
PTO/PTI
Figure 1: Technology uptake — Existing fleet vs. orderbook.
45
Minimum Savings (%)
40
Maxiumum Savings (%)
35 30 25 20 15 10 5 0
WPT
ALS
WHRS
PTO/PTI
Figure 2: Energy saving potential by technology.
WPT can reduce energy use to varying degrees depending
rotor sail installations and $170,000 to $300,000 per mast
on the system, with reported savings ranging from one to
for wing sails, with annual maintenance costs generally in
five percent for kite sails, seven to 12.5 percent for rotor
the range of 3.5 to 10 percent of capital cost and payback
sails, three to eight percent for rigid or soft wing sails and
periods typically under five years for appropriately
six to 40 percent for suction sails. Confirmed full-scale
matched vessels.
savings at the higher end of the rotor sail range have been recorded on product tankers and bulk carriers in commercial service.
Installation of WPT typically ranges from two to four weeks for kite sails and rotor sails, and from one to three weeks for soft wing sails and suction sails. No drydock is required.
Savings are strongly dependent on vessel type, size and trade route, as performance is directly governed by the wind conditions encountered on the vessel’s operating routes and the available deck space for installation. Bulk carriers, large tankers and VLCCs benefit most from using this technology. In addition to energy savings, these technologies may also reduce underwater radiated noise, with reported improvements of around five to 10 decibels (dB) across all main WPT types. Capital costs vary by technology type, ranging from approximately $200,000 to $400,000 for kite systems to one to three million dollars for
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 30
Installation Requirements and Key Limitations
Technology Readiness
The installation requirements of WPT vary by system, in
Wind propulsion technologies demonstrate a relatively high
most cases, installation requires careful assessment of
level of readiness, although maturity varies by system type.
deck arrangement, visibility and vessel stability before
Suction sails appear to be the most mature, while kite sails
installation. A common challenge for most wind propulsion
and rotor sails are also well advanced. Rigid and soft wing
systems, except towing kites, is their potential interference
sails are slightly less mature.
with cargo handling and other deck activities, although retractable or foldable designs can reduce this impact.
Despite this progress, Clarksons Research data from March
The main limitations of WPT are linked to their dependence
1.4 percent of roll-on/roll-off (ro/ro) vessels and
on wind conditions and vessel operating profile. Their
0.46 percent of gas carriers in service currently fitted with
performance is highly route- and weather-dependent, and
WPT. However, orderbook figures point to growing interest,
they are generally less suitable for smaller ships, short
with planned adoption reaching 14.3 percent for ro/ros,
routes or vessels operating on fixed schedules. Towing kites
2.3 percent for tankers and 1.65 percent for general cargo
require the least structural modification and are attractive
vessels. This suggests that while WPT is not yet widely
from a retrofit perspective, but they have their own
deployed across the fleet, its readiness is increasingly being
constraints, including a restricted operating envelope, more
reflected in future vessel investment decisions.
2026 shows that market uptake remains limited, with only
complicated deployment procedures and relatively limited installation experience.
Existing Fleet
WPT
Orderbook
WPT
Bulkers
0.20%
Bulkers
0.99%
Containerships
0.01%
Containerships
0.07%
Gas Carriers
0.46%
Gas Carriers
0.64%
General Cargo
0.13%
General Cargo
1.65%
LNG
0.00%
LNG
0.00%
Offshore
0.01%
Offshore
0.00%
Other
0.03%
Other
0.00%
Passenger
0.03%
Passenger
1.38%
Pure Car Carriers (PCC)
0.22%
PCC
0.00%
Ro/ro
1.44%
Ro/ro
14.29%
Tankers
0.18%
Tankers
2.30%
Total Uptake Across All Segments
0.10%
Total Uptake Across All Segments
0.95%
Table 7: WPT uptake — existing fleet and orderbook. [Clarksons Research]
2.2.1.2 Air Lubrication Systems ALS are designed to improve vessel efficiency by reducing hydrodynamic friction between the hull and the surrounding water. By reducing frictional resistance, these systems reduce the propulsion power required to maintain the same speed. In operational terms, this can translate directly into reduced energy consumption and measurable fuel saving.
31 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
ALS are commonly grouped into three principal types, according to the way air is introduced and maintained beneath the vessel.
1
2
3 The third is the air cushion
The first is the air bubble
The second is the air cavity
method, in which bubbles
method, which relies on
method, which uses a
are distributed across the
the continuous filling of a
deeper cavity supplied with
bottom of the hull to form
recessed cavity with air,
pressurized air to partially
a lubricating layer that
thereby creating a stable
support the hull, reducing
reduces drag.
low-friction interface.
wet surface area and, in some cases, draft as well.
ALS can reduce vessel energy use, with reported average net savings in calm waters of three to 10 percent for bubble drag reduction (BDR), five to six percent for air layer drag reduction (ALDR), four to 16 percent for partial cavity drag reduction (PCDR) and three to 10 percent for passive air lubrication systems (PALS). These figures represent a mix of model test estimates and vendor claims; the most robustly validated realworld results come from full-scale sea trials and longterm voyages, where net savings of 8.8 percent were confirmed for a heavy cargo carrier and four to five percent for an LNG carrier over seven months of service. Savings are greatest for wide-beam, shallow-draught vessels with large flat bottom areas, such as bulk carriers, heavy cargo carriers and large tankers; vessels with smaller flat bottom ratios or higher operating speeds will typically achieve results at the lower end of these ranges. Translated to economic terms and based on a retrofit capital cost of $0.8 million to $2.8 million with annual operating and maintenance costs of $45,000 to $150,000, the payback period for ALS installation is typically cited at three to five years, with actual fuel cost savings proportional to vessel size, utilization rate and prevailing fuel prices. The typical timeline for ALS installation is 20 to 24 weeks from order to commissioning, with an estimated drydock requirement of approximately six days.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 32
Installation Requirements and Key Limitations
Technology Readiness
Air lubrication systems require an extensive integration
Air lubrication systems display different levels of
effort, as these in place of the systems requires additional
technology readiness depending on the underlying
equipment such as compressors, piping, pneumatic and
concept. Among the main concepts, BDR is the most
control systems and air dispensers fitted to the hull.
mature, reflecting the fact that it has already been deployed
In addition, existing equipment, piping and ventilation
on commercial vessels, has been approved by multiple
arrangements may need to be reorganized to make space
classification societies and is widely available. By contrast,
for the system and ensure proper operation.
ALDR and PCDR remain at earlier stages of development,
These requirements also highlight the main limitations of
while PALS are somewhat more advanced.
air lubrication systems which include design complexity,
Several manufacturers, including major shipyards (Daewoo
additional maintenance demands and additional
Shipbuilding & Marine Engineering and Samsung Heavy
dedicated space onboard for supporting equipment. The
Industries in South Korea, Mitsubishi Heavy Industries in
added weight may also affect the vessel’s lightship
Japan), now offer bubble ALS as fully commercial products.
characteristics, necessitating updates to stability
These systems have been installed on a variety of vessels
calculations and performance assessments.
with large flat bottom hull areas, including cruise ships, containerships, product tankers and LNG carriers. Clarksons Research data from March 2026 show that 15.3 percent of LNG carriers in service are already equipped with ALS, with this set to grow significantly, as 39 percent of LNG carriers and 20.7 percent of PCCs currently in the orderbook will deploy the ALS technology.
Existing Fleet
ALS
Orderbook
ALS
Bulkers
0.12%
Bulkers
0.33%
Containerships
1.92%
Containerships
3.69%
Gas Carriers
0.23%
Gas Carriers
0.32%
General Cargo
0.02%
General Cargo
0.00%
LNG
15.32%
LNG
39.00%
Offshore
0.01%
Offshore
0.08%
Other
0.03%
Other
0.00%
Passenger
0.50%
Passenger
4.97%
PCC
1.66%
PCC
20.74%
Ro/ro
2.40%
Ro/ro
0.00%
Tankers
0.07%
Tankers
0.00%
Total Uptake Across All Segments
0.34%
Total Uptake Across All Segments
2.95%
Table 8: ALS uptake — existing fleet and orderbook. [Clarksons Research]
33 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2.2.1.3 Waste Heat Recovery Systems
Technology Readiness
WHRS are designed to capture part of the energy that
WHRS is generally considered mature technology. PTG,
would otherwise be lost through engine exhaust and
STG and combined PTG/STG systems are well established,
convert it into productive use onboard the vessel. Instead
commercially available from numerous manufacturers, and
of allowing this heat to dissipate, WHRS convert it into
have already been deployed on hundreds of commercial
additional electrical power, propulsion support or steam for
vessels, including installations on containerships and
onboard heating needs. In this way, they improve overall
cruise ships.
energy efficiency by maximizing the value derived from fuel already consumed.
Despite this maturity, overall market uptake remains
Waste heat recovery can be applied in several ways,
0.34 percent of containerships, 0.36 percent of ro/
depending on how the vessel’s excess heat is captured and
ro vessels and 0.32 percent of passenger vessels in
used. One approach is the power turbine generator (PTG),
service, although further growth is expected through the
where a portion of the engine exhaust is redirected to drive
orderbook, particularly in containerships (2.92 percent),
a turbine and produce electricity. Another option is the
passenger vessels (1.93 percent) and general cargo
steam turbine generator (STG), which uses exhaust heat
vessels (1.15 percent). This suggests that, while WHRS are
to produce steam that powers a turbine for auxiliary and/
technologically proven, their wider adoption is still evolving.
relatively modest. WHRS are currently installed on
or propulsion power. In more advanced configurations, PTG and STG systems can be combined to recover a greater share of the available exhaust energy. Other solutions, such as micro boilers or auxiliary engine economizers, make use of waste heat from the exhaust gas of auxiliary engines to generate steam and reduce the need for additional fuel consumption onboard. Waste heat recovery systems can improve vessel energy efficiency by up to eight percent through the productive use of exhaust heat that would otherwise be wasted. Installation of WHRS typically takes a few weeks to several months and requires drydocking. Installation Requirements and Key Limitations WHRS can be applied in both retrofit and newbuild projects, but their installation typically requires a relatively high level of integration. Depending on the system type, this may involve modifications to the exhaust arrangement, steam piping and associated power generation equipment. These additions can increase system complexity and result in higher maintenance requirements, as additional components must be monitored and serviced throughout the vessel’s lifecycle. The main limitations of WHRS are linked to operational profile and system compatibility. Their benefits are strongest on vessels with main propulsion engines operating continuously at high load, close to maximum continuous rating, where sufficient waste heat is available for recovery. For the same reason, WHRS are generally not compatible with diesel-electric propulsion, variable speed generators, hybrid mechanical-electric systems, battery-electric arrangements, fuel cells, supercapacitors or wind-assisted propulsion systems. By contrast, WHRS can be combined relatively easily with PTO generators, since both are typically connected to large prime movers.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 34
Existing Fleet
WHRS
Orderbook
WHRS
Bulkers
0.09%
Bulkers
0.20%
Containerships
0.34%
Containerships
2.92%
Gas Carriers
0.00%
Gas Carriers
0.00%
General Cargo
0.06%
General Cargo
1.15%
LNG
0.00%
LNG
0.00%
Offshore
0.04%
Offshore
0.68%
Other
0.00%
Other
0.48%
Passenger
0.32%
Passenger
1.93%
PCC
0.00%
PCC
0.00%
Ro/ro
0.36%
Ro/ro
0.00%
Tankers
0.04%
Tankers
0.54%
Total Uptake Across All Segments
0.09%
Total Uptake Across All Segments
0.99%
Table 9: WHRS uptake — existing fleet and orderbook. [Clarksons Research]
35 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2.2.1.4 Power Take-off/Power Take-in PTO/PTI systems are designed to improve how power is distributed and used onboard a vessel. By connecting a shaft generator to the main propulsion system, these systems allow energy to flow in different directions
At the same time, PTO/PTI systems can reduce engine and generator maintenance needs through improved load management. They are also partially compatible with batteries, supercapacitors and fuel cells, making them relevant in more hybridized power system designs.
depending on the vessel’s operating needs. In simple terms,
In terms of limitations, the main constraints relate to space,
they create a more flexible link between propulsion and
integration complexity and vessel suitability rather than a
onboard electrical demand, helping the vessel use available
lack of technical maturity. PTO/PTI systems have already
power more efficiently.
been widely adopted on oceangoing cargo vessels and
PTO/PTI systems can deliver energy savings of up to 10 percent, while also offering a modest reduction in underwater radiated noise of less than 5 dB. For PTO/PTI systems, no standard installation timeframe
uptake has expanded into other vessel trades as frequency converter technology has become more available and cost-effective. Technology Readiness
is generally reported, as they are most often installed on
PTO/PTI is a fully mature technology that has already
newbuilds.
been proven in real operating conditions and is
Installation Requirements and Key Limitations The installation of PTO/PTI systems requires close integration with the vessel’s propulsion shaft, electrical network, control systems and variable-speed generator arrangements, which makes them more suitable for newbuilds than for retrofit applications on existing
commercially available. Although a single global figure for PTO/PTI adoption is not readily available in open literature, vendor data indicates that the technology has already seen broad commercial uptake.
vessels. In addition, these systems are generally not well suited to vessels with limited space availability, since the installation of motor generators, converters and associated electrical equipment can place additional demands on machinery arrangement.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 36
2.3 Weather Routing: From Forecast Avoidance to Vessel-specific Voyage Decision Support Weather routing is evolving beyond simple weather
Vessel specificity is therefore not marginal refinement. It is part of the foundation of a credible routing solution.. 2.3.2 Safety and Operability Must be Embedded
avoidance toward a more capable form of voyage decision
Efficiency alone is not a sufficient basis for route selection.
support. As pressure increases to improve fuel efficiency,
A route cannot be considered optimal if it reduces fuel
reduce emissions, strengthen schedule reliability and
consumption or transit time while exposing the vessel to
manage operational risk, the effectiveness of routing
unacceptable motions, loads or operability concerns. For
depends on more than forecast availability. It depends on
that reason, safety constraints should be embedded in the
whether the routing logic accurately reflects the vessel, the
routing process itself.
voyage and the operating envelope.
One of the most effective ways to do this is through
Making a better voyage decision requires a clear
seakeeping-based modeling. Vessel response methods
understanding of vessel response, operational limits and the
provide a meaningful picture of how the ship is likely to
trade-offs between distance, transit time, fuel consumption
behave in forecast conditions. Depending on the level of
and safety.
fidelity, this can include:
2.3.1 Why Vessel Specificity Matters
• Roll, pitch and heave response
Ships exposed to the same forecast on the same route
• Vertical and lateral accelerations
can experience materially different outcomes. Factors such as hull form, propulsion characteristics, loading condition, draft, speed-power behavior and operating limits all influence how weather conditions translate into fuel
• Slamming risk • Green water on deck
consumption, delays and risk.
• Propeller emergence
That is why routing based on generic assumptions and
• Other motion- and operability-related criteria
heuristic methods is often insufficient. A route that appears attractive in a simplified model may become less attractive
The key point is that environmental severity does not,
once vessel-specific performance is taken into account. At
by itself, define operational risk. Risk emerges from the
a minimum, a decision-grade routing framework should
interaction between sea state, heading, speed, loading
include:
condition and vessel characteristics.
• Added resistance and power demand in weather • Speed loss and fuel consumption effects • Loading- and draft-dependent behavior • Safety operating limits
37 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Surge
Sway 2
0.40
0.12 1 0.10 0
0.08
0.35
0
0.30
-2
0.25 -1
0.06 0.04
-2
0.02
-3
0
-4
0.20 -6
0.15 0.10
-8
0.05
-10
0 0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Non-dimensional wavelength [ /L]
Heave
1.0
1
0.8 0.6
Roll
3.5
-2
0
3.0
-1
2.5
-4
2.0
-6
-2 -3
0.4
-4
0.2 0
1.5
-5
1.0
-6
0.5
-8 -10
-7 0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0
0.5
1.0
1.5
Pitch
2.0
2.5
3.0
Yaw
4.0
-2
3.5
-12
1.4 1.2
-3
3.0 2.5
-4
2.0 1.5
-5
3.5
-10
1.0 -8
0.8 0.6
-6
0.4
1.0 -6
0.5 0
-7 0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.2
-4
0 0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
RAO 6 DoF | U = 12.000 kn | beta = 150.000 deg. | vs wavelength | 1|/A
Phase [rad]
Figure 3: Indicative response amplitude operators for a large tanker, illustrating vessel-dependent motion response.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 38
2.3.3 What Will Distinguish High-value Solutions The next generation of weather routing solutions is likely to be defined by four characteristics.
1
High-quality Environmental Inputs:
2
Vessel-specific Performance Representation:
3
Integrated Safety and Operability Screening:
The solution should use time-varying wind, wave, swell and current information of sufficient quality and resolution to support route evaluation across the full voyage.
The model should reflect how the vessel performs in varying weather conditions, including speed degradation, added power demand, fuel consumption and operating limitations.
Safety criteria, including comfort, should be part of route generation, ideally informed by vessel response rather than environmental thresholds alone.
Optimization Methods Suited to Real Constraints:
4
The choice of optimization method matters. Classical routing approaches remain useful in simpler settings, but more realistic voyage problems require methods that can represent many feasible choices while accounting explicitly for costs, constraints and operational trade-offs. In practice, the most effective solutions are those where the computational approach is aligned with the complexity of the decision-making environment.
39 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2.3.4 Illustrative Case
• The orthodrome, used as baseline
An illustrative real vessel comparison demonstrates why this is important. The case considers an Atlantic passage from Gulf to North Africa and compares three trajectories over the same voyage window:
• The actual AIS track of the vessel using heuristic methods for navigation • A weather-optimized route using a vessel-specific performance model
Voyage West to East Weather Optimized AIS Actual Orthodrome
Figure 4: Illustrative comparison of orthodrome, actual AIS track and weather-optimized route on an Atlantic passage.
Time = 390 hours
Orthodrome
Actual
Optimum
Distance (miles)
4,218
4,449
4,495
10.7
11.2
10.5
10.8
11.4
11.5
Propulsion Fuel (tonnes)
166
185
158
Fuel Savings (%)
Base
-11%
5%
Average Speed through Water (knots) Average Speed over Ground (knots)
Table 10: Illustrative case results summary.
In this specific case, it is evident that the usage of weather routing optimization would result in a significant reduction in fuel consumption, with a commensurate reduction in emissions.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 40
Figure 5: Illustrative snapshot of significant wave height with routes overlaid.
Figure 6: Illustrative snapshot of current magnitude with routes overlaid.
41 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Figure 7: Illustrative snapshot of wind magnitude with routes overlaid.
The broader message is straightforward: the value of weather routing lies not in producing a route that merely looks different, but in demonstrating why an alternative route is preferable in terms of fuel efficiency, exposure, operability and decision transparency. 2.3.5 Industry Outlook The direction of travel is clear. The most effective and valuable weather routing solutions are likely to move from generic weather avoidance to integrated voyage decision support that combines:
• Forecast environmental conditions • Vessel-specific performance modeling • Embedded safety and operability assessment • Optimization methods suited to realistic operational constraints This approach provides the basis for balancing efficiency, emissions, schedule reliability, transparency and prudent seamanship.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 42
2.4 Predictive Maintenance and Fleet Reliability Performance
2.4.1 Predictive Maintenance
Unplanned machinery failure is one of the few remaining
unplanned downtime, improving vessel availability and
large and genuinely addressable items in vessel operating
enabling better maintenance planning. Earlier identification
cost. Off hire is charged in lost earnings before any repair
of emerging equipment issues allows operators to
invoice is raised, and a failure that forces a missed laycan or
prepare personnel, tools and spare parts before failures
an unscheduled deviation carries commercial consequences
occur, reducing commercial disruption, optimizing
well beyond the cost of the repair itself.
equipment maintenance planning and improving reliability
Predictive maintenance creates asset value by reducing
performance. Predictive maintenance is the means of converting part of that unplanned cost into planned cost, and of extending
Artificial intelligence (AI) and machine learning (ML)
component life where the evidence supports it rather
enable early detection of abnormal machinery behavior by
than replacing it on a calendar. The material that follows
analyzing onboard sensor time-series data. By combining
sets out how the underlying analytics work. The decision
operational context, domain expertise, maintenance
facing the executive reader is narrower: whether the fleet
history and advanced analytics, these technologies identify
is instrumented to generate the data, and whether the
anomalies and emerging patterns that may indicate
organization is prepared to act on what it produces.
elevated risk or impending failures at the system, subsystem or component level. Machine learning models continuously learn normal operating behavior from historical data and detect deviations across varying operating conditions, providing actionable insights for predictive maintenance and improved operational reliability.
Collected Data
Vessel-specific Data
Detection Process
Sensor Data
Anomaly Detection
Tag Mapping and Channel List
Validation
Failure Cases
Action
Figure 8: Anomaly detection process.
43 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
• Deployment in Cloud Architecture • Implementation in Python • Optimization Algorithms
The anomaly detection engine establishes a signature for
Recommendations for action can be developed after
what is considered a “normal” pattern. This is determined
anomalies are detected, based on the affected component,
or learned from the historical time series data, by analyzing
anomaly severity and other relevant criteria. Preventive
the correlations and relations between multiple variables
actions such as inspection, calibration, sensor re-alignment
or single parameters and their states across a range of
and proactive maintenance can help avoid failures and
operating conditions.
reduce unplanned downtime. The algorithms are designed
The methodology can also identify emerging patterns that may not have specific historical precedence but exhibit a strong likelihood of developing into real issues.
to be adaptive and capable of learning from new data to ensure continuous coverage of anomalies to avoid unplanned downtime.
The identification of potential failure events for selected
There are a few critical decisions
systems, subsystems or components is done using
that need to be made when
time‑series data and relevant contextual information (e.g.,
designing an anomaly
operating profiles, maintenance history).
detection module.
Figure 8 illustrates the main steps in anomaly detection and ultimately for achieving predictive insights. This enables the fleet owners and operators to detect early warnings for potential impending failures. The detection of an abnormal condition triggers further analysis that could determine potential root causes responsible for the observed anomaly, such as equipment damage or a degraded sensor or other data quality-related issues. Anomalies could also arise due to several factors such as changes in operating conditions, modes, sensor failures or actual damage to equipment.
Post-anomaly Self-awareness Process Anomaly RCA Recommendation
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 44
2.4.1.1 Determining the Appropriate Method to Use One of the most important decisions is choosing a method or technique for anomaly detection. Most methods described in the literature fall into two broad categories: supervised and unsupervised methods.
The following presents a summary of the different types of methods used for anomaly detection.
a.
Model-based Methods: In this method if an unknown data
Unsupervised methods identify patterns in data by
point exhibits significant deviation from
finding commonalities among sub-groups of the
an assumed model of the underlying
data, in the absence of true labels. On the other hand,
phenomenon, then it can be flagged as
supervised methods use labeled historical data
abnormal.
where past anomalies of interest have been identified and categorized by root cause under different operating conditions.
b.
Density-based Methods: This method identifies natural clusters where the concentration of known operating/normal states is determined and new data points that exhibit nonmembership to the known data clusters and are sparsely placed are labeled as potential anomalies.
c.
Distance-based Methods: This method measures the distance between data points from known data distributions representing the underlying phenomenon which are labelled as potential outliers.
d.
Information Theory-based Methods: This method uses information theory concepts such as minimum description length, relying on the assumption that an outlier is seen as an unexpected increase in the amount of data entropy, and thus can be used to flag anomalies.
45 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2.4.1.2 Time Series Nature of the Data To construct these models, a model of being ‘normal’ must be constructed, along with a measure of the distance from normal. Therefore, most of the methods calculate a real value outlier score to obtain a quantified estimation of the degree to which a data point or observation is normal. • Acceptable Type I and II errors: This has a direct bearing on the assumed risk due to either missed anomaly alerts (false negatives) or effort required to disposition all alerts generated (false alarms). The method parameters and hyper-parameters have to be optimized based on the acceptable levels of these risks. • Parameters to use: Deciding which ones to include for
• Edge versus central deployment: Deploying anomaly detection algorithms at a central location provides an advantage of learning across the fleet. However, deploying at edge can provide initial alerts (threshold-based) to onboard personnel. • Anomaly consumption process: A deliberate process to consume the outputs of the anomaly detection algorithms needs to be developed. The dispositioning of alerts into real issues versus sensor issues, the feedback cycle from onboard personnel and the list of operating procedures to respond to specific alerts are important elements of an effective anomaly detection process.
the anomaly detection processing for a given set of equipment poses a data dimensionality challenge. This can be addressed using knowledge of equipment design and operations.
2.4.1.3 Anomaly Disposition and Feedback: A critical part of the anomaly detection process is the continuous flow of information back into the system for optimization and to reduce deterioration in the performance of the anomaly detection algorithms. For this, the following two processes need to be developed as part of the machinery digital implementation:
a.
Anomaly Disposition: After anomalies are detected, they
b.
Feedback Loop from the Machinery Asset to the Anomaly Detection Algorithms:
should be analyzed to support mitigation
As part of the machinery digital twin
planning, including the preparation of
augmentation process, it is recommended to
tools, spare parts, and personnel, while
develop a feedback loop so that the actual
also preventing excessive false alarms
findings (validation or disapproval) are
from reaching the onboard crew.
communicated back to the machine learning algorithms to maintain the model parameters.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 46
Building on the anomaly detection effort and utilizing the
One of the main advantages of using RUL models is
existing condition-based data, models for estimating the
increased flexibility in planning for future maintenance
remaining useful life (RUL) for critical components and
and avoidance of unplanned failures. Other advantages
their failure modes can be developed for covered sub-
include the ability to estimate how the machinery asset will
systems/components.
perform or when it may fail if the current operational profile
Component Life
is assumed to continue.
Current Life
Design Life
Severe Use
Life Extension with RUL Mild Use t1
t0
t2
Time Figure 9: Illustration of remaining useful life.
47 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
2.4.1.4 Challenges to be Addressed As the machine’s digital twin is developed, there will be implementation challenges that need to be addressed. These arise largely from operational variability across the fleet and from the need to ensure that models scale and adapt as new data becomes available. Therefore, the following need to be covered as part of the implementation strategy:
a.
Feature Extraction:
b.
Handling Uncertainty:
c.
Model Development:
Effective model
Uncertainty may arise
For building the model,
development requires
from operations (e.g.
the following phased
features that capture
variation in operating
approach can be used:
degradation within a
history, repair practices,
component or system.
and crew operations), data
This includes both directly
(e.g. sensor location, data
measured features and
availability) and modeling
designing features from
(e.g. life distribution and
measured data values.
degradation behavior assumptions).
Phase I: Assemble timeseries data together with periodic observation and measurement data for model development. Phase II: A model building and validation step, where machine learning algorithms to estimate the remaining life of equipment will be built. This phase will also address the challenges in model selection and feature extraction. Phase III: In this phase, appropriate user interfaces for building the human-machine interaction with the RUL module will be developed. This phase will also include training the end users in usage and interpretation of the results for members of the onshore management and vessel crew.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 48
2.4.1.5 Benefits
• Develop a deeper contextual understanding of detected anomalies — including their severity, recurrence and
The capability enables operators to:
patterns — to support more informed downstream actions such as inspections, calibration, sensor validation
• Receive early warnings for potential impending
and proactive maintenance, as well as other preventive
machinery failures via anomaly alerts.
measures aimed at minimizing unplanned downtime and improving vessel availability for charter.
• Benefit from adaptive algorithms that continuously learn from new data and feedback, improving detection performance over time and maintaining coverage for evolving failure modes.
The commercial test of a predictive maintenance program is not the sophistication of its models. It is whether three conditions hold together:
1
2
3
The vessel is instrumented
The shore organization is
Maintenance planning
to generate usable data.
resourced to disposition
is permitted to change
alerts rather than
in response to what the
accumulate them.
analytics show.
Where all three hold, the return appears as improved
To analyze textual data from warranty logs and other
availability for chartering, deferred capital replacement and
planned or unplanned maintenance sources, text
a defensible evidence base when a charterer or a lender
processing methods can be applied. By nature, such data is
asks how the fleet is managed. Where they do not, the
transactional and unstructured.
investment produces alerts that nobody acts on. That is a governance decision before it is a technology one.
Transactional data processing is performed for
2.4.2 Fleet Reliability Performance
the unstructured data into a structured categorization
Fleet reliability analytics help prioritize investments, focus resources on the highest impact reliability issues, identify systemic risks and support vessel availability and commercial performance. Advanced reliability models can be developed using vessel-specific data to identify machinery systems where reliability-related maintenance actions should be prioritized. This can support mitigation decisions such as enhanced monitoring, targeted training and strategic provisioning of spares.
49 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
maintenance and events data, where the goal is to convert utilizing natural language processing (NLP). This will enable the data to be usable for further digital twin modeling by extracting failure cases and classifying events.
At the completion of the above processing, historical
• Events associated with non-critical systems, such as
maintenance data from all sources (computerized maintenance management system (CMMS), warranty logs,
accommodations, appliances, etc.
etc.) is categorized into one of the following categories:
For machinery reliability analysis, events related to strictly
• Repair event where a machinery item requires
Figure 10 provides a high-level flow of information,
maintenance to restore functionality • Unplanned repairs identified during planned maintenance
planned activities or non-covered systems are excluded. depicting the insights and critical questions that such analysis would address:
Bad Actors Quantify Operational RAM Risks: • Benchmark current reliability of major sub-systems • Identify emergent reliability risks • Provide reliability trends over time • Quantify the relative risk in reliability amongst multiple maintenance facilities
Quantify to Component Level Risks • Statistical and risk models to benchmark baseline reliability risks • Fleet wide risk assessment • System to component level models
People or Process or Product? • Identify main factors causing RAM risk • Data improvement
Figure 10: Overview of reliability-based performance.
Some of the major benefits of fleet reliability performance analysis are summarized below:
• Identifies potential emergent reliability risks, with main root causes and failure mode
• Serves as a critical input to build a “system-of-systems”
• Determines opportunities for continuous data
reliability and/or availability model to understand the
quality improvement in client’s data system
impact of the interaction of these system reliabilities with a specific configuration of vessels in a fleet • Identifies top “bad actors” causing reliability issues (downtime); systemic and specific within the fleet
• Enables vessel-to-vessel benchmarking within comparable vessel classes • Supports vessel-level reliability risk analysis
• Uses reliability models to establish an independent understanding of critical machinery
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 50
2.5 Digitalization as Performance Visibility Infrastructure: Energy and Emissions Monitoring and Management In ship management, digitalization is no longer just about automation — it is increasingly understood as a performance visibility infrastructure: a system of interconnected technologies that collect, integrate, analyze and visualize operational data to enable continuous situational awareness and decision-making. Performance visibility infrastructure transforms vessels from data-scarce, episodic reporting entities into real-time, continuously monitored assets. This shift fundamentally changes how technical, operational, environmental and commercial performance is managed. Digitalization begins with capturing high-frequency data through sensors and converting it into meaningful performance metrics using analytics layers. Efforts are ongoing to address challenges in data quality and standardization, integration with multiple shipboard systems and original equipment manufacturers (OEMs), cybersecurity
51 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
and change management. Currently, dashboards at the vessel and fleet level with real-time tracking and prediction functionalities assist the ship operator and fleet manager not only to visualize and compare against commercial performance objectives, but more importantly to optimize, detect inefficiencies and reduce unplanned downtime. Such infrastructure aligns with energy and emissions benchmarking at vessel, fleet and peer levels. It enhances early anomaly detection, contributes to incident investigation and continuous improvement and can provide safer voyage planning and optimum weather routing. Digitalization extends to the digital applications which are deployed at a vessel-specific level, such as optimum weather routing, optimum bunkering, parametric rolling and container lashing management, offering valuable options to ship operators. Ship managers apply a range of energy and emissions-related metrics to monitor the performance of vessels, compare it against peers, assess it against their own reference values, detect inefficiencies and consider improvements.
Figure 11: Examples of peer benchmarking results for Kamsarmax bulk carriers.
This data-driven governance has assisted ship managers
The increase in vessel-specific digital applications highlights
in evolving into data-centric organizations with KPIs
the growing role of digitalization across the maritime
integrated into daily workflows. In turn, this supports
sector. As more aspects of shipping become data-driven,
transparency in performance-based contracts,
the synergy between operational optimization and supply
regulatory and in sustainability reporting.
chain efficiency will only strengthen. These developments
Digital performance visibility will not decarbonize shipping. But it is the infrastructure that allows operators to manage the transition effectively,
signal a future where every drop of marine fuel is utilized with even greater precision, supporting a more productive, reliable and ultimately greener global supply chain.
protect asset value and make the compliance and commercial decisions that the next decade will demand.
TECHNOLOGY AND DEVELOPMENT PATHWAYS | 52
PA R T 3:
RETROFIT AND EXECUTION REALITY
3.1 Turning Decarbonization Ambition into Action The maritime industry has spent the past several years evaluating technologies, fuels and operational strategies that can support the transition to lower-emission shipping. Yet identifying a solution is only part of the challenge. The next phase is execution. Whether the objective is to improve efficiency, comply with emerging regulations, extend asset life or prepare for future fuels, success will ultimately depend on the industry’s ability to transform plans into practical projects. In many cases, the biggest obstacles are no longer technological. They are questions of shipyard capacity, workforce availability, engineering complexity, project timing and the ability to execute retrofits at scale across a global fleet. This section explores the realities shaping retrofit and fleet modernization decisions today. It examines the growing pressure on shipyard capacity, the evolution of ship design, the increasing role of digitalization and modular architecture and the practical considerations that influence retrofit planning and execution. While new technologies and decarbonization pathways often attract the most attention, their success will ultimately be determined by how effectively they can be integrated into existing vessels, delivered within increasingly constrained shipyard schedules and translated into measurable operational and commercial outcomes.
Success will ultimately depend on the industry’s ability to transform plans into practical projects.
RETROFIT AND EXECUTION REALITY | 54
3.2 Shipyard Readiness and Capacity
2%
For most owners, the binding constraint on the in-service
2%
2%
2%
fleet between now and 2030 will not be technology or capital. It will be access to a yard, at a price and on a date that works. Retrofit capacity is finite, it is being consumed
6%
by newbuilding congestion, and the projects that require decarbonization occupy a dock for roughly three times
6%
as long as a conventional energy efficiency retrofit. The practical consequence is that yard slot booking has become a capital planning decision with a two-year lead
41%
7%
time, not a procurement task to be handled closer to the docking window.
8%
Although green retrofit solutions are increasingly available,
8%
implementation is constrained by limited dock space, shortages of skilled workers and the growing complexity of
14%
integrating advanced systems, where complex conversions require significantly longer dock time than standard energy-efficiency upgrades, reducing yard throughput and intensifying capacity pressure. Accordingly, the success of maritime decarbonization will largely depend on whether shipyards have the capacity, workforce and technical readiness to execute retrofits at scale. Against this backdrop, China continues to dominate the global repair market, while major yards worldwide are investing in digital shipyard capabilities, robotics, digital twins, artificial intelligence (AI)-driven planning and additive manufacturing to improve efficiency and reduce labor bottlenecks.
55 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
China Turkey
Other Europe Indonesia
Other Asia Rest of the World
Greece
Netherlands
United Arab Emirates
South Korea
Japan
Figure 12: Number of ships undergoing repair work by yard country or region, 2025 to 2026 year-to-date. [Clarksons Research]
700 600 500
China Other
400 300 200 100 0
Figure 13: Number of ships undergoing repair work by top yards, 2025 to 2026 year-to-date. [Clarksons Research]
At the same time, retrofit demand is accelerating. An aging
constraint before 2030, with deficits emerging as early
global fleet, rising compliance pressure from International
as 2028 under aggressive retrofit demand. As congestion
Maritime Organization (IMO) and regional rules, high
in newbuilding spills into repair capacity, both lead times
newbuild prices and large orderbooks are pushing owners
and costs are expected to rise. This makes 2027 to 2028 a
toward retrofit as the faster, more economical and more
critical window for owners to secure yard slots and avoid
practical decarbonization pathway. Scenario analysis
execution delays during peak decarbonization demand.
suggests global shipyard capacity could become a binding
RETROFIT AND EXECUTION REALITY | 56
3.2.1 Workforce and Technical Readiness The successful execution of the global fleet’s transition to low- and zero-emission operations depends on bridging the competence gap and integrating advanced Industry 4.0 technologies into shipyard and vessel workflows. One of the obstacles to decarbonization of the global fleet is the scarcity of skilled welders, engineers and project managers, especially for complex conversion projects, where lack of expertise is further exacerbated by the aging workforce engaged in the maritime industry in countries that have traditionally dominated the sector. In response to these labor constraints, leading yards are transitioning toward digital shipyards. These facilities integrate advanced software platforms, AI-driven production planning and data-driven workflows across the vessel lifecycle to improve labor efficiency. At the same time, to combat workforce shortages and reduce production costs, shipyards are increasingly implementing robotic technology for labor-intensive tasks such as cutting, welding and painting. For instance, Samsung Heavy Industries’ Geoje Shipyard has developed robot systems for pipe cleaning and automatic welding, achieving a 68% production automation rate. Automation has been shown to cut welding times in half and can reduce the number of required skilled workers by twothirds. Similarly, Japan has introduced public-private investment measures focused on deploying AI and robotic technologies to modernize domestic ship maintenance and
and green technology is carried out in a way that is fair to the maritime workforce. It prioritizes retraining personnel, implementing safe automation and safeguarding livelihoods. Ten out of fifteen major shipbuilders studied across China, Korea, Japan and the European Union explicitly emphasized the development of critical skills, with a focus on energy efficiency and digital tool operation, to address the recognized skills gap in the current maritime workforce. 3.2.2 Retrofit Demand vs. Capacity Pressures The global ship repair and conversion market is projected
secure regional maritime supply chains.
to reach $244.5 billion by 2026. The average age of the
Beyond robotics, the adoption of digital twin technology
of tonnage now over 15 years old. As vessels age, they
for planning retrofits and conversions increased by 20
require more extensive maintenance and lifecycle upgrades
percent in 2024. The digital shipyard market is projected
to remain competitive. At the same time, stricter IMO and
to exhibit steady growth between 2026 and 2034, with a
regional regulations, such as FuelEU Maritime and Carbon
compound annual growth rate (CAGR) of 23.56 percent.
Intensity Indicator (CII), act as catalysts for retrofit demand.
By creating virtual replicas of ship machinery, yards can
High newbuilding prices hit a 17-year high in the current
perform high-precision simulations that improve quality
orderbook, which is forcing shipowners to view retrofitting
assurance and reduce vessel downtime. AI and big data
as a more economically viable strategy for compliance.
analytics further support this by providing predictive production scheduling and supply-chain risk analysis, enabling yards to anticipate bottlenecks before they lead to
world fleet has risen to 13 years, with roughly 34 percent
This rising demand places further pressure on available yard capacity, with a critical factor being the “time-on-dock”
cost overruns.
required for different project types. While standard energy-
In addition, advanced yards are leveraging additive
of 22 days, complex alternative fuel conversions require
manufacturing to manufacture specialized components and
a median of 67 days. This 45-day difference significantly
spare parts on site. This technical capability is strategically
reduces the number of vessels a yard can process annually,
important for de-risking procurement pipelines and
effectively shrinking global throughput as the industry
reducing lead times associated with obsolete or long-
pivots toward more complex decarbonization projects.
lead equipment, which might otherwise delay project
saving technology (EST) retrofits have a median duration
completion.
As a result, market monitoring and scenario analysis
Major shipbuilding companies are increasingly
constraint before 2030. Under an aggressive retrofit
incorporating “Just Transition” strategies into their business
scenario, in which all eligible oil-fueled vessels are assumed
models to ensure the workforce is equitably prepared for
to undergo retrofit due to escalating oil costs, a global
industry transformation. By definition, a “Just Transition”
capacity deficit is projected to emerge as early as 2028,
ensures that the maritime sector’s shift to decarbonization
rising to a shortfall of over one billion gross tonnage (gt)
57 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
indicate that global yard capacity could become a binding
$0.85M $30.92M
$4.62M
$45.22M Total
China South Korea Other Japan
$8.83M
Figure 14: Global shipping newbuilding orderbook in compensated gross tonnage. [Clarksons Research]
days by 2030. While there is a latent capacity of
uncertainty for shipowners, with some stakeholders taking
approximately 0.6 billion gt days in yards currently focused
a cautious approach to investment and implementation
on other sectors, the rapid alignment of decarbonization
decisions. However, with capacity tightening, the years
deadlines will likely stress this infrastructure to its absolute
2027 to 2028 are emerging as a critical window for
limit. The practical result of this mismatch is not only
shipowners to secure yard slots on favorable terms. Acting
higher cost, but longer slot lead times.
early may offer a significant competitive advantage, while
3.2.3 Lead-time Implications As of early 2026, 57 percent of new vessel contracts are not expected to be delivered until after 2028. Driven by a surge in orders heavily concentrated in Chinese shipyards, the congestion in newbuilding capacity is spilling over into repair and retrofit segments, severely tightening slot availability. Additionally, the delay in the formal adoption of the IMO
those who delay risk facing longer lead times, higher costs and limited berth availability during peak demand cycles. An owner who has not identified which vessels need yard time before 2030 and has not begun securing slots and long-lead equipment is not preserving optionality — the decision is being made by the market on that owner’s behalf, at a later date and at a higher price. The 2027 to 2028 window is where the difference between a planned retrofit program and a reactive one is set.
Net-Zero Framework (NZF) has contributed to continued
RETROFIT AND EXECUTION REALITY | 58
3.3 Key Trends in Shipyard Design Between 2020 and 2025, Energy Efficiency Design Index (EEDI) Phase III, CII and the introduction of the NZF became major drivers in the evolution of shipyard design philosophy. Over this period, design approaches shifted from conventional heavy fuel oil (HFO) vessels fitted with scrubbers toward dual-fuel newbuilds, resulting in significant gains in overall vessel efficiency.
59 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Other key developments include main engine tuning for minimal specific fuel oil consumption (SFOC) at slower speeds, advanced hull forms, wind propulsion technologies (WPT) and energy-saving devices.
Laden, Tonnnes Per Day
70 60 50
20% Drop in Consumption
40
10% Drop in Consumption
30 20 10 0
2000
2010
Built 14 knots
Built 12 knots
2015
2025
Built 12 knots
Built 12 knots
Figure 15: A Capesize operating Tubarao-Qingdao averaged across Feb. 2026 earnings data. [Clarksons Research]
60% 50% 40% 30% 20% 10% 0%
EST-Fitted Alt. Fuel Capable
Scrubber Fitted Eco-Modern Fleet
Figure 16: Environmental technology uptake by percent of fleet gross tonnage. Note that “Eco-Modern” refers to vessels fitted with modern electronic main engine. [Clarksons Research]
100
Vessel Speed
95 90 85 80 75 70
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
Index (2008=100) Crude Tanker Bulker
Products Tanker Containership
Figure 17: Average tanker, bulker and containership vessel speeds. [Clarksons Research]
RETROFIT AND EXECUTION REALITY | 60
3.3.1 Hull Evolution Straight stems, as opposed to traditional bulbous bows, are re-emerging due to their reduced resistance in both calm seas and waves at low operating speeds. In recent years, particularly in some cases of the container sector, the traditional bulbous bow has been replaced by a new innovative design called the “invisible bulbous bow.”
Figure 18: Bulbous bow design change.
160
50% 45%
140
40%
Million gt
120
35%
100
30%
80
25% 20%
60
15%
40
10%
20
5%
0
0%
Bulker
Tanker Other
Containership
Gas
% Fleet Fitted by Year-end
Figure 19: Installation of energy-saving technologies by sector (gt). Basis year of retrofit or year of build for vessels fitted from newbuild. [Clarksons Research]
61 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
3.3.2 Design-stage Integration of Energy Saving Devices (ESDs) ESDs like enhanced hydrodynamics, ultra-low friction coating, air lubrication (in select cases), energy saving devices like propeller boss cap fin (PBCF), Becker Mewis duct and WPT are now being incorporated at the design stage. These solutions are particularly prominent in bulk carriers and are becoming increasingly common in containerships, with tankers still lagging behind.
Number of Vessels
70 60 50 40 30 20 10 0
2020
2021
2022
Orderbook
2023
2024
Newbuild
2025 Retrofit
2026
2027
2028
2029
Pending Retrofit
Figure 20: Installation of wind-based energy-saving technologies. Basis year of retrofit or year of build for vessels fitted from newbuild. [Clarksons Research]
RETROFIT AND EXECUTION REALITY | 62
3.3.3 Modular Design Architecture 3.3.3.1 Diesel Electric Propulsion Wärtsilä 9L46C 9450 kW Pod 12,000 kW
Wärtsilä 12V46 12,800 kW
Lips Feathering CPP 25,000 kW
Wärtsilä 12V46 12,800 kW
Pod 12,000 kW Wärtsilä 9L46C 9450 kW
Figure 21: Sample diesel-electric configuration.
Diesel-electric propulsion has been the standard
Modularity allows operators to run gensets at an optimal
architecture in modern cruise ships for more than two
load range, typically around 75 to 85 percent load
decades. In this arrangement, the traditional single large
to improve SFOC performance while also providing
two-stroke HFO main engine is replaced by multiple
redundancy, maneuvering flexibility and greater
medium-speed diesel generator sets (e.g. often six or
independence during berthing operations.
more, with a combined power range of about 70 to 100 megawatts) that supply electric propulsion motors,
At first glance, modularity seems to bring additional
typically Azipods.
complexity, including the potential for higher upfront costs
The principal reason for such a choice is the highly variable
offers important advantages, which may be translated into
power demand (hotel load, propulsion and thrusters)
other segments.
throughout their operating cycles. While a single large two-stroke engine is optimized for efficient operation at a specific design point, a multiple-genset arrangement enables power generation capacity to be adjusted dynamically by starting or stopping individual units as needed to fit multiple predetermined hoteling load patterns that frequently recur in the operational profile of passenger vessels. This flexibility allows the power plant to operate closer to optimal efficiency across a broader range of load conditions.
63 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
and increased maintenance requirements. However, it also
Wärtsilä 9L46C 9450 kW
Wärtsilä 9L46C 9450 kW
Wärtsilä 9L46C 9450 kW
Capex: From a capital expenditure perspective, a ship equipped
Opex and Maintenance:
with multiple medium-speed diesel generator sets
Modular plants allow
will generally require a higher initial investment than
maintenance to be carried
a conventional propulsion plant centered around a
out sequentially, unit by unit,
single low-speed, two-stroke HFO engine. The reason is
without requiring complete
straightforward: a diesel-electric architecture requires
propulsion downtime. This can
not only several engines and generators, but also
improve operational availability, simplify
substantial electrical infrastructure, including switchboards,
maintenance planning, and support the use of
transformers, frequency converters, propulsion motors
more standardized spare parts inventory.
and advanced power management systems. In contrast, a traditional two-stroke installation benefits from a relatively simple direct-drive arrangement with fewer major components. Nevertheless, cruise ships are a special case. Unlike cargo vessels, cruise ships experience highly variable propulsion, and hotel loads throughout a voyage. Under
Future Adaptability: A modular architecture may reduce the need for major future retrofits by making the power plant more adaptable to changing operational and regulatory requirements.
these conditions, the additional capex associated with multiple gensets can be justified by the ability to match generating capacity to demand, improve redundancy and optimize machinery utilization.
RETROFIT AND EXECUTION REALITY | 64
Distributed Engine Room 1
Main Switchboard
Energy Management System AC Load AC Load
Multiple Cradle-mounted Squirrel-cage Induction Motors in Tandem on Propeller Shaft
Distributed Engine Room 2
Figure 22: Future ship design using modularity architecture for fuel and energy flexibility. Two distributed engine rooms (LNG-HFO and methanol-HFO), multi-screw for maneuverability, electric propulsion to use multiple energy sources via EMS. Modular or containerized carbon capture, wind and battery.
Fuel Flexibility and Dynamic Blending: One of the strongest arguments for modularity is its potential to de-risk the fuel transition in the long term. This argument holds most strongly for segments with variable power-demand profiles and predictable trading patterns — cruise vessels, liquefied natural gas (LNG) and LNG bunkering vessels, ferries and offshore assets — which is where the orderbook shows the architecture concentrating. For spot-traded tankers and bulk carriers operating at steady load on ocean passages, a two-stroke direct-drive plant remains the efficient baseline, and fuel flexibility is more economically bought through fuelready provision than through distributed generation. As fuel pathways remain uncertain, a vessel may need to operate with different combinations of conventional and low- or zero-carbon fuels
65 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
over its life. A single large dual-fuel engine may offer less flexibility in handling multiple distinct fuel options such as B100, HFO/marine diesel oil (MDO), LNG, methanol or ethanol. By contrast, a modular plant could support more flexible fuel allocation across units, improving the vessel’s ability to manage carbon levies, compliance costs and well-to-wake greenhouse gas targets.
Accommodation, Deck Equipment, Cranes, etc.
HFO (B100 Blend) + LNG (Bio-e Blends) GENSETS Two Large Engines and One Small Engine
Frequency Converter
Carbon Capture up to 30–50%
Battery Container
Wind Technology
AC Load AC Load
HFO (B100 Blend) + Methanol (Bio-e Blends) GENSETS Two Large Engines and One Small Engine Engine Equipment, Pumps, Heaters, Coolers, etc.
Weight: A modular electric power system may also offer weight advantages in some arrangements, particularly where it
machinery spaces, and can reduce the size of the traditional main engine room. In some concepts, this may free up valuable internal volume and improve layout flexibility.
replaces very large two-stroke engines and their associated
The latest orderbook demonstrates that many large
foundations. Depending on the design basis, this could
vessel orders now favor multiple generator engine electric
materially reduce machinery weight, although the actual
propulsion and hybrid architectures rather than a single
outcome will remain vessel-specific and should be verified
mechanically driven low-speed two-stroke engine. This
through initial design.
trend is strongest in cruise ships, LNG carriers, LNG
Volume and Arrangement Flexibility: Because four-stroke gensets are smaller and do not require a direct mechanical connection between the prime mover
bunkering vessels, offshore assets, general cargo vessels and ferries. These vessels feature recurring patterns in their power demand profile that can be best matched with multiple genset arrangements.
and propeller shaft, machinery can be distributed more flexibly within the vessel. This may enable alternative engine room arrangements, including partially distributed
RETROFIT AND EXECUTION REALITY | 66
3.3.3.2 Small Scale Modularity Already in Effect
a.
Battery or Fuel Cell Modules: Typically, in the one to four megawatt hours range,
b.
Containerized Fuel Tanks and Carbon Capture Modules:
the containerized battery systems support peak
Deck-mounted containerized tanks (e.g., bio-LNG
shaving and allow engines to operate at optimal
or B100) allow flexible fuel use without long-term
efficiency. Containerized fuel cell units operating
permanent structural commitment. Additionally,
on alternative fuels are emerging as portable green
modular, container-based carbon capture systems
power banks.
are being developed to separate onboard carbon capture from shoreside processing, enabling a more flexible commercial approach.
© BOSCH
© The Paper
© EST-Floattech
Figure 23: Example containerized battery/fuel cell arrangement.
© Seabound
Figure 24: Containerized fuel tanks and OCCS.
67 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
c.
Wind-assisted Propulsion Systems: Modular or containerized rotor or suction sails can be installed at suitable locations onboard to support fuel savings and emissions reduction.
© Econowind
© Berge Bulk
Figure 25: Examples of wind-assisted propulsion technologies.
RETROFIT AND EXECUTION REALITY | 68
3.4 Retrofitting Pathways and Decision Considerations Retrofit planning is a strategic decision process that must balance regulatory compliance, fuel economics, operational realities, safety, class approval and long-term asset value. In many cases, the most effective retrofit pathway is not the most ambitious one, but the one best aligned with the vessel’s age, trade pattern, remaining service life and commercial role. 3.4.1 Typical Retrofit Planning Workflow
1
2
3
Peer Benchmarking
Performance Health Check
Define the Retrofit Objective
Benchmark the performance
A detailed investigation
A vessel owner may be
metrics of owned vessels
should be conducted by
seeking to improve CII
against peer vessel trends
analyzing the vessels’
performance, meet Energy
to evaluate the status
operational data, including
Efficiency Existing Ship Index (EEXI) requirements,
of the vessel’s current
but not limited to noon
performance. This helps to
reports, power versus ship
reduce fuel consumption,
identify potential areas for
speed and draft, and fuel
secure charter attractiveness,
improvement and supports
oil consumption of main
extend the trading life of an
the selection of suitable
engine, auxiliary engines,
aging asset or prepare for
retrofit measures.
boilers and other consumers.
a future fuel transition. The
Comparison of the relevant
selected objective has
operational data against
a significant impact on
the reference baseline
the scope and design of
which is defined by the
the retrofit.
ship’s technical documents, machinery specifications, shop tests and trials is to be carried out. The findings will help identify where performance improvements may be needed. Meanwhile, a robust technical and operational baseline should be established beyond the ship’s technical documents. This should include the vessel’s age, type, propulsion plant, power demand profile, route pattern, port interface and drydocking schedule.
69 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
4
5
Option Screening, Feasibility
Techno-economic Evaluation
and Engineering Study
Screening should consider
6 Project Execution and Performance Verification
At this stage, owners
not only technical feasibility,
Project execution must
typically compare a range of
but also the broader
be followed by detailed
retrofit pathways, including
economic, operational,
design, class and statutory
energy-efficiency retrofits,
and strategic implications
approval, procurement,
machinery optimization,
of each retrofit pathway,
installation, commissioning,
digital and operational
including CAPEX, OPEX,
crew training and post-
upgrades, emissions-control
fuel availability, safety
retrofit performance
systems, battery-hybrid
complexity, future
verification. Retrofit value
integration, shore power
optionality, engineering cost,
is not created at contract
capability, and, in selected
yard time, off-hire exposure,
award. It is realized when
cases, fuel conversion or
fuel savings, maintenance
the vessel returns to service
fuel-ready modifications.
burden, financing conditions,
and the promised savings,
General arrangement impacts, stability implications, structural modifications, power balance, ventilation needs, hazardous area implications, fire safety, bunkering concepts and equipment placement need to be assessed. Early class
carbon-cost exposure,
compliance benefits or
payback period, and residual
operational improvements
value. Scenario analysis is
are achieved in practice. The
essential to assess how fuel-
performance data collected
price uncertainty, regulatory
during actual operations,
developments and operating-
together with experience
profile changes could
gained during the retrofit
influence the business case
process, contributes to the
for each option.
industry learning curve and supports future optimization.
engagement is important at this stage.
RETROFIT AND EXECUTION REALITY | 70
3.4.2 Typical Timelines and Yard Requirements Retrofit timelines depend heavily on the scope of work. Minor efficiency retrofits such as propeller upgrades, hull coatings or certain energy-saving devices may progress from feasibility assessment to installation within several months and can often be completed during a scheduled docking with limited additional off-hire, potentially in about two weeks. Moderate retrofits, including shore power integration, shaft generator upgrades or batteryhybrid additions, generally require a longer engineering and procurement cycle and may demand several weeks in the yard. Major fuel conversion projects typically involve the longest lead times, sometimes extending well beyond a year when concept development, approval, equipment procurement and installation are considered together.
71 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Yard capability is a critical factor. Not all shipyards can effectively execute complex retrofits. Owners should assess fabrication capacity, heavy-lift capability, piping and electrical integration expertise, OEM coordination capability, commissioning support and, where relevant, experience with low-flashpoint fuels or battery installations. The dry-docking schedule should be planned early, considering yard slot availability, statutory survey windows and charter party commitments. 3.4.3 Safety and Class Considerations If a retrofit is considered a major conversion, the vessel may be treated in certain aspects as a new vessel, which means all relevant existing rules and regulations may apply. That is
why early class engagement is important so that all parties
Safety is a key issue during the execution of the retrofit.
understand the applicable rules and approval pathways.
Collaborative efforts from all crew, superintendents and
Hazard identification studies and, where necessary,
yard and class surveyors are needed to support safe
detailed risk assessments should be incorporated into the
execution throughout the retrofit process.
project schedule.
Yard capability is a critical factor. Not all shipyards can effectively execute complex retrofits.
RETROFIT AND EXECUTION REALITY | 72
PA R T 4 :
IMPLICATIONS AND STRUCTURED DECISION SUPPORT
4.1 From Compliance to Competitiveness: Making the Right Strategic Choices The maritime industry’s transition is often discussed in terms of technologies, fuels, and regulations. Yet for shipowners, operators, financiers and boards, the challenge is ultimately a business decision. Every investment in a new vessel, retrofit, efficiency upgrade or fuel strategy is ultimately a decision about where to commit capital in an uncertain future. As carbon-related costs become a growing part of vessel operating expenses and regulatory requirements continue to evolve, the focus is shifting from simply understanding the transition to determining how best to navigate it. The question is no longer whether change is coming, but which decisions made today will create the greatest resilience, flexibility and long-term value in the years ahead. This section examines the commercial, financial and strategic implications of that reality. It explores how capital allocation, compliance costs, financing, charter market expectations, technology readiness and execution risks are influencing investment decisions across the maritime sector. Successful decarbonization is not only an engineering challenge, but also a decision-making challenge that requires balancing opportunity, risk and uncertainty. By providing a structured view of the factors affecting fleet investment and modernization strategies, this section aims to help organizations make more informed, defensible and future-focused decisions in an increasingly complex operating environment.
The focus is shifting from simply understanding the transition to determining how best to navigate it.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 74
4.2 The Capital Question — Financing the Transition Under Fragmentation
By 2026, the compliance regime has shifted carbon cost from contingency to recurring operating expenditure. Every order placed, every retrofit deferred, every charter contract
4.2.1 The Chief Financial Officer’s Agenda
signed allocates capital inside that regime. Inaction is no
The question is no longer whether regulatory cost exposure
longer a position; it is a choice with a quantifiable price.
is real. It is what the implied discount on a conventional fuel asset ordered in 2026 already is — and where the capital
That price compounds across three horizons:
advantage sits today.
Combined European Union
The International Maritime
Compliance window for
(EU) Emissions Trading
Organization’s (IMO) mid-term
conventional fossil pathways
System (ETS) and FuelEU
measures are expected to
narrows significantly. Vessels
Maritime exposure materially
enter into force. Global retrofit
built without optionality in
reprices operating costs for
capacity forecast turns
2026 face increasing asset
vessels trading in EU waters.
negative. Early movers have
value pressure.
FuelEU Maritime enters its
already captured key
second compliance cycle.
efficiency gains.
2028
2030
2035
Figure 26: Price components across future time horizons.
This section builds the case from the top down: the total-cost-of-ownership framework ABS applies with clients, the charter and financing dynamics already reshaping commercial competitiveness and the four-move strategic framework ABS advocates for capital decisions made now under uncertainty.
75 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
4.2.2 Total Cost of Ownership: The New Math
Four Pathways, Four Cost Profiles
For two decades, vessel investment decisions were made on a relatively stable cost stack: capital cost, fuel cost, operating cost and financing cost. Carbon cost was a future contingency, not a current line item. From 2026 onward,
Consider an owner deciding in 2026 between four options shown below for a ten-vessel program on a typical European Union (EU)-exposed mainline trade:
that stack has changed structurally.
• Order ten conventional new builds,
A useful framing — used in ABS’ 2025 Outlook, Beyond
• Order ten dual-fuel new buildings (liquefied natural
the Horizon: Vision Meets Reality, and supported by our
gas (LNG) or methanol capable, with bio-/e-LNG or
advisory engagements — is that the decarbonization
e-methanol transition pathway)
impact on operating cost can now be decomposed into three primary levers:
• Order ten retrofit-ready conventional newbuildings conventional-fuel today, but engineered from the design
• Fuel selection accounts for approximately 70 percent of the decarbonization outcome.
phase to accept future upgrades: reinforced under-deck structural allowances, oversized main switchboards, additional engine-room volume, cable trays for shore-
• Energy efficiency technologies account for
power connection, tank arrangements permitting future
approximately 15 percent.
conversion, and hull-form optimization for wind-assist
• Operational and performance optimization account for the remaining 15 percent.
integration. ABS supports this posture through Ready notations (LNG-Ready, Ammonia-Ready, MethanolReady, Hydrogen-Ready) and structural readiness assessments
• Capital decisions made today need to be evaluated against that decomposition, not against a fuel-only cost forecast.
• Retain existing tonnage and retrofit with a stacked set of energy-efficiency interventions (i.e. wind-assisted propulsion, hull form optimization, air lubrication, advanced coatings, voyage optimization).
The total cost of ownership (TCO) comparison must integrate five cost layers across a 15- to 25-year asset life:
Cost Layer
Conventional Newbuild
Retrofit-ready Newbuild
Dual-fuel Newbuild
Retrofit Program
Capital cost
Reference (100%)
5–15% premium
25–50% premium
5–15% of newbuild capex
Fuel cost (15-year)
High (conventional pathway)
Initially high; convertible later
Mixed; bio-/e-fuel pathway available
Reduced 10–30% via energy efficiency technologies (EETs)
Carbon compliance cost
Full exposure, rising
Full initially; declines post-retrofit
Reduced, but not eliminated
Reduced via efficiency
Residual value (15-year)
Sharply discounted
Held near baseline (convertible)
Held closer to baseline
Asset already mid-life
Optionality premium
None
Material; retrofit pathway open
Material; bio-/e-fuel pathway pivot
None on fuel; yes on capex
Table 11: Indicative cost layer comparison. Actual values are vessel, trade and fuel-specific.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 76
The capital premium spectrum on newbuild optionality
roughly two-thirds of vessels in the current orderbook
is real and well-documented — from five to 15 percent
incorporating such technologies at the design stage. For
for retrofit-ready conventional designs, and up to 25
owners with significant existing tonnage — which is most
to 50 percent for dual-fuel newbuildings versus base
owners, given that the global conventional fleet remains
conventional. Across the alternative fuel orderbook
above 87,000 vessels in service — the retrofit case remains
captured in industry fleet databases as of early 2026,
structurally underweighted in capital allocation discussions
this premium has not deterred orders; approximately 72
that are dominated by newbuilding decisions.
percent of newbuild orders by capacity in 2025 specified alternative-fuel capability or readiness, of which LNG dualfuel accounted for about 60 percent, methanol roughly 12 to14 percent, and liquefied petroleum gas (LPG), ammoniaready, methanol-ready and hydrogen-capable designs filling the remainder. The orderbook signal is clear: a 25 to 50 percent premium is being paid for optionality on a 20-year asset, not because the future fuel pathway is certain, but because the cost of being locked out of compliant pathways is judged
The Compounded Number Standstill, and the math turns punitive. Consider a six-vessel European fleet trading regular EU routes. In 2028, FuelEU Maritime may add approximately $0.6 million in cost. The IMO Net-Zero Framework may add additional costs. The trajectory then steepens. By 2035, the FuelEU Maritime bill alone may reach $17 million. From 2028 through 2035, the two regimes together could cost close to $38 million for this fleet, with no growth and no additional revenue
to be even higher than the premium paid.
generated in return. It is pure cost.
The Retrofit Case is the Underweighted One
The steepest jump comes at the end: The FuelEU Maritime’s
In ABS’ experience advising owners through our four-
percent annually, roughly doubling the bill between 2034
tier vessel energy performance framework — peer
and 2035 alone.
benchmarking, performance health check, improvement investigation with payback and lifecycle modeling and post-retrofit validation using in-service data — a wellexecuted retrofit program can close 15 percent to 30 percent of the efficiency gap on existing tonnage at a
penalty for repeated non-compliance compounds at 10
This is what “a second fuel bill” means in numbers. And from 2028, when the FuelEU Maritime and the IMO measures are both assumed to apply, a vessel trading in EU waters may pay close to twice as much for the same
fraction of newbuild capital cost.
tonne of carbon. These figures assume only one thing:
Across the global fleet, energy-efficiency technologies
switch and no pooling strategy. This is the cost of inaction,
are now installed on more than 10,000 vessels, covering
quantified. It is not a tail risk. It is the base case.
approximately 37 to 38 percent of global tonnage, with
77 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
that the owner does nothing; no efficiency retrofit, no fuel
4.2.3 Carbon Cost as Operating Reality: The Second Fuel Bill The cost trajectory outlined on the previous pages hides three sensitivities that materially affect the investment decision.
1
2
3
Sensitivity to European
Sensitivity to FuelEU
Sensitivity to the Eventual
Union Allowance (EUA)
Maritime Intensity Glidepath
IMO Measure
Price Path
The FuelEU Maritime’s
Whatever form the
The European Commission’s
greenhouse gas (GHG)-
IMO mid-term measure ultimately takes — whether
modeling, market consensus
intensity reduction steps
and independent forecasters
down from −2 percent
a fuel-intensity standard,
now project EUA prices in
(2025) to −6 percent (2030)
an enhanced CII or a hybrid
the €400 to 500 range by
to −14.5 percent (2035) and
— its layering on top of EU
the 2040s under current cap
then accelerates sharply: −31
and UK regimes will add
trajectories, with the Linear
percent by 2040 and −80
to total compliance cost
Reduction Factor tightening
percent by 2050. The first
in the medium term. The
from 4.3 to 4.4 percent from
compliance cycle — with
double-payment review
2028. Even sustained EUA
ship-specific reports filed
clause discussed earlier is
prices above €100 — already
by January 31, 2026, verified
the principal mitigant, but
within the range of forward
reports recorded by
no relief is expected before
consensus — would push
March 31, 2026, compliance
2028, and any reconciliation
the 2030 carbon-linked
balances and pooling
will be partial.
operating cost for an EU-
arrangements confirmed
exposed vessel materially
by April 30, 2026, and
above the figures stated
documents of compliance
previously. The longer-term
issued by June 30, 2026
risk is that EUA prices may
— is delivering the early
spike above €200 or €300
commercial reality. For
during periods of supply
owners managing pooled
tightness. While the EU’s
compliance positions
price stability mechanisms
across mixed fleets, the
may help contain disruption,
cost differential between a
they do not eliminate it.
verified-WtW alternativefuel pathway and a fossilequivalent voyage is now a quantifiable line item factored into time-charter equivalent revenue calculations.
Compliance cost is no longer a function of how a vessel
ABS’ framing through this is direct. Fuel selection drives
operates within a static regulatory framework; it is a
70 percent of the decarbonization outcome, while
function of how the framework itself evolves. Treating
efficiency and performance optimization contribute
carbon cost as a known variable in a TCO model — even
the remaining 30 percent. Both measures pay back
with sensitivity ranges — is now the appropriate standard
under any fuel pathway, regulatory trajectory and
for fleet planning. Treating it as a future contingency,
market cycle. Efficiency interventions are scenario-
as many models built before 2024 still do, materially
proof. They are the first step in any rational capital
understates the cost of keeping conventional tonnage in
allocation under uncertainty, regardless of which fuel
service through mid-life.
pathway ultimately gains scale.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 78
4.2.4 The Charter Layer: Where Compliance Meets Commerce The TCO calculation previously described is internal to the owner’s accounts. The commercial environment around it is being repriced in real time as well.
1
2
3
Charter-rate Spread is
Carbon Clauses are being
Insurance and Protection
Emerging
Embedded into Time-charter
and Indemnity (P&I)
Forms
Industry observation across
The risk perimeter is
2024 and 2025 indicates
Industry standardization
expanding. Alternative-
a charter-rate spread of
work — The Baltic and
fuel handling (methanol,
approximately 10 to 15
International Maritime
ammonia, hydrogen)
percent emerging between
Council (BIMCO’s) Carbon
introduces safety and
high- and low-emission
Intensity Indicator (CII)
insurability questions that
tonnage in comparable
and EU ETS clauses among
are still being worked out
trades, with the spread
the most widely adopted
at the IMO Sub-Committee
widening on EU-exposed
— has moved carbon-
level and through P&I
routes where charterers face
cost allocation from an
club guidance. For dual-
direct carbon cost pass-
open commercial issue
fuel vessels operating
through under their cargo
to a contractual one. The
on transition pathways,
contract arrangements.
economic incidence of
insurance terms are
The mechanism is
carbon cost is being settled
differentiating. For shadow-
straightforward: a charterer
at the time of fixture, not
fleet operations and vessels
hiring a low-CII vessel pays
after the fact. For owners,
with weakening compliance
less in carbon allowances,
the practical consequence
profiles, insurance and
less in FuelEU Maritime
is that carbon performance
class access have already
compliance and faces less
is now priced into charter
tightened.
risk on its own Scope 3
income, not absorbed as an
emissions reporting. The
opaque cost.
hire premium that vessel can command reflects that advantage.
79 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
The Strategic Verdict: A vessel’s compliance profile is now an attribute of its commercial competitiveness, not just its regulatory standing. The framework — stay bankable, stay insurable, stay acceptable — is no longer a long-
4.2.5 The Financing Architecture: Capital Markets Repricing Risk If the charter market is repricing operating exposure, the financing market is repricing capital-structure risk. Three structural shifts are evident.
horizon planning principle; it is the operating standard required to access charter, finance and insurance markets on competitive terms in 2026.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 80
4.2.5.1 Loan Margins are Differentiating by Carbon Intensity Ship-finance markets are integrating carbon performance directly into credit decisions. The Poseidon Principles, a disclosure framework covering ~75 percent of global ship finance across 36 signatory banks, has moved from a reporting exercise to an underwriting input. Signatory banks now describe using portfolio alignment scores in client selection, deal prioritization and the structuring of sustainability-linked loans (SLLs). The mechanism is the lender’s view of long-term residual value, regulatory cost exposure and refinancing risk. For SLLs in the sector, margin adjustments tied to verified emissions performance are now standard, though banks do not publicly disclose the specific pricing differentials involved.
a.
Sustainability-linked Finance has Scaled, but Unevenly
b.
The Mid-market Gap is Real Approximately 20 to 25
c.
Verified Performance is the Emerging Credit Metric
Global sustainable
percent of sustainable
The unifying theme
maritime finance now
maritime finance is
across charter, finance
exceeds $90 billion in
reaching small and mid-
and insurance is that the
cumulative volume, with
sized shipowners. The
underwriting question
approximately $25 billion
instruments, advisory
has moved from “what
issued in 2023 alone.
architecture, and
does this vessel emit?”
The financing structures
verification overhead
to “what does this
themselves have matured
are still calibrated for
vessel demonstrably
significantly. These now
larger transactions. For
deliver, and how is that
include SLLs tied to
mid-market owners,
performance verified?”
verified CII trajectories,
who collectively control
Carbon performance
emissions intensity
a significant share of
is being assessed
reductions, or alternative-
European and Asian
with the discipline of
fuel uptake; green loans
short-sea, dry bulk, and
a credit metric — and
tied to specific use-of-
product tanker tonnage,
increasingly priced like
proceeds for alternative-
the financing landscape
one. The implication
fuel newbuildings or
is more fragmented than
for owners is that the
retrofits; transition finance
the headline numbers
value of investment in
instruments for sectors
suggest. Corridor-
measurement, monitoring
and fuels still maturing.
level blended-capital
and verification
ABS has supported clients
structures, opex-linked
infrastructure has shifted
in raising over $200
incentives that reward
from compliance overhead
million through SLLs in
verified fuel savings and
to a commercial enabler.
the past three years alone,
risk-sharing instruments
with the same pattern
from public banks could
visible: target-setting,
help close this gap if
performance verification
deployed at scale.
and post-loan reporting are the new minimum standards.
81 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
4.2.5.2 Stranded Asset Risk and the
A conventional vessel ordered today and held to mid-
Optionality Premium
life is not at risk in 2027 or 2028. It may be at material
The residual-value risk facing conventional vessels is no longer a distant concern. It is moving much closer to
residual-value risk by the early-to-mid 2030s — as the spread between conventional and alternative-fuel operating economics widens beyond the level that
the planning horizon.
secondary-market buyers will accept.
A vessel ordered in 2026 with a 20- to 25-year lifespan will still be trading in 2046 and beyond. By then, the IMO’s 2050 net-zero target year will be in sight, EU ETS allowance prices under consensus forecasts may have
This is the stranded-asset case framed in commercial terms rather than environmental ones. The capital question is not whether the asset can continue to operate, but whether it can be sold, chartered or
risen to €300 to €500 per tonne range. The FuelEU
refinanced at a value consistent with the original
Maritime’s intensity reduction pathway may reach 80 percent and the regional regulatory regimes may either
investment case.
have converged or become even more fragmented.
a.
The Optionality Premium is the Response A dual-fuel newbuild at 25 to 50 percent capital premium retains the ability to switch from conventional pathway to LNG to bio-LNG or e-LNG (or methanol to bio-methanol to e-methanol) as supply scales and regulatory pressure tightens. This flexibility is the explicit hedge being paid for in the order premium. It is not a bet that any one alternative fuel wins. It is a hedge that prevents being locked into the wrong one. The value of this hedge depends on how the vessel trades. • For tonnage on fixed routes with known bunkering points and the ability to pass incremental fuel cost through to customers — liner container, car carrier and cruise trades — dual-fuel capability has moved close to an operational expectation, and the premium buys access to fuel the vessel can reliably take on. • For tonnage trading spot across regions where alternative-fuel bunkering remains unavailable, the same premium buys an option that cannot be exercised on most voyages, and the capital is better directed toward efficiency measures that return from day one and toward fuel-ready provision that preserves the conversion at a fraction of the cost. The distinction is between paying for flexibility and paying for equipment that sits idle. Part 5 addresses this point in detail and traces its consequences for newbuild specification and retrofit planning. In a market where fuel-pathway uncertainty remains relevant, methanol’s share of newbuild orders declined from approximately 18 percent to 12 percent between 2024 and 2025, ammonia and hydrogen remain in low double-digit project counts and LNG remains dominant by a wide margin — optionality is the rational position.
b.
Retrofits as the Bridge for Existing Fleets For the ~96 percent of vessels in the global fleet that are not alternative-fuel capable today, retrofits provide a practical pathway. They reduce current carbon cost exposure under EU ETS and FuelEU Maritime, extend the commercial useful life of the asset by improving efficiency, CII and charter acceptability, and they buy time for fuel choices to become clearer before the larger capital decision is made. Currently, wind-assisted propulsion is the clearest practical type of retrofit. More than 50 seagoing ships have installed and are using them in operation and there are more than 100 on order for 2026 delivery. These retrofits are expected to reap a 10 to 30 percent fuel savings depending on route. More broadly, EETs (air lubrication, hull form optimization, advanced coating, voyage optimization, waste-heat recovery) have moved into the mainstream. Roughly two-thirds of the current orderbook tonnage already incorporates EETs at the design stage.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 82
The strategic decision is not simply between newbuild and status quo. The smartest position, observed consistently across the owners now setting the pace, is sequenced: improve existing assets, invest in optionality for new capacity and use verified performance data to guide future decisions.
4.2.5.3 The Decision Framework: Four Moves Under Uncertainty The capital question typically comes down to four sequential moves that ABS advocates when discussing fleet planning for 2026 with clients.
a.
Cut Energy Demand
b.
Protect Optionality
The most underweighted move in capital
Do not lock into a single fuel pathway
planning. Energy efficiency is scenario-
before port readiness, bunkering
proof — it pays back under any fuel
availability, and safety standards are fully
pathway, any regulatory trajectory, any
in place. The capital premium on dual-fuel
market cycle. For existing tonnage, retrofit
and alternative-fuel-ready designs is real,
programs targeting 15 to 30 percent
but it is securing flexibility over a 20-year
efficiency improvement reduces current
asset life, not just solving fuel choice over
EU ETS and FuelEU Maritime exposure
the next five years. Modular fuel systems,
immediately, improve CII and charter
alternative-fuel-ready notations and
acceptability, and extend commercial
designs that can pivot from LNG to
useful life. For newbuilds, design-
bio-/e-LNG or from methanol to
stage integration of EETs is no longer a
e-methanol are ways to manage
differentiator; it is a baseline expectation.
uncertainty without freezing investment.
These four moves map directly onto ABS’ strategic framework. Protect the bridge — addresses the 2026–2030 horizon, using transition fuels (primarily LNG with methane-slip controls and credible bio-/e-LNG trajectories) alongside efficiency improvements. Extend the runway — addresses the 2030 to 2035 horizon for the existing fleet through retrofit programs, performance optimization and onboard carbon capture as the technology matures. Prepare for the endgame — looks beyond 2035 to developments such as scaling zero-carbon fuels and, potentially, nuclear propulsion once they are safe, insurable and commercially available. The capital allocation question for the owners is which horizon dominates the current decision; the framework is intended to help answer that clearly.
83 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
c.
Move Early on Execution
d.
Make it Bankable
Retrofit and yard capacity is forecast to
The investment case works when risk
turn negative globally between 2028 and
and reward are shared across the value
2030. The orderbook for alternative-fuel
chain — owners, charterers, cargo, lenders
newbuildings is peaking in 2026 to 2028
— through contracts, not through hope.
deliveries before declining sharply. Capital
The deals being financed at attractive
decisions made in 2026 and 2027 are
terms today have three things in common:
more likely to be executed under more
committed demand from charterers
favorable yard, financing, and supply-
or cargo owners, real supporting
chain conditions than decisions deferred
infrastructure (port, fuel, bunkering), and
to 2028 and beyond. Those who wait will
verified performance data anchoring
pay more and wait longer.
the financial structure. This three-part bankability triad is the underwriting test that lenders are applying for.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 84
4.2.6 Three Strategic Implications for Boards For boards, Chief Executive Officers and capital providers shaping strategy for 2026 and beyond, three clear implications follow from this analysis.
Third, performance data is the new credit metric, and verification infrastructure is the enabling investment. The role of data is changing. What was once primarily a compliance reporting function is becoming a commercial enabler. Owners who invest in the data layer — accurate
First, the cost of inaction is now measurable and recurring.
emissions measurement, verified efficiency outcomes,
For the 14,000 total equivalent unit (TEU) EU-trading
transparent fleet performance benchmarking — are
containership used as the reference vessel in Part 1/1.2.6,
not absorbing compliance overhead. They are building
carbon-linked operating cost rises from the mid-single-
the foundation needed for SLLs, charter premiums
digit millions of dollars in 2026 to approximately $20
and insurance terms that competitors without that
million per vessel per year by 2035 — roughly $55,000
infrastructure cannot match. The bankability triad —
per day. Applying the same assumptions to a mid-size dry
infrastructure readiness, regulatory clarity, validated
bulk carrier consuming about 30 tonnes per day on EU-
performance — is converging across charter, finance and
exposed trades gives approximately $4 million per year,
insurance into a single underwriting standard.
or about $12,000 per day. The absolute figures differ by an order of magnitude across segments; the direction and the compounding do not. Neither is a “worst case.” Both are the base case under current regulatory and market assumptions. Second, the capital advantage is shifting toward early movers with optionality. The combination of 25 percent to 50 percent capital premiums for dual-fuel newbuilds, 10 percent to 15 percent charter-rate spreads, 10 to 20 basis-point loan margin spreads, and emerging insurance differentiation creates a meaningful weighted-average cost-of-capital advantage for owners who position early. Conversely, conventionally configured vessels held into the 2030s are increasingly exposed to discounted valuations in both charter and resale markets.
85 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
The capital question, properly framed, is therefore not about timing alone. It is about converting the carbonpricing from an external cost imposed on the industry into a capital-allocation discipline that distinguishes the owners and operators positioned for the next two decades from those holding tonnage exposed to structural risk. ABS’ role is to bring together engineering-grade performance evaluation, lifecycle TCO modeling under stacked regulatory scenarios, validation of innovative technologies and digital enablement of in-service data to help ensure that the decisions made under uncertainty in 2026 are the ones that remain bankable in 2035.
4.3 Risk Landscape and Decision Framework 4.3.1 Risk Landscape
As a result, operators gain an advantage by keeping fleet designs and investment choices flexible. This means prioritizing optionality where possible, such as fuel-ready
To evaluate the retrofit-versus-newbuild decision, operators
designs, adaptable machinery arrangements, modular
must weigh five critical risks that shape technical feasibility,
retrofit potential and operating strategies that preserve
regulatory exposure, execution timing and long-term asset
room for future transition decisions.
value. 4.3.1.4 Execution Risk 4.3.1.1 Technology Immaturity Risk Even where strategic direction is clear, execution is The industry faces the challenge of bridging the widening
constrained by realities such as yard capacity, engineering
gap between climate ambition and operational reality.
bandwidth, specialist labor, equipment lead times and
Operators must distinguish between strategic wildcards,
approval cycles. As decarbonization demand accelerates,
which are technologies that are technically credible but
supply-chain pressure becomes not just a procurement
remain dependent on future infrastructure and those that
issue, but a strategic delivery risk.
are operationally ready at scale. Currently, solutions like LNG and biofuel blends offer certainty as proven pathways
Operators that sequence projects realistically, secure
with established bunkering standards, whereas zero-carbon
long-lead items early and work with experienced yards
fuels like green hydrogen and ammonia face steep hurdles
and vendors will be better placed to avoid delay and cost
in availability and affordability.
escalation. In parallel, digital performance systems can help reduce uncertainty by improving operational visibility,
For owners, the main risk is committing too early to
identifying efficiency opportunities, supporting compliance
systems that may not perform well because of supply
reporting and generating clearer evidence for investment
chain delays or limited port infrastructure. A good decision
decisions. While data cannot resolve shipyard capacity
framework should focus on practical adoption of proven
constraints, it can improve planning quality and reduce the
technologies, especially those that provide clear efficiency
risk of misallocated yard time.
gains, lower emissions or compliance benefits without locking the fleet into a narrow future path.
4.3.1.5 Capital Allocation Risk
4.3.1.2 Regulatory Non-compliance Risk
The retrofit-versus-newbuild choice should not be framed as a purely technical decision. It is a capital allocation
The regulatory landscape is evolving quickly, but not always
question shaped by vessel age, remaining asset life, trade
in a coordinated way. IMO measures, regional rules, carbon-
route, fuel strategy, charter period, charter expectations,
pricing regimes, fuel standards, and reporting requirements
compliance exposure, and access to yard capacity. In many
are all advancing on overlapping but not fully aligned
cases, retrofit offers the faster and more pragmatic path to
timelines. This creates uncertainty for owners and operators
near-term compliance and efficiency improvement. In
attempting to make long-life investment decisions under
others, a newbuild may provide better long-
changing policy assumptions.
term economics, lower lifecycle risk, and
The regulatory alignment must be treated as a continuous
stronger future-fuel optionality.
management task, not a one-time compliance exercise. Operators that actively track policy developments, stresstest investment choices against multiple regulatory scenarios, and maintain transparent compliance roadmaps will be better positioned than those reacting only when deadlines are close. 4.3.1.3 Pathway Stranding Risk Uncertainty over future fuel availability, cost competitiveness, infrastructure readiness and lifecycle emissions remains one of the most important strategic risks. LNG, methanol, ammonia, biofuels, electrification and hybrid solutions each present different combinations of opportunity, infrastructure dependency and transition risk. There is still no single pathway that suits every ship type, trading pattern or investment horizon.
IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 86
4.3.2 Risk Assessment
• Decision uncertainty highlights areas where data is lacking or external conditions, such as regulation, remain
Identifying the risks is only the first step. To support
unclear, indicating a need for flexibility rather than rigid
decisions, these risks must also be compared in a
commitment.
structured way. Therefore, each risk under the risk landscape is consolidated and mapped across four
• Execution complexity focuses on the practical difficulty
specific dimensions which are strategic impact, decision
of implementation, including technical, logistical and
uncertainty, execution complexity and overall risk level to
supply-chain challenges. At the same time, it points to
provide a structured lens for high-stakes decision-making.
the need for strong project management and technical coordination.
• Strategic impact measures how seriously an issue could affect long-term viability, market position or net-zero
• Overall risk level brings these elements together into
goals; when high, it becomes a board-level concern
a clear prioritization tool, helping stakeholders focus
requiring strategic direction and capital planning.
quickly on the issues that matter most.
Risk Area
Strategic Impact
Decision Uncertainty
Execution Complexity
Overall Risk Level
Technology Immaturity
Medium-High
Medium
High
High
Regulatory non-compliance
High
High
Medium
High
Pathway Stranding
Very High
Very High
High
Very High
Execution
High
Medium
Very High
High
Capital Allocation
Very High
High
High
Very High
Table 12: Risk areas and impact.
The table above indicates that pathway stranding and
driven less by whether standards will tighten and more by
capital allocation present the highest overall risk. Pathway
the pace of change and the degree of alignment across
stranding forces operators to navigate the volatile
regional frameworks. Conversely, technology immaturity
intersection of future fuel availability, fluctuating long-
risk is categorized as a more manageable dimension,
term economics and the danger of locking a fleet into
provided operators maintain discipline through phased
infrastructure that may become obsolete. This uncertainty
deployment and early validation.
directly impacts capital allocation, as the choice between retrofitting existing assets and investing in newbuilds depends on technology readiness, regulatory changes and commercial positioning. While these high-level decisions set the course, execution risk acts as the primary execution barrier. Even a technically sound strategy can be derailed by shipyard congestion, equipment lead-time and labor shortages. Furthermore, regulatory non-compliance also remains a persistent concern,
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4.3.3 Structured Decision Framework 4.3.3.1 Case Study: Retrofitting an Aging 35,000 dwt Bulk Carrier with Wind-Assisted Propulsion (Flettner Rotors) A 17-year-old 35,000 dwt bulk carrier is being considered
As a result, the project cannot yet be considered “ready.” This is precisely the type of outcome the framework is designed to produce: preventing premature investment in a technically feasible solution that lacks sufficient economic return and commercial justification.
for retrofitting with wind-assisted propulsion in the form of Flettner rotors. Although the technology readiness level (TRL) is acceptable, the project fails the age-appropriate investment criterion. The vessel’s remaining hull life is too short to justify the expected equipment payback period.
Potential Improvement A “not ready” outcome does not necessarily end the analysis. In this case, the framework also helps identify what would need to be improved for the project to become viable.
1
2
Shorten the Payback Period to Satisfy the
Extend CII Compliance Longevity
Age-appropriate Investment Criterion
If the retrofit enables the vessel to
Use onboard digital systems to quantify
maintain a CII rating of C or better,
avoided carbon-pricing costs, such as EU
the vessel may remain commercially
ETS or FuelEU Maritime exposure. If these
acceptable for longer, effectively
avoided costs are significant, they may
extending its useful operating life and
materially shorten the payback period.
supporting a longer investment recovery
Align the technology choice closely
period.
with the vessel’s actual trade route and commercial profile, and where possible secure a green premium or longer-term charter commitment to strengthen the business case.
The initial outcome and the identified improvement pathways show why a structured decision method is needed. Decarbonization decisions cannot be based on technical readiness alone and they must also be tested against economic viability, regulatory value and practical execution constraints.
Execution risk acts as the primary execution barrier. Even a technically sound strategy can be derailed by shipyard congestion, equipment lead-time and labor shortages.
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4.3.3.2 The Framework Behind the Outcome The conclusion reached in this case study was not reached by judgment alone. It was produced by a structured decision framework (SDF) that assesses the five risks against four evaluation pillars. Each pillar contains specific measurable outcomes that transition a project from a conceptual risk to a data-driven decision.
1
Strategic and Technical Flexibility:
2
Lifecycle and Capital Management:
3
Digital and Commercial Accountability:
4
Execution and Supply-chain Readiness:
Prioritize fuel pathway strategies and flexible vessel designs to anchor subsequent technical decisions and hedge against pathway ambiguity.
Execute “retrofit versus newbuild” choices as high-stakes capital gates, ensuring they are realistically sequenced and aligned with proven technology readiness.
Embed digital performance systems to ensure continuous compliance with evolving regulations while providing the transparent carbon accounting information that customers now demand.
Mitigate execution risks by securing shipyard slots and long-lead equipment early, ensuring that staged technology adoption remains on schedule.
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The risk assessment highlights where decision pressure is highest. The SDF is designed to respond to those pressure points by testing whether a project is flexible, economically
4.3.3.3 Decision Flow: From Risk to Decision To arrive at a decision, the user should follow this logical
viable, commercially defensible and executable.
progression:
The identified risks shape the design of the SDF. As the
1. Start with the risk landscape to identify which factors are
risks involve strategy, uncertainty and complexity, the SDF must address all three. Rather than asking a simplistic question such as, “Is it expensive?”, the SDF uses targeted yes/no questions to probe the specific risks that have been
most material to the project. 2. Run the project through the SDF across the four pillars to produce a Readiness Score.
identified. In doing so, it transforms raw uncertainty into
3. Apply hard-stop criteria such as proven technology and
a readiness score. This structured assessment helps filter
age-appropriate investment, which can override the
out speculative projects and as a result, the final decision
aggregate score.
is based on a logical, defensible foundation rather than intuition or guesswork. Once a decision is made and a project is executed, the results flow back into the risk landscape. Every successful decision lowers the risk for the next project. Conversely, if a project reveals new supply chain bottlenecks, that data updates the risk landscape for the next cycle.
4. Refine the project assumptions if the initial result is weak, then rerun the assessment. 5. Use the final profile to support a go, no-go or defer the decision. Users should view the SDF as a simulation tool and use it to bridge the gap between high-level ambitions and the reality of capex and technical feasibility.
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4.3.3.4 How Does the SDF Help?
Risk Landscape • Identifies the What and Why • Awareness and prioritization
Decision Making
Structured Decision Framework (SDF) Informs the Decision
• Tests the How and When
• Executes the Action Feeds Back to Update
• Readiness Profile
Pathway Stranding
Capital Allocation Risk
advantage and transparency
Risk Assessment
Technology Immaturity
Regulatory Non-Compliance
• Commercial
Strategic and Technical Flexibility
Lifecycle and Capital Management
Digital and Commercial Accountability
Execution and Supply-Chain Readiness
Figure 27: SDF decision flowchart.
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Strategic Impact Decision Uncertainty Execution Complexity Overall Risk Level
Four Pillars
Strategic and Technical Flexibility
Lifecycle and Capital Management
Digital and Commercial Accountability
Execution and Supply Chain Readiness
Multi-fuel Readiness
Regulatory ROI
Automated Reporting
Slot Reservation
Modular Footprint
Benchmarking
Charterer Alignment
Long-lead Procurement
Anchor Consistency
Proven Technology (TRL)
Data Transparency
Staged Sequencing
Retrofit Ease
Age-appropriate Investment
Verification Readiness
Specialized Labor
Pathway Optionality
Operational Synergy
Performance Benchmarking
Approval Timeline
Figure 28: SDF evaluation pillars.
The SDF is organized around a set of questions under four
At the same time, the framework preserves flexibility by
evaluation pillars, enabling those pillars to be applied as a
keeping fuel and technology pathways open, while still
practical framework for decision-making.
supporting the growing need for regulatory compliance,
Rather than serving as a purely conceptual framework, it helps assess strategic fit, lifecycle viability, regulatory exposure and delivery feasibility to identify stronger longterm investments. It connects each decision directly to key operational and commercial factors such as vessel age, remaining useful life, trading pattern, operating profile and
internal transparency and defensible governance. It also strengthens execution planning by evaluating practical constraints such as shipyard availability, equipment lead times, approval requirements and supply-chain readiness, allowing owners to take action on a more informed, credible and defensible basis.
the applicable compliance horizon.
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PA R T 5:
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035
5.1 A Strategic Outlook for Maritime Industry Leadership The earlier sections of this report explored the full range of technical and operational sustainability pathways available to the international maritime industry through 2035. This
Success through 2035 will belong to organizations that execute interconnected, practical decisions now and not those that wait for certainty or bet prematurely on a single pathway.
section consolidates those findings into a forward-looking agenda for leadership decision-making, focused on the operational and commercial choices that will determine fleet competitiveness, regulatory standing and transition readiness over the next decade.
Three capabilities underpin this:
1
Capturing immediate value through efficiency and proven technologies.
2
Building design flexibility and robust data foundations.
3
Developing the organizational readiness to adapt as fuel markets, infrastructure and regulation evolve.
Organizations must capture immediate value through
The discussion that follows focuses on the fleet strategy,
efficiency gains and proven technologies, developing
investment and operational choices that matter most, with
design flexibility, robust data capabilities and organizational
particular attention to the tanker and bulk carrier segments
readiness. These foundational strengths will allow entities
that dominate the current orderbook and where the
to adapt as fuel markets, infrastructure and regulations will
decisions are least straightforward.
inevitably evolve.
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5.2 Fleet Strategy Starts with How Vessels Trade
5.3 The Design-to-operations Gap
At the center of every organization’s transition planning is
do not reflect how they operate. This problem affects both
a capital allocation problem. Leaders must decide which
newbuilds and the in-service fleet.
vessels justify further investment and which assets to phase out. However, resolving this challenge requires a deep
Many vessels are designed against regulatory baselines that
A bulk carrier may be designed and Energy Efficiency
understanding of how the fleet operates.
Design Index (EEDI)-certified around a nominal design
According to the United Nations Trade and Development
below that speed. The result is a vessel that looks efficient
(UNCTAD) governing body (Review of Maritime Transport
on paper but operates below its potential in practice. Its
2025), over 90 percent of active tonnage is still running
propeller works outside an optimal efficiency range, and its
on conventional fuels, while orderbooks represent
engine runs at part load where specific fuel consumption is
approximately 15 percent of the fleet. As a result,
higher than it needs to be.
most vessels will still be operational in 2035 and will overwhelmingly run on conventional fuels. Tankers and bulk carriers dominate both the active fleet and the current orderbook, yet these are precisely the segments where
speed but spend most of its commercial life trading well
The World Bank’s 2025 analysis concluded that efficiency measures could reduce ship emissions by up to 40 percent by 2030, with roughly half paying for themselves,
alternative fuel adoption remains lowest.
yet measures with the highest potential, including
This trend reflects a commercial reality that generic
optimization, remain largely untapped.
discussions of energy transition often overlook. Conventional fuel vessels trade globally on spot markets, calling ports across West and Sub-Saharan Africa, Brazil, Southeast Asia and other regions where alternative fuel bunkering infrastructure is effectively nonexistent. For example, methanol is available or planned in only 58 ports worldwide, compared to 239 for liquefied natural gas (LNG). For a Supramax bulker that may call 40 different ports in a year across four continents, committing capital to a dual-fuel system is not a hedge against risk. It is a
wind-assisted propulsion, air lubrication and port call
The commercial implication is direct. The design-tooperations gap creates two linked problems. First, it destroys value: oversized machinery, poor Carbon Intensity Index (CII) ratings and unnecessary carbon cost exposure. Second, it obscures the most cost-effective solutions — propeller optimization for real trading speeds, engine derating for part-load efficiency and operational calibration to actual service conditions rather than nameplate performance. Closing this gap is the single highest-return
misallocation of capital.
action for most in-service fleets. The first year of CII
For liner trades, the adoption of dual-fuel systems has
vessels reporting CII ratings for 2023, 19 percent scored D
rapidly transitioned from a forward-looking strategy to
or E. In particular, 74 percent of bulk carriers and 61
an operational expectation. Because these vessels
percent of roll-on/roll-off (ro/ro) ships scored C or
operate on predictable schedules with designated ports
worse, while containerships and gas carriers performed
of call, operators can develop bunkering infrastructure
significantly better.
and establish long-term fuel supply agreements. Consequently, the primary hurdle for liners is not geographic uncertainty, but rather securing strategic fuel-
reporting made this gap visible at the fleet scale. Of the
For owners ordering newbuilds today, this means the design brief should specify the vessel’s expected trading
supply agreements for their dual-fuel fleets.
speed, route profile and operational patterns, not merely
This distinction between how liner vessels and spot-
fleet, it means that some of the most cost-
market vessels trade is one of the most important framing
effective interventions are those that
decisions in the entire transition, and it should shape fleet
realign the vessel’s systems with how
strategy, newbuild specification and retrofit planning.
it actually operates. In practice, this
its regulatory compliance targets. For the in-service
means propeller modifications optimized for real trading speeds, engine derating to improve partload efficiency, optimum routing and operational practices calibrated to the vessel’s actual service conditions rather than nameplate performance.
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600
Ammonia Biofuel
Vessel Count
500
Ethane Hydrogen
400
LNG LPG
300
Methanol Nuclear
200
100
0
Figure 29: Vessel orderbook by ship and fuel type. [Clarksons Research]
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 96
5.4 Concrete Design Decisions that Preserve Optionality Effective leadership requires specific design and equipment choices, that balance possible costs and risks. The following are among the most consequential for tanker and bulk carrier newbuilds being ordered today. Three categories of design decision preserve optionality at minimal cost:
Each costs a fraction (at the design stage) of what it would cost as a retrofit, and together they produce a vessel that is more efficient at delivery, better positioned for CII, less exposed to carbon costs and ready to adapt. • Propeller selection for actual operating speeds. Specifying a propeller optimized for the vessel’s expected trading speed rather than its maximum design speed can improve propulsive efficiency by three percent to five percent. The incremental cost at newbuild
Efficiency from Day One
is negligible compared to a post-delivery propeller
• Propeller selection for actual operating speeds
12 knots rather than 14.5 knots, this single decision can
• Engine configuration and shaft generators • Weather routing and voyage optimization capability Structural Readiness for Future Technology • Deck strengthening for future equipment • Fuel tank arrangement and engine room layout
replacement. For a vessel expected to trade at 11 to be the difference between a C and a B rating on the CII scale. • Engine configuration and shaft generators. Selecting an engine configuration combined with a shaft generator allows the main engine to supply auxiliary power while underway at low speeds. This approach significantly reduces or eliminates the need to run auxiliary diesel generators. Peer-reviewed studies on bulk carriers indicate this measure can save 0.1 to 0.5 tonnes
Regulatory Positioning • Shore power connection readiness
of fuel per day on a laden voyage and materially improve CII performance. The capital cost is recovered within two to three years at current fuel prices, and even faster under carbon pricing.
97 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
• Deck strengthening for future equipment.
• Weather routing and voyage optimization capability.
Reinforcing deck structures during construction to
Equipping newbuilds with the sensor and control
accommodate future installation of wind-assisted
infrastructure, connectivity, and data systems needed
propulsion systems (rotor sails, suction sails or rigid
for voyage optimization is a low-cost, high-return
wings) costs a fraction of what structural modification
decision. Verified results from commercial deployments
would cost as a retrofit. Deck strengthening during
show fuel savings of three percent to nine percent
design preserves the option without committing to the
per voyage depending on route and conditions. The
technology.
hardware cost is minimal at the design stage, but the
• Fuel tank arrangement and engine room layout for future conversion. Designing the fuel tank arrangement and engine room
return depends on the quality of the software platform and the organization’s commitment to acting on its recommendations.
for a future methanol or ammonia fuel system is the
These decisions cost little at the design stage, yet
essence of fuel-ready ordering. The approximately 941
they deliver operational and commercial returns, while
methanol-ready and 406 ammonia-ready orders placed
preserving the ability to adapt as the regulatory and fuel
in 2026 [Clarksons Research] reflect this approach. The
landscape evolves. Previously mentioned design decisions
cost premium for fuel-ready design is meaningfully lower
will allow owners to have a vessel that is more efficient
than installing full dual-fuel capability at delivery. A fuel-
from delivery, better positioned for Carbon Intensity
ready infrastructure avoids paying for a fuel system that
Indicator (CII), less exposed to carbon costs and ready
cannot be fully utilized until bunkering infrastructure
to adopt future technologies and fuels without expensive
matures in the vessel’s actual trading area.
structural rework.
• Shore power connection readiness. Shore power connection adds modest cost at newbuild but positions the vessel for ports that are increasingly mandating cold ironing, particularly in the European Union (EU), California and parts of East Asia. Retrofitting shore power capability is significantly more expensive and disruptive to the vessel’s service.
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5.5 The Trade-Pattern Question Shapes Everything Else The most important distinction is not between ship types but between trade patterns. A vessel on a fixed route between the Arabian Gulf and Northwest Europe faces a fundamentally different fuel landscape than one trading spot across West Africa, South America and Southeast Asia. The design and investment decisions should reflect that difference.
a.
Liner Trades: Dual-fuel is Increasingly the Expected Choice
b.
Spot-market Trades: Single-fuel Systems and Design Flexibility
For vessels operating on fixed routes with
For tankers and bulk carriers trading in the spot
known bunkering points, the case for a
market, the picture is fundamentally different. These
dual-fuel system is strong. These trades
vessels call ports along the West African coast, Brazil
allow operators to plan bunkering around
and parts of the Indian subcontinent and Southeast
a limited number of hubs where alternative
Asia where alternative fuel bunkering is effectively
fuel supply is developing. The cost of
unavailable. A dual-fuel or multifuel system is
alternative fuel can be passed through
commercially unviable if the vessel cannot access
to customers, particularly in container
the fuel on most of its actual voyages. The capital
shipping where major cargo owners and
premium of 10 percent to 20 percent for a dual-fuel
charterers are increasingly requiring
system that sits unused generates no return and no
demonstrated sustainability performance
compliance benefit.
as a condition of engagement.
The right posture for spot market segments is a
For example, 57 percent of cruise vessel
single-fuel system today, running on conventional
orders, 97 percent of containership
fuels with maximum efficiency, and the design
orders by twenty-foot equivalent unit
decisions previously described. This allows owners to
(TEU) and 100 percent of vehicle carrier
accommodate a fuel switch when a charterer requires
orders by dwt are now dual-fuel. The
it or when bunkering infrastructure develops along
gating item is not vessel capability but
the vessel’s actual trading routes. In the context of
supply-chain agreements with bunker
today’s bunkering landscape, this posture balances
suppliers. Organizations operating in liner
near-term commercial reality with longer-term
trades should be negotiating fuel supply
transition readiness.
commitments in parallel with newbuild orders, not sequentially.
The conversion is justified when bunkering is available at a critical mass of ports, when fuel cost is manageable and when the fuel’s lifecycle emissions profile delivers real value under the IMO’s well-to-wake (WtW) framework. Until those conditions are met, the investment is better directed toward efficiency measures that deliver returns from day one. This trade-pattern framing should also inform retrofit decisions for the in-service fleet. A tanker on a long-term charter to a refinery with developing methanol bunkering is a reasonable candidate for fuel-system retrofit, whereas a bulker trading spot across the Atlantic and Pacific is not. For the latter, the highest-return investments are those that reduce fuel consumption regardless of fuel type: air lubrication, wind-assisted propulsion, propeller and hull optimization, shaft generator installation and digital performance management.
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| DECISION POINT: PRACTICAL PATHWAYS TO 2035
Segment
Alternative Fuel Share
Dominant Fuel
Trade Model
12,000+ TEU Containership
93%
LNG (80%)/methanol (20%)
Liner
Pure Car and Truck Carrier (PCTC)
93%
LNG (84%)/methanol (13%)/ ammonia (3%)
Liner
Cruise (Orderbook)
50%+
LNG (57%)/hydrogen (32%)/ methanol (11%)
Reduced, but not eliminated
LNG Carrier
100%
LNG (cargo as fuel)
Term/project
Very Large Gas Carrier (VLGC)/Very Large Ammonia Carrier (VLAC)
92%
LPG (64%)/ethane (31%)/ ammonia (4%)/LNG (1%)
Term-heavy
Suezmax/Aframax
14–18%
LNG (90%)/methanol and other (10%)
Spot-dominant
Medium Range Product Tanker
~1–2%
Methanol/LNG
Spot
Handysize Bulk Carrier
~4–5%
Methanol/LNG/ethane/ biofuel
Spot/tramp
Ultramax Bulk Carrier
~5–6%
Methanol/LNG/ammonia
Spot/tramp
Table 13: 2026 Orderbook share of alternative fuel-capable vessels by gross tonnage (gt) [Clarksons Research].
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 100
100% 80% 60% 40% 20% 0%
Car Carriers (PCTC)
Containerships (12k+ TEU)
Cruiseships
LPG
Handysize Bulkers
LNG Carriers
MR Tankers
LNG
Hydrogen, LNG
Ultramax Bulkers
VLGC/ VLAC
Figure 30: Alternative fuel type by orderbook.
5.6 The Retrofit Business Case for the In-service Fleet For the in-service fleet, particularly mid-life tankers and bulk carriers with eight to fifteen years of remaining commercial life, the retrofit question is which combination of measures delivers the strongest return given the vessel’s operational profile. The business case has shifted materially in the past three years. Technologies that might once have offered marginal returns on fuel savings alone now deliver increasing value. The value is created by fuel cost reductions, improved CII ratings, reduced carbon cost exposure under the European Union Emissions Trading Scheme (EU ETS) and the forthcoming IMO pricing mechanism, and better commercial standing with charterers and financiers who increasingly screen on sustainability performance. A practical package of hull, propeller, and voyage-efficiency measures can deliver cumulative fuel consumption reductions of nearly 10 percent, depending on the vessel’s baseline condition and operating profile. Adding air lubrication or wind-assisted propulsion can increase the cumulative reduction to 15 percent or beyond.
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| DECISION POINT: PRACTICAL PATHWAYS TO 2035
Prioritization should be based on a structured view of each asset. Vessels with the highest carbon cost exposure (frequent EU port calls, high fuel consumption, deteriorating CII trajectories), the longest remaining commercial life and the most unfavorable compliance trajectory should receive investment first. Vessels trending toward D or E on CII, or at risk of slipping from C as reduction factors escalate to 21.5 percent by 2030, face the most immediate urgency. Identifying them early is more effective and less costly than corrective action after the fact. Organizations that lack the analytical foundation to perform this assessment at the vessel level, including CII trajectory forecasting, carbon cost modeling, and trade pattern analysis, should treat building that capability as an immediate priority. In practice, vessel-level evidence is what allows organizations to distinguish between assets where retrofit investment can be commercially justified and those where a lighter-touch approach is more appropriate.
5.7 Carbon Cost Exposure is Now an Operating Variable
specifications, retrofit timing, corridor selection). For large ocean-going tankers, even a modest reduction in fuel consumption can have a significant annual cost impact,
Carbon pricing has become a layered operating cost and
given the growing contribution of carbon-related costs.
the layers are compounding. The EU ETS and FuelEU
5.8 Data as the Foundation for Future Decisions
Maritime already apply to European trades, and the forthcoming IMO pricing mechanism will potentially extend carbon costs globally for the first time. The combined
The ability to manage carbon cost exposure, prioritize
effect is that every vessel’s fuel bill now has a carbon
retrofit investment and demonstrate sustainability
component that varies by trade pattern, fuel type and
performance depends on reliable, continuous, verifiable
regulatory jurisdiction. The required response is quantified,
vessel performance data. Efficiency opportunities available
vessel-level exposure modeling across multiple scenarios.
to the in-service fleet are meaningless without good data,
The International Energy Agency (IEA) estimates that
because owners cannot verify whether projected savings
meeting the IMO’s 2035 targets could require nearly three
will materialize.
exajoules (EJ) of fuels emitting under 19 grams carbon
The Boston Consulting Group Shipping Benchmarking
dioxide equivalent megajoules (gCO₂e/MJ). That volume
Initiative analysis illustrates the savings that strong data
of demand cannot be met by incremental biofuel blending
capability makes possible. It showed that companies
alone. It implies a structural shift in the fuel mix that will
combining operational discipline with technology
expose organizations to new pricing dynamics, alongside
adoption achieved 10 percent lower emissions intensity
the carbon costs they are already managing.
and eight percent lower operating costs than their peers.
The most important response is to move to quantified,
Furthermore, The World Bank’s 2025 analysis identified
vessel-level exposure analysis. Modeling each vessel’s
the inability to accurately quantify savings from individual
annual carbon cost under multiple regulatory and fuel
measures as one of the primary barriers to retrofit
price scenarios helps to inform both near-term operational
adoption.
decisions (speed optimization, biofuel blending, route adjustments) and longer-term fleet strategy (newbuild
For practical purposes, organizations need data capabilities at three levels of maturity:
1
2
3
Foundation:
Analytical:
Emerging: Lifecycle fuel data readiness
Continuous vessel
CII trajectory forecasting and
performance monitoring that
integration of performance
for the IMO’s WtW
tracks fuel consumption,
data into operational and
framework, a capability
speed, power, and emissions
investment decisions, turning
that requires new supplier
beyond noon report intervals.
data into action.
relationships and certification
As well as emissions data
infrastructure (International
quality assurance that meets
Sustainability and Carbon
the accuracy standards
Certification, Roundtable
of multiple regulatory
on Sustainable Biomaterials
frameworks simultaneously.
certification).
These are the raw inputs without which nothing else works.
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 102
Five critical data capabilities for decarbonization:
1
Continuous Vessel Performance Monitoring
2
CII Trajectory Forecasting
3
Emissions Data Quality Assurance
4
Lifecycle Fuel Data Readiness
5
Decision-integrated Performance Data
Track fuel consumption, speed, power and emissions beyond noon report intervals.
Identify vessels at risk of rating deterioration before it occurs.
Meet accuracy standards across multiple regulatory frameworks.
Support IMO well-to-wake reporting and fuel certification, such as International Sustainability and Carbon Certification (ISCC) and Roundtable on Sustainable Biomaterials (RSB).
Embed insights into operational and investment decisions.
For newbuilds, the sensor infrastructure, connectivity and data architecture should be specified at the design stage. The hardware cost is minimal, and the value depends on the organization’s commitment to using the data.
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5.9 Execution Constraints are Real and Underestimated Even with the right fleet strategy, sound design decisions, and robust data systems, the transition can stall if the organization lacks the capability to execute. The constraints are not primarily technological, but rather human, organizational, infrastructural and systemic. Workforce readiness is the major constraint, because alternative fuels demand new crew competencies. For example, ammonia handling requires specialized safety training, emergency response procedures, and familiarity with toxic-gas detection and release mitigation systems. The IMO has issued generic interim training guidelines (STCW.7/Circ.25), but comprehensive fuel-specific certification frameworks are still under development, training pipelines are long and competition for qualified personnel is intensifying. The practical response is to begin
However, the current regulatory landscape adds further complexity. The IMO’s Net-Zero Framework, approved in principle at the 83rd meeting of the IMO’s Marine Environmental Protection Committee (MEPC) in April 2025 as the centerpiece of mid-term greenhouse gas (GHG) reduction measures, remains unadopted. A planned October 2025 extraordinary session was adjourned after member states failed to reach consensus, with unresolved concerns over fuel availability, the design of the pricing mechanism and the use of the International Convention for the Prevention of Pollution from Ships (MARPOL) to introduce economic measures. Adoption has been deferred to an extraordinary session now targeting December 2026, but the outcome is not assured. Until the framework is adopted, GHG fuel intensity (GFI) reduction targets for 2028 onward, the WtW lifecycle cost analysis methodology and default emission factors for fuels, such as ammonia, remain provisional. Furthermore, IMO interim guidelines for
training well ahead of vessel delivery or conversion.
ammonia and hydrogen are provisional, with acknowledged
With orderbook volumes reaching their highest level since
are still maturing, requiring risk-based design approaches
2007, yard capacity constrains both newbuild deliveries
and close collaboration with flag Administrations and
and complex retrofits. In practice, scheduling retrofit work
classification societies for approval.
during drydocking windows can require 18 to 24 months of advance planning, particularly for technologies needing multiple days of yard time such as air lubrication installation
gaps. Early movers will operate under frameworks that
Organizational readiness binds all these factors together. Managing a fleet through simultaneous regulatory change,
or wind-assist foundation work.
technology adoption, fuel transition, and data system
Beyond yards, the transition depends on fuel availability,
functional coordination, and the ability to make decisions
port infrastructure and classification readiness, all involving
under uncertainty. Organizations that treat execution
external parties whose timelines cannot be fully controlled.
capability as a strategic investment will navigate
The response is to engage early: signal demand through
the decade ahead more effectively than
letters of intent, participate in corridor initiatives and build
those that focus exclusively on
relationships with fuel suppliers and port authorities before
technology and fuel selection.
upgrade requires sustained management attention, cross-
supply is fully in place.
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5.10 The CEO Decision Framework — Six Questions for the Boardroom Everything set out in this Outlook resolves, in practice, into six questions. They are the questions being put to shipping executives by their own boards, by charterers running procurement screens and by lenders assessing residual value. None of them can be answered by a framework alone; each requires vessel-level evidence tied to the specific trade routes, trade type and operating conditions in which those vessels are employed. What follows is how this Outlook answers them.
1
2
3
Which vessels justify retrofit
Which assets should be replaced
What is our fleet exposure to
investment?
and which retained?
carbon and fuel volatility?
Not the oldest, and not the
This is a capital allocation
Quantifiable today and
worst-performing. The vessels
question rather than a technical
quantifiable per vessel. The
that justify investment are those
one, and the variable that
methodology in Part 1 builds
where three conditions coincide:
decides is residual value rather
annual exposure from stated
high carbon cost exposure
than operating cost.
public parameters and can be
A conventional vessel ordered
any vessel in a fleet. What that
through frequent EU port calls and high fuel consumption, sufficient remaining commercial life to recover the capital, and a compliance trajectory that will otherwise deteriorate.
today is not at risk in 2028; it may be at material risk by the early-to-mid 2030s, when the spread between conventional and alternative-fuel operating
The 35,000 dwt bulk carrier
economics widens beyond what
examined earlier in Part 4
secondary-market buyers will
illustrates the inverse — a
accept. The test is therefore not
technically sound wind-assist
whether the asset can continue
reproduced or adjusted for exercise reveals is usually not the size of the current bill but the shape of the curve: exposure compounds toward the end of the decade as the FuelEU Maritime glidepath steepens, and it does so whether or not the owner acts.
retrofit that fails on remaining
to trade but whether it can be
The exposure figures in this
hull life alone. Prioritization of
sold, chartered or refinanced at a
Outlook assume no efficiency
this kind cannot be done at fleet
value consistent with the original
retrofit, no fuel switch and no
level. It requires vessel-level
investment case. Where the
pooling strategy. They are not
CII forecasting, carbon-cost
answer is uncertain, the retrofit
a stress case; they are what
modeling and trade-pattern
case is generally underweighted
happens by default.
analysis, and organizations that
relative to replacement, because
lack that capability should treat
it preserves the asset while the
building it as the prior decision.
fuel question resolves.
105 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
Taken together, the six questions describe a sequence rather than a checklist. The data capability comes first, because the first four questions cannot be answered without it. Execution capacity comes next, because it determines what can actually be delivered and when. The capital decisions follow from both. Organizations that invert this order by committing to fuel pathways and newbuild specifications before they can assess vessel-level performance or secure yard access are making their largest decisions based on the weakest information available to them.
4
5
6
How much fuel flexibility is
Are we embracing the digital and
Can the organization execute at
worth paying for?
AI capabilities that will define
the required pace?
It depends on how the vessel
future competitiveness?
This is the question most often
trades, and on nothing else of
For many owners, the journey toward digital
assumed rather than tested, and
comparable weight.
transformation is still in its early stages. Yet
it is where strategies fail.
On a liner trade with fixed routes, known bunkering points and the ability to pass cost through to customers, dual-fuel capability has moved close to an operational expectation and the premium buys access to fuel the vessel can reliably take on; the gating item is the supply agreement, not the vessel. On a spot trade calling ports where the fuel does not exist, the same premium buys an option that cannot be exercised on most voyages, and the capital returns more if directed toward efficiency measures that pay from day one and fuelready provision that preserves the conversion at a fraction of the cost. The distinction is between paying for flexibility and paying for equipment that sits idle.
one reality is becoming increasingly clear: data collection is no longer the destination; it is the foundation. The industry is moving beyond compliance reporting and performance monitoring toward using data to drive smarter, faster, and more profitable decisions. Leading organizations are increasingly leveraging digital platforms, advanced analytics, and AI-enabled tools to enhance vessel performance, improve operational efficiency, optimize voyages, forecast emissions exposure, and support more informed decision-making across their fleets.
The constraints are not technological. Yard capacity is projected to become a binding constraint before 2030, and scheduling retrofit work during a drydocking window can require 18 to 24 months of advance planning. Crew competence for alternative fuels depends on certification frameworks that are still under development and training pipelines that are long. Fuel supply, port infrastructure and
The opportunity extends far beyond
class readiness all involve third
technology itself. Owners that successfully
parties whose timelines cannot
combine trusted fleet data with digital
be controlled.
and AI-driven decision support can reduce fuel consumption, minimize downtime, strengthen emissions performance, and make more effective investment and operational decisions. As reporting requirements, carbon costs, and market expectations continue to evolve, the ability to turn data into actionable insight is becoming a significant source of
An owner who has not identified which vessels need yard time before 2030 and has not begun securing slots and longlead items has not preserved optionality — the decision is being made by the market, later and at a higher price.
competitive advantage. Increasingly, digital capability is becoming as important to long-term competitiveness as fuel strategy, fleet renewal, and access to capital. The organizations that combine operational excellence with data-driven decision-making will be best positioned to succeed in the decade ahead.
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 106
5.11 Looking Ahead The maritime sustainability transition through 2035 will not be defined by a single technology, fuel or regulatory measure. It will be defined by how effectively organizations combine practical design decisions, operational efficiency, proven retrofit technologies, appropriate fuel flexibility matched to actual trade patterns, robust data systems, capable workforces and strategic partnerships.
107 | DECISION POINT: PRACTICAL PATHWAYS TO 2035
The direction is clear: carbon costs are rising, regulatory requirements are converging, commercial expectations for sustainability performance are increasing and fuel pathways are diversifying. The fleet must become more efficient, more flexible and better managed across every dimension.
The organizations that are best positioned for the decade ahead are not those waiting for certainty, but those making concrete, connected decisions now. The decisions include: • Specifying newbuilds around how they are expected to trade, rather than around regulatory baselines alone • Retrofitting mid-life vessels with proven technologies
• Preserving design flexibility to accommodate future fuel options and evolving bunkering infrastructure • Investing in the people, skills and organizational capability needed to successfully execute strategy None of these decisions require perfect foresight about which fuel pathway will ultimately prevail, but all of them
that deliver measurable efficiency gains and
improve the organization’s operational and commercial
immediate returns
position. The challenge for industry leadership is
• Building the data and analytical capabilities required for informed operational and investment decisions
whether they can convert the pathways available today into practical, scalable and commercially grounded implementation at the pace the next decade demands.
TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 108
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