Decision Point — Practical Pathways to 2035

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

While ABS uses reasonable efforts to accurately describe and update the information in this publication, ABS makes no warranties or representations as to its accuracy, currency or completeness. ABS assumes no liability or responsibility for any errors or omissions in the content of this publication.

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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.

11

| 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 commitments to be reviewed in light of any global measure adopted at IMO, with the explicit aim of avoiding double

2025-2026, with initial scope limited to direct emissions and embodied precursor emissions; indirect (electricityrelated) 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.

window for conventional 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

FuelEU Maritime is the first

calculation and enforcement

major maritime instrument

that applies continuously

structured on a full WtW

rather than only at D/E

intensity basis with explicit

rating thresholds. Whether

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

this is delivered through

By 2035, the gap widens

fuels of non-biological origin

an upgraded CII, a parallel

materially. For asset planning

(RFNBOs) and wind-assisted

GFI instrument, or a hybrid

purposes, the binding

propulsion. The compliance

framework remains the open

constraint shifts from “Is

balance mechanism allows

architectural question for

alternative fuel available?” to

pooling and banking, partly

MEPC 85.

“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 All respondents confirmed that CII ratings are now part

— Ahead of Full

— Costs Are Real, Behavior

Commercial Impact

Change Remains Limited

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.

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, as it now translates into

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

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

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

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

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

• Develop a deeper contextual understanding of detected

2.4.1.5 Benefits

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 accommodations, appliances, etc.

maintenance data from all sources (computerized maintenance management system (CMMS), warranty logs, 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

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.

monitored assets. This shift fundamentally changes how

Digitalization extends to the digital applications which

technical, operational, environmental and commercial

are deployed at a vessel-specific level, such as optimum

performance is managed.

weather routing, optimum bunkering, parametric rolling and

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

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

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

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

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,

87 | DECISION POINT: PRACTICAL PATHWAYS TO 2035

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.

IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 88

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.

89 | DECISION POINT: PRACTICAL PATHWAYS TO 2035

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.

IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 90

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.

91 | DECISION POINT: PRACTICAL PATHWAYS TO 2035

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.

IMPLICATIONS AND STRUCTURED DECISION SUPPORT | 92

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.

TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 94

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.

95 | DECISION POINT: PRACTICAL PATHWAYS TO 2035

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

of fuel per day on a laden voyage and materially improve CII performance. The capital cost is recovered within

• Shore power connection readiness

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.

TECHNICAL AND OPERATIONAL PATHWAYS TO 2035 | 98

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.

99

| 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:

Continuous vessel

CII trajectory forecasting and

Lifecycle fuel data readiness

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.

103 | DECISION POINT: PRACTICAL PATHWAYS TO 2035

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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