Shipping Faces Major Obstacles in Achieving Decarbonisation

The global shipping industry finds itself facing substantial challenges as it works to meet ambitious decarbonisation targets.
Moody’s Ratings has explored these difficulties in depth, focusing on the shortage of sustainable fuels and the long, expensive process of transitioning to greener vessels.
The financial agency's report points out how the shipping industry is still struggling to reduce its carbon footprint, despite regulatory pressures and the growing urgency to tackle climate change.
Shipping’s urgent need to cut emissions
As the shipping industry is responsible for around 2-3% of global carbon emissions, its contribution to climate change cannot be ignored — but the transition to sustainable operations isn't happening quickly enough, Moody’s says.
The industry's dependence on traditional bunker fuel and liquefied natural gas (LNG) means that the vast majority of vessels are still powered by fossil fuels, which undermines efforts to cut emissions significantly in the near future.
At present, roughly 90% of commercial vessels use bunker fuel, a highly polluting energy source.
The remaining 10% are mostly powered by LNG, a cleaner but still fossil-based alternative. LNG does emit less carbon dioxide (CO₂) than marine diesel when burned, but its full life cycle emissions remain a subject of debate.
As such, it is not considered a long-term solution for the industry's decarbonisation needs.
Even looking ahead to 2029, a significant proportion of new ships, more than 70%, will continue to rely on these traditional fuels.
The urgency for the sector to decarbonise is underscored by growing regulatory demands.
The International Maritime Organization (IMO), which sets global standards for shipping, has established targets for reducing emissions by 2030 and 2040. But without rapid advances in sustainable fuel availability and significant changes in the way vessels are built and operated, the industry is unlikely to meet these goals.
Regulations, sufficient fuel supplies and financial incentives, meaningful progress remains slow. As Maersk’s experience shows, companies are having to make compromises that may not fully align with their environmental goals.
Maersk’s fuel dilemma
Danish shipping giant Maersk provides a telling example of the difficulties shipping companies face in moving towards greener operations.
Maersk had long been sceptical about LNG, viewing it as only a partial solution to decarbonisation, given its fossil fuel origins.
However, the company has recently ordered 50 to 60 dual-fuel ships that can run on LNG. This shift in strategy highlights the main challenge in shipping’s decarbonisation: the lack of readily available sustainable fuels like methanol.
Sustainable methanol, which is seen as a potential green alternative to fossil-based marine fuels, remains in short supply.
According to Moody’s, there simply isn’t enough of it available to meet demand, and this shortage will likely persist for the next decade, if not longer.
This forced Maersk to adjust its strategy, despite its ambitious environmental goals, including a 35% reduction in emissions by 2030 and 96% by 2040.
While Maersk’s decision to invest in LNG-powered ships reflects the pressing need to act now, it also underlines the limitations of current technology and fuel availability.
Moody’s points out that many vessels expected to be delivered over the next few years will require expensive modifications to run on methanol or ammonia, adding further complexity to the industry’s decarbonisation efforts.
Regulatory gaps and financial risks
The shipping industry's slow progress in decarbonisation is compounded by the absence of globally coordinated regulations.
Moody’s warns that the lack of uniform rules for reducing emissions and inadequate incentives for adopting green fuels present significant risks to the sector.
The report labels this regulatory gap "credit negative," meaning it could affect the financial stability of shipping companies if they do not adapt quickly enough.
Regulatory uncertainty also makes long-term planning more difficult. Investing in new ships, for instance, involves significant financial risk, particularly when the future availability of sustainable fuels is still uncertain.
Ships designed to run on methanol or ammonia may become obsolete in 15 years if those fuels fail to become widely available.
Despite this, Moody’s report does note some positive developments.
Support for a global emissions levy, which would make polluting more expensive and sustainable fuels more attractive, is gaining momentum within the IMO.
However, whether this proposal will be adopted remains unclear, leaving the shipping industry without a clear path forward.
The shipping industry also plays a crucial role in global supply chains, meaning its emissions have broader implications.
These emissions include both upstream transportation — such as the shipment of materials to manufacturers — and downstream transportation, where finished goods are delivered to customers. This adds pressure on businesses reliant on shipping to reduce their carbon footprints.
"Without policies to stimulate demand and production of green fuels, the shipping industry will struggle to decarbonise in any meaningful way," Moody’s says.
As long as regulators focus solely on reducing emissions without addressing the fuel supply issue, shipping companies will remain dependent on fossil fuels.
For now, the future of decarbonisation in the shipping industry is uncertain.
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