International efforts to secure a global net-zero framework are expected to remain stalled until at least October 2026, but existing European Union regulation is already providing the shipping industry with a measure of certainty around investment in green fuels.
Richard Meade, editor-in-chief at Lloyd’s List, writes that demand for low-carbon shipping solutions remains strong, underpinned by the EU’s FuelEU Maritime and ReFuelEU Aviation regulations, both of which are legally binding.
Despite a more defensive posture from climate advocates in the short term, the EU retains a pro-Green Deal majority until at least 2029, maintaining regulatory momentum in the bloc.
While political rhetoric around climate ambition has softened in some quarters, the financial incentives tied to decarbonisation remain firmly in place, he says.
“EU Emissions Trading System revenues from maritime-related emissions are projected to generate €10bn ($11.8bn) annually by 2030, and where that revenue goes matters materially to a lot of people.”
Although some climate regulation and voluntary agreements have come under pressure globally, ETS revenues are viewed as politically and fiscally untouchable within the EU, he adds.
With significant budgetary constraints in Brussels and mounting pressure to increase defence spending, removing decarbonisation measures would also eliminate a key revenue stream, a scenario widely regarded as untenable.
However, how much of that revenue will be reinvested directly into shipping has been the subject of intense debate, Meade argues.
“But European shipowners have been trying to direct the national ETS revenues to fund the uptake of clean maritime fuels and clean maritime technologies. Without a clear EU mandate, that is unlikely to happen in a sufficiently meaningful way, and maritime revenues will inevitably leak elsewhere.”
The issue also carries international sensitivities. Any perception that the EU is disproportionately taxing shipping linked to lower-income countries, while retaining revenues for domestic use, could complicate negotiations at the International Maritime Organization (IMO), particularly ahead of renewed efforts to reach a global agreement later this year.
Against this backdrop, early drafts of the EU’s forthcoming maritime strategy have attracted attention by indicating that ETS revenues will be directed towards maritime decarbonisation and that EU regulation could be aligned with the IMO framework should a global deal be reached in October.
While these signals have been welcomed by parts of the industry, significant uncertainty remains over how the commitments will be implemented in practice. Aligning EU and IMO approaches, as well as determining how funds are ultimately distributed, is expected to prove complex.
The final version of the EU maritime strategy is due to be formally unveiled next month. Although the overarching direction is likely to be well received, clarity on funding allocations and governance mechanisms is still some way off.
