Buyers show waning appetite for premiums needed to decarbonize shipping

The willingness of companies to fund the transition of maritime shipping to net zero is slowing, a survey by the consulting firm BCG has found.

The finding reflects uncertainties around the future of sustainable shipping, the authors noted. The industry handles around 80 percent of the worldwide trade in goods and produces 3 percent of global emissions in the process. Its chief regulatory body, the International Maritime Organization (IMO), has committed to transitioning the industry to net zero by 2050. But much of the progress to date has relied on voluntary initiatives by businesses. 

That has resulted in a low single-digit percent of the market being covered by the premiums needed to pay for low-carbon fuels such as ammonia and other innovations, said Alex Dewar, a managing director and partner at BCG and an author of the report. “It is a very, very small market today,” he noted.

Growth in the size of those premiums has slowed, according to a survey by Dewar and colleagues of 125 executives and other professionals working in logistics, supply chain and related areas. The average premium paid by cargo owners grew by 1 percentage point annually between 2021 and 2023, but slowed to a half percentage point increase, to 4.5 percent, in 2024. Eighteen percent of all cargo owners remain unwilling to pay a premium of any size, a fraction that has held steady since 2022.

Regulatory uncertainty

The slowing in growth is due partly to carriers holding back on investments until the regulatory picture becomes clearer. The IMO has set global targets, but it is up to individual countries to implement them. The European Union (EU) is a leader in doing so; since January, ships at EU ports have been subject to the FuelEU Maritime Regulation, which requires gradual decreases in the greenhouse gas intensity of shipping fuels, ending with an 80 percent reduction by 2050. But implementation elsewhere has been slower, deterring shipping companies from making investments, such as retrofitting ships to work with low-carbon fuels.

Uncertainty around the supply of low-carbon fuels is another issue, added Dewar. “There’s a chicken and egg problem,” he said. Some low-carbon fuels, including ammonia and hydrogen, require specialist infrastructure at ports and onboard ships. Carriers are wary of investing in vessels that run on these fuels until that infrastructure is in place, but fuel suppliers don’t want to build the infrastructure until ships are ready to use it.

This gloomy big picture does obscure signs of progress, however. The fraction of companies considered “frontrunners” in the survey, which BCG defines as being willing to pay a premium of between 5 and 20 percent, increased from 20 percent to 24 percent over the past 12 months. This group includes businesses in fashion and beauty, health care and food and beverage. Like others willing to pay a premium, they may be motivated a desire to cut Scope 3 emissions or to establish sustainability bona fides for marketing purposes, noted Dewar.

What companies can do

Firms on the buyer side of shipping can do a number of things to accelerate progress, said Dewar. More demand for sustainable shipping will obviously help, and initiatives are designed to facilitate that. BCG is a backer of the First Movers Coalition, a World Economic Forum project under which cargo owners commit to using zero-emission fuels on at least 10 percent of their goods by 2030 (and on 100 percent by 2040). Cargo owners can also join with others to aggregate demand for sustainable shipping through the Katalist “book and claim” platform.

In addition, buyers can help by providing clarity on standards for carbon accounting and other parts of the process for contracting for sustainable shipping. Dewar recommended two organizations working in this area: the Sustainability Consortium and The Consumer Goods Forum.

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