The Decarbonization Dilemma: Navigating Uncertainty in the Shipping Industry

The shipping industry stands at a crossroads, faced with an “uncertainty dilemma” as it seeks to navigate the complexities of the decarbonization challenge. This dilemma and challenge is underscored by a qualitative survey from Houlder, a London-based design and engineering consultancy. Jonathan Strachan, Houlder’s Chief Technical Officer, shares findings of his discussions with shipowners, which highlight the difficult decisions they face amid tightening environmental regulations and shifting global policies.

A Spotlight on Uncertainty

The survey, which engaged shipowners across sectors including container, tanker, bulk, cruise, and ferry, reveals that uncertainty is a significant obstacle to the industry’s energy transition. With regulations evolving rapidly and often lacking clarity, shipowners find themselves torn between taking decisive action and waiting for more concrete guidance. As one passenger shipowner remarked, key questions remain unanswered, such as the definition of domestic shipping – and the potential phased implementation of policies like those seen in the European Union.

Complicating matters further, the political landscape adds another layer of unpredictability. In 2024, elections in 64 countries, including the United States, had shipowners closely monitoring potential policy shifts. Decisions from the new U.S. administration could significantly influence sustainability strategies, while a lack of clear direction from transport departments globally has delayed progress for many.

The Regulatory Compass

Despite the murky political waters, regulatory developments provide some direction. Compared to two years ago, shipowners report greater certainty regarding regulations such as the EU Emissions Trading System (ETS). Smaller owners see the ETS as increasingly impactful, while larger operators view it as a manageable component of their strategies, offering a reference price for carbon that informs daily operations and business planning.

FuelEU Maritime, however, looms larger in the minds of shipowners. With penalties for non-compliance as high as €2,400 per tonne of very low-sulfur fuel oil equivalent, this regulation has prompted more urgent action. According to one respondent, the stringent penalties have shocked businesses into prioritizing energy efficiency and future fuel adoption. “From an R&D point of view, these have helped secure support and budget,” they added.

Waiting for the Right Time

Inaction is not an option – we can’t let uncertainty become an alibi for inaction on decarbonization. Hardly headline news, but with regulations such as FuelEU Maritime, owners are running out of time. They need to accurately simulate scenarios with information available today to enable informed decision-making now. The industry’s predicament can be likened to navigating through fog: without navigational aids, progress slows to a crawl.

Arguing that waiting for perfect clarity is a strategic misstep. 100% certainty is neither possible nor necessary for shipowners to navigate the decarbonization maze. The leading shipowners are already starting the journey with the help of partners, staying agile to adapt, and remaining informed about the technological pathways available to them.

Charting a Course Forward

Two years after its last survey, Houlder’s findings highlight the persistence of uncertainty as a central theme. Shipowners are navigating challenges ranging from verifying clean technology performance to scaling green alternative fuels. What emerges clearly is that uncertainty, while daunting, need not be paralyzing.

By embracing adaptability, leveraging partnerships, and acting on the best available information, shipowners can move forward despite the fog. The outcome of this research is clear: progress on decarbonization is possible, but it requires bold decisions, informed risk-taking, and a willingness to change course as new challenges arise. The stakes are high, and time is running out. Yet with the right tools and strategies, the industry can stay on course toward a sustainable future.

Jonathan Strachan is Houlder’s Chief Technical Officer.