While over half of the current global ship orderbook, measured by gross tonnage, consists of vessels capable of operating on alternative fuels, less than 10% of the existing global fleet possesses the technology to utilize these greener energy sources. This stark contrast underscores the significant hurdles that remain in the industry’s transition towards a more sustainable future, reports Baltic Exchange.
Fuel Optionality
The OECD’s report, “The Role of Shipbuilding in Maritime Decarbonisation: Impacts of Technology Developments and Policy Measures,” highlights a strong inclination towards “fuel optionality” in the shipbuilding industry, with LNG-capable vessels currently dominating new orders. These vessels represent 37% of the orderbook by gross tonnage. Following LNG, methanol-capable ships account for 9.7% of the orderbook, while ammonia-capable ships have a smaller share at 0.55%.
Emerging propulsion technologies such as battery, hybrid, and nuclear power are also gaining traction for specific vessel types, although their overall adoption remains below 1%.
The report also points to a significant concentration in the design and construction of alternative fuel-capable vessels, with Chinese shipyards holding the largest share of the orderbook at 47% in Compensated Gross Tonnage (CGT), closely followed by Korea at 42%. Interestingly, the construction of methanol and ammonia-capable ships is primarily concentrated in Korea, China, and Japan, while biofuel-capable ships see a more diverse range of producing countries and manufacturers.
European engine designers play a dominant role in this transition, supplying over 65% of the alternative fuel-capable fleet and orderbook, indicating their strong position in developing the crucial engine technology for these vessels.
Innovation Slowdown
The capacity of shipyards to build vessels capable of operating on low or zero-emission fuels is increasing. In 2024, 82 shipbuilders were engaged in the construction of such vessels. Over the past decade, the proportion of active shipyards with the capability to build these advanced vessels has grown, ranging from 7% to 36% for different ship types in 2023. However, the report by Berger and Daniel highlights that this progress is not uniform across all vessel segments. Bulk carriers and tankers are lagging in the adoption of alternative fuel capabilities in newbuilds, while a significant portion of shipyards are constructing containerships and cruise ships with these features. Currently, LNG is the dominant alternative fuel in new construction, with methanol also showing increasing growth.
A concerning trend identified in the report is the slowing yearly growth in patenting activity for low-carbon maritime technologies. Despite the increasing pressure to decarbonize the maritime sector, the peak in the yearly share of low-carbon patenting within maritime technologies occurred between 2010 and 2015, according to the authors. This suggests a potential stagnation in the rate of innovation in this critical area.
Policy Levers
Government policies are identified as crucial for facilitating the transition to low and zero-emission shipping and shipbuilding. However, the OECD report highlights that current policies predominantly target the shipping sector rather than directly addressing the shipbuilding industry. According to Berger and Daniel, “While over 80% of assessed jurisdictions are implementing maritime decarbonisation strategies, most of these focus on the shipping sector, and less on the shipbuilding industry.” The report also points out that “5 out of 25 countries do not have a dedicated decarbonisation strategy for the maritime sector, potentially causing an inconsistent policy mix and enforcement of measures.”
The current trend in government policies leans towards support programs rather than mandatory regulations. The authors note that “Most countries focus their policy measures on strategies, roadmaps and a spectrum of government-backed support programmes to support decarbonisation.” Research and development (R&D) and the adoption and supply of alternative fuels are the most frequently targeted areas for policy interventions. In contrast, “binding measures, such as fuel standards or carbon pricing mechanisms are limited.” The report identifies financing the transition as a significant obstacle. To address this, the authors suggest that “increased government guidance can support green finance practices.”
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Source: Baltic Exchange
