European Shipowners Seek €33 Billion to Fund Green Transition

European shipowners are calling for a threefold increase in emissions allowances to support shipping’s green transition, arguing that the European Commission’s proposed funding will not cover the high cost of cleaner fuels and technologies.

A new study by the European Community Shipowners’ Associations (ECSA) estimates that the sector needs at least €33 billion between 2028 and 2040, three times the approximately €11 billion available under the Commission’s proposal.

The estimate assumes a carbon emissions allowance price of €100 per tonne of CO₂. ECSA notes that alternative marine fuels currently cost an average of four times as much as conventional fuels.

How the proposed funding mechanism would work

The proposal centres on the European Sustainable Maritime Alternative Propulsion (SMAP) mechanism, which aims to help shipping companies adopt cleaner fuels and technologies.

Under the scheme, companies would receive carbon emissions allowances with financial value to offset part of the additional cost of the green transition.

The European Commission proposes allocating 110 million allowances for 2028–2040. ECSA argues that the sector needs at least 330 million allowances, three times the proposed allocation.

High costs of alternative fuels

The substantial price gap between conventional and alternative fuels remains one of the biggest obstacles to shipping’s transition to cleaner energy.

ECSA says sustainable marine fuels cost an average of four times more than conventional alternatives.

The Commission’s proposal would allow the SMAP mechanism to cover 55% of the remaining cost difference for biogas and advanced biofuels, 80% for low-carbon hydrogen and comparable fuels, and up to 90% for renewable fuels of non-biological origin.

The scheme would also cover 90% of the additional costs of eligible technologies.

However, ECSA warns that companies cannot count on receiving these maximum support rates. If applications exceed the available funding, the mechanism would reduce support proportionally across applicants.

The association therefore considers the total number of available allowances crucial to helping shipping companies plan future investments with greater certainty.

Shipping contributes around €9 billion annually to the EU emissions market

The study also highlights shipping’s financial contribution to the European Union’s Emissions Trading System (EU ETS).

Although shipping accounts for approximately 10% of emissions covered by the EU ETS, the sector purchases around 90 million allowances annually. This represents nearly 20% of the allowances auctioned under the system.

At an illustrative price of €100 per allowance, the sector faces an annual cost of approximately €9 billion.

Unlike other European industries, including steelmaking, cement production and aviation, shipping has not received free emissions allowances.

From the 2026 emissions year, shipping companies must cover 100% of the emissions falling under the European system.

ECSA estimates that, if emissions remain at current levels, shipping’s total obligation for 2028–2040 would amount to approximately 1.17 billion allowances, worth €117 billion at the assumed price of €100 each.

Even if the Commission adopted ECSA’s proposal for 330 million allowances, the funding directed towards the green transition would cover only around 28% of that total cost. Under the Commission’s current proposal, the share would stand at approximately 9%.

European shipowners lead orders for alternative-fuel vessels

The study also highlights European shipowners’ role in ordering vessels capable of using sustainable fuels.

According to figures cited by ECSA, European owners account for 44% of the global capacity of vessels on order that can use sustainable fuels.

However, building new ships alone will not deliver the necessary emissions reductions. The sector also needs sufficient supplies of alternative fuels at competitive prices, alongside the infrastructure and technologies required to use them.

ECSA is therefore calling for energy-efficiency projects to qualify for support. Such investments could reduce ships’ fuel consumption and emissions directly.

SMAP could cut annual emissions by up to nine million tonnes

The proposed mechanism could deliver environmental benefits beyond financial support for shipping companies.

According to the European Commission’s impact assessment, cited by ECSA, SMAP could reduce annual greenhouse gas emissions by between 1.7 million and nine million tonnes of CO₂ equivalent by 2035, depending on the level of available funding.

ECSA argues that developing a viable market for alternative fuels could accelerate shipping’s energy transition and help the sector meet the targets of the EU’s FuelEU Maritime Regulation.

The study nevertheless acknowledges significant uncertainties in its projections. Future fuel prices, production capacity and the development of new technologies remain difficult to predict.

(Source: AMNA)

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