Can the EU continue to lead the maritime transition by turning carbon policy into investment?

The EU has built a bold framework for maritime decarbonisation, with the next challenge being to secure investment while maintaining competitiveness and global progress

A stronger EU policy signal, but not yet a decisive investment signal

European shipping has now moved decisively into a greenhouse gas pricing era. FuelEU Maritime provides a progressively tightening, well-to-wake greenhouse-gas intensity requirement that gives the sector a longer-term direction of travel. Its targets rise from a 2% reduction in 2025 to 80% by 2050. For shipowners weighing assets with operational lives measured in decades, that trajectory can matter as much as today’s carbon price.

Shorter-term carbon pricing comes in directly as a complement to FuelEU under the EU Emissions Trading System (EU ETS). Here, shipping companies surrender allowances covering 100% of their verified in-scope emissions for 2026 by the 2027 compliance deadline – now also including methane and nitrous oxide.

Together, these represent a major shift in shipping economics. Yet there is an important distinction between having a carbon price and having a carbon price high enough, and sufficiently predictable, to change long-lived investment decisions on ships, fuels and infrastructure. Carbon pricing strengthens the business case for cleaner options, but at current prices does not close the substantial cost gap between conventional and low- or zero-carbon fuels.

Closing the fuel-cost gap

The European Commission’s July 2026 proposals to revise the EU ETS are therefore particularly significant. They will now move through the European Union (EU) legislative process, with the final design subject to negotiation between the Commission, Parliament and Council. One of the most interesting proposals is the Sustainable Maritime Alternative Propulsion (SMAP) mechanism.

SMAP goes directly at one of maritime decarbonisation’s hardest “chicken and egg” problems. Low- and zero-carbon fuels remain substantially more expensive than conventional marine fuels. Shipowners are reluctant to sign long-term offtake agreements while that premium remains uncertain; producers, in turn, struggle to finance new production without bankable demand.

The proposal would reserve up to 110 million EU ETS allowances between its entry into operation and 2040 to help narrow the price differential for eligible sustainable fuels and zero-emission propulsion technologies. The scale depends on the EU allowance price but is potentially significant – if EU allowance prices are €100 per tonne of carbon dioxide equivalent, this proposal would represent around €11 billion of support for the sector.

Used well, that support could do more than subsidise fuel consumption – it could provide the revenue certainty needed to unlock long-term offtake agreements and investment in new fuel production, helping build the scale and confidence needed for wider market deployment.

Regional action cannot replace global alignment

But this sector is international, making the case for effective global measures through the International Maritime Organization. If comprehensive international agreement proves elusive, countries seeking faster progress will likely rely more on regional or national measures.

For example, the UK extended its own ETS to cover domestic maritime activity and emissions generated in UK ports from July 2026, while countries including Belgium and Türkiye are also exploring policy options to accelerate maritime decarbonisation.

Regional action can drive localised progress, but it can increase costs and complexity for businesses. International shipping companies operate fleets across multiple jurisdictions. A patchwork of carbon prices, fuel standards, reporting systems and support mechanisms makes compliance and investment optimisation more complex. This strengthens the case for coherent global policy leadership.

A policy architecture for investment

The EU supports global policy leadership on this matter but also has its own climate targets to meet; this balance will also come under scrutiny through the planned 2027 review of FuelEU Maritime. The EU has also recognised it has a more immediate challenge: not simply to make legislation more ambitious, but to make the combined policy architecture investable. EU ETS places a cost on emissions; FuelEU sets the long-term trajectory; and proposed mechanisms such as SMAP can help bridge the price gap that still prevents many clean-fuel projects from reaching financial close.

The Commission’s wider maritime policy agenda supports this direction of travel. The EU Industrial Maritime Strategy and EU Ports Strategy adopted in March 2026, recognise that competitiveness depends not only on cleaner fuels, but also on investment in shipbuilding innovation, port infrastructure, digitalisation, resilience and security. This matters because the transition cannot be delivered through vessel regulation alone. Ports will increasingly need to function as energy and industrial hubs, while shipyards, equipment manufacturers, and technology providers must develop and commercialise the vessels and systems the transition requires.

If these elements work together, Europe can do more than regulate maritime decarbonisation. It can use carbon pricing and fuel standards to create demand, targeted support to unlock first projects, and its industrial and ports strategies to direct investment towards the infrastructure, technology and capabilities needed for long-term competitiveness. In a period of uncertain global consensus, demonstrating that climate policy can catalyse rather than deter investment may be Europe’s most important maritime contribution.