A just and equitable transition hinges on sufficient revenues

Shipping’s energy transition will likely have disproportionate negative impacts on lower-income countries.

Regardless of the exact design of the measures, they will likely increase the costs of imports and exports, hitting developing countries harder due to their general nature of commodity exporters and importers.

Given that both the transition itself and the measures to spur the transition will impact these countries, two questions remain: which options will keep the negative impacts to a minimum and which will be the best to mitigate the negative impacts created?

Firstly, the flexible compliance mechanism will likely reduce the negative impacts on gross domestic product (GDP) in the short run but will result in a significantly higher impact in the long run compared to options that include a levy and a revenue disbursement mechanism.

Secondly, with regard to mitigating any unavoidable negative impacts on developing countries, the only other option left on the table is to use revenue spending. This means that proposals need to be reviewed in light of how much revenue they generate. Paying out rewards for e-fuels will likely be a priority. A just and equitable transition will therefore require the generation of enough revenue to pay out the rewards while having sufficient money left over to support countries in their transition, for example by supporting fuel production, infrastructure development and capacity building, and supporting wider climate adaptation and mitigation efforts.

Conclusion

Achieving the IMO’s decarbonisation targets demands urgent and coordinated action across the global shipping industry. A robust international regulatory framework – currently being discussed at the IMO - can create the change needed at the scale and speed required to deliver zero-emission shipping by 2050.

The transition to e-fuels presents the most scalable and effective path to reducing emissions, but its success hinges on creating a viable business case for e-fuels. This requires addressing key factors such as cost competitiveness, investment risk, and fuel availability, enabling shipowners, fuel producers, ports, and cargo owners to commit to long-term investments. Scenarios under consideration centred around a GFS and suggested compromise solutions like a banded flexible compliance mechanism, are unlikely to drive certainty and reduce risk for e-fuel investments. A robust regulatory framework—anchored in a levy-and-reward mechanism—can however provide the necessary financial stability, investment certainty, and sustained revenue streams to drive the adoption of e-fuels over short-term alternatives.

A just and equitable transition must ensure that decarbonisation efforts do not disproportionately impact vulnerable economies. This involves implementing policies that minimise negative short-term effects while ensuring that revenues - generated from a levy - are equitably distributed to support developing nations. Access to financial and technical assistance will be crucial to enabling these countries to build the infrastructure and capabilities needed for their transition.

Ultimately, a clear and predictable policy landscape, supported by strong collaboration between governments, industry leaders, and financial institutions, will be essential to unlocking the full potential of e-fuels and ensuring maritime decarbonisation.

Full report: Global Maritime Forum