Shipping’s transition: navigating regulation, fuel & finance
Shipping is entering a new era. Regulation, carbon costs and alternative fuels impact fleet decisions – and how we partner with clients through transition.
Global shipping is entering a decade of accelerated change with tightening regulations, scaling alternative fuels and carbon exposure starting to shape voyage profitability and vessel values. We discussed these themes in our recent Industries in Transition podcast episode, “Shipping: riding the clean tech wave,” (Spotify, Apple) where our maritime specialists – Abhishek Pandey, Global Head of Transportation Finance and Chih Chwen Heng, Head of Maritime Research and Decarbonisation – discussed how regulatory pressure, fuel innovation and financing are reshaping the industry.
For shipowners, choices made today around retrofits, renewals and fuel flexibility will determine their competitive position for years to come. As trade routes evolve and regulatory expectations strengthen, we work closely with clients to help them navigate uncertainty, build transition optionality, and secure access to the capital needed to modernise fleets at the right pace.
Shipping remains the cheapest and the least pollutive form of transportation to move one ton of goods for one mile. Shipping does the heavy lifting to get goods to their final destination.Abhishek PandeyManaging Director, Global Head, Transportation Finance
How are regulatory trends influencing long-term fleet strategy?
An increase in environmental regulations are moving the industry in the right direction. Effective from 2028, the International Maritime Organization’s (IMO) Midterm Measures will introduce a global carbon levy directly linked to a vessel’s emissions intensity, pending formal adoption in October 2026. These surcharges will apply to any ship sailing in international waters and increase over time, influencing investment and operational decisions across the shipping industry.
Regionally, the EU Emissions Trading Scheme (ETS) already imposes carbon costs for vessels calling at European ports, while the UK ETS will come into effect this year. Combined, these systems establish a tangible cost for emitting carbon dioxide and create competitive differences across vessel classes.
During our podcast discussion, Chih Chwen captured the purpose of these shifts succinctly:
“All these regulatory policies are a means to an end; ultimately, for shipping to achieve its IMO targets of 20 per cent, 70 per cent, and net zero by 2030, 2040, and 2050 respectively.Chih Chwen HengHead, Maritime Research and Decarbonisation
Our participation in the Poseidon Principles steering committee reinforces this direction. As banks align their portfolios with decarbonisation trajectories, capital naturally flows toward more efficient, flexible and future-ready vessels.
These developments do not force shipowners into a single pathway, but they make it increasingly important to build structured transition plans.
How should shipowners evaluate their alternative fuel strategies?
The emergence of methanol, ammonia and biofuel variants has transformed fuel strategy into a complex decision for shipowners. Unlike other transport sectors, shipping is evolving toward a multi-fuel environment, as Chih Chwen emphasised in the podcast.
The consensus is that shipping will move towards a multi-fuel solution over the next 25 years, where all the fuels will have a part to play.Chih Chwen HengHead, Maritime Research and Decarbonisation
Owners are not looking for a single fuel choice. Instead, they are looking for the right fuel or combination of fuels, aligned to their trades, vessel ages, charterer expectations and long-term economics.
Here is a comparison of the leading fuel pathways:
| Fuel type | Emission reduction potential | Availability today | Pros | Cons |
| Methanol | Up to ~80 per cent | Growing | Good fuel availability | Higher cost |
| Ammonia | Up to ~100 per cent | Limited | High long-term potential | Significantly more expensive; with high toxicity creating handling concerns amongst crew |
| Biofuels (bio variants of Fuel Oil, LNG, methanol and ammonia) | 20-90 per cent | Moderate | Drop-in capability | Higher cost and Feedstock constraints |
Flexibility is becoming a strategic asset. Dual-fuel vessels are increasingly favoured because they allow shipowners to comply today while preserving optionality as alternative fuel economics continue to evolve.
Where are shipowners prioritising investment today?
Across the clients we speak with, and as highlighted in the podcast, investment is flowing into measures that generate rapid, meaningful improvements without locking in long-term configurations.
Energy-saving devices such as propeller upgrades, bow optimisation, pre-swirl stators and air lubrication systems are gaining strong traction. Abhishek described the momentum vividly:
Out of the 110,000 vessels on the water today, the two most popular ESTs (Energy Saving Technologies) are propeller enhancements and bow enhancements. Another innovative EST is air lubrication – affectionately called ‘the bubbles’.Abhishek PandeyManaging Director, Global Head, Transportation Finance
How we partner with clients to deliver their transition strategy?
At Standard Chartered, our role is to combine capital solutions with technical insight, regulatory understanding and long-term partnership. This is a consistent theme across our work and echoed throughout the podcast conversation. We support clients through:
Tailored transition financing
We offer sustainability-linked loans that incentivise emissions improvements, and transition financing that supports dual-fuel investments, energy-saving upgrades and green-compliant retrofits.
Strategic and regulatory advisory
Clients engage us to model carbon exposure, evaluate alternative fuels, and understand the implications of IMO Mid-Term Measures, EU ETS, UK ETS and Poseidon alignment.
Deep maritime sector expertise
Our specialists advise on CII/EEXI pathways, retrofit effectiveness, fuel readiness and the comparative economics of alternative fuels across global routes.
Long-term partnership
Transition spans multiple investment cycles. We work with clients across that horizon to plan timing, optimise capital structure and maintain commercial optionality.
Being innovative, aware of the implications of changing regulations and aligning with the Bank’s overall business strategy to support clients as they transition their businesses has been a core part of our success in the shipping sector.Abhishek PandeyManaging Director, Global Head, Transportation Finance
What should the shipping sector focus on moving forward?
For a structured transition, shipowners can consider focusing on:
- Modelling carbon-cost exposure across the EU ETS, UK ETS and IMO’s 2028 levy.
- Identifying vessels for upgrade, redeployment or renewal based on CII/EEXI trends and lifecycle economics.
- Deploying energy-saving technologies for rapid and meaningful CII improvement.
- Using biofuels to achieve near-term reductions while preserving fuel flexibility.
- Exploring dual-fuel capability for long-haul or younger vessels.
- Aligning financing strategy to secure liquidity and competitive pricing.
- Monitoring fuel-market developments to support flexible long-term decision-making.
In conclusion: turning transition into competitive advantage
Decarbonisation is transforming the shipping sector, and presents an opportunity to build more competitive, resilient fleets. With clearer regulatory signals and expanding transition-financing options, shipowners can take confident steps today that preserve value and secure access to high-quality trade lanes tomorrow.
We work closely with clients worldwide to help them interpret regulatory changes, evaluate fuel strategies and structure the right financing to support fleet renewal and optimisation. Explore how we can partner with you in your transition strategy
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