Navigating Environmental Compliance: Maritime Fleet Renewal Under Fuel Market Uncertainty

3 March 2026

 

Highlights:

  • Low-carbon fuel availability is often binding, so cost-optimal pathways prioritize “efficiency everywhere” and continued reliance on compliance-unit purchases during the transition.
  • Scarce low-carbon fuel volumes are prioritized for ships with longer remaining life and are often used to track a Base GFI target rather than to maximize surplus-credit generation.
  • Projected low-carbon fuel availability for maritime may remain insufficient to track a tightening Base GFI target, underscoring that meeting NZF targets at scale will require credible long-horizon signals to accelerate low-carbon fuel production.
  • Uncertainty-aware (stochastic) planning selects a more hedged early retrofit portfolio and improves cost and downside-risk performance relative to mean-trajectory planning.
  • Standard-based regulatory designs (such as GFI standards) can induce earlier technology commitment and sustained fuel switching, while a levy-only design can lead to persistent emissions payments and weaker structural decarbonization when price signals weaken.
  • One-tier standards can be close to two-tier outcomes for firm decisions but may require explicit safeguards to maintain sufficient carbon revenue generation.
  • Targeted rewards aimed at long-term scalable fuels (e.g., e-ammonia) can support gradual early uptake, enabling learning and infrastructure scale-up so that these fuels become cost-effective in the late 2040s and support sector-wide net-zero goals.

In the face of tightening decarbonization requirements and uncertainty in alternative marine fuel markets (cost and availability), this work develops a ship-resolved long-term fleet renewal planning framework from an individual liner shipping company’s perspective. The framework jointly optimizes renewal actions (energy-efficiency retrofits, dual-fuel conversions, and end-of-life replacement) and annual fuel deployment under fleetwide caps on low-/zero-carbon fuel availability, producing renewal pathways, sensitivities, and tail-risk metrics. A unified, modular compliance mapping captures fuel-intensity standards, deficit payments, surplus crediting with limited banking, and targeted rewards, enabling consistent comparison across regulatory architectures (e.g., NZF-type hybrid, one-tier standard with pricing, and a pure levy). We solve a deterministic benchmark and a scenario-based stochastic extension that captures joint fuel cost and supply uncertainty to quantify expected performance and downside exposure.

For a more in-depth understanding, you can access the paper here.

This research was supported by the Singapore Maritime Institute (SMI) Fellowship award (SMI-2023-FS-02).

Authors:

Irfan SOUDAGAR, Szu Hui NG

 

Scroll to Top