Ø  If there is one consistent and increasingly vocal theme coming out of the liner shipping industry, it’s that an effective carbon pricing mechanism must be put in place on a global level to ensure customers will help fund the energy transition in the container sector.

Ø  With the concept of a carbon tax known to be controversial among member states of the International Maritime Organization (IMO), the repercussions from regulators falling short can’t be ruled out: ocean carriers having to shoulder a disproportionate share of the staggering costs to decarbonize, thus hurting industry financials — especially among smaller carriers — and possibly leading to yet further industry consolidation and less choice and competition. 

Ø  Similarly, the highly competitive liner shipping industry, judging by its minimal profitability over a period of decades prior to the COVID-19 pandemic, would face challenges passing along the higher cost of zero-carbon fuels in an environment of overcapacity and low freight rates that are frequently the reality during normal business cycles. Even today, the industry is finding it very difficult to pass on zero-carbon fuel costs to a majority of shippers; a very small percentage of shippers currently are willing to pay more for zero-carbon products, according to carriers and forwarders. 

Ø The much larger impact of decarbonization costs could force smaller and less efficient liners out of the market, thereby accelerating the steady march of consolidation. Between 1996 and 2022, the share of the top 20 carriers in container carrying capacity grew from 48% to 91%, according to the 2022 United Nations Conference on Trade and Development Review of Maritime Transport. 

Ø  “If there is a great variance in that additional cost across different liners, the ones with lower underlying costs. For example, the largest liners with green fuel offtakes, digitization, organizational muscles, etc. will get a relative advantage by being able to create their required profit margin at lower prices,” Jameson said. “I do not see that increasing green shipping regulation in isolation will push liners into difficulties; rather it could exacerbate already existing dynamics — disproportionately impacting smaller liners with less strong decarbonization capabilities."