Impacts on the marine cargo industry

In February 2025, the UK’s Climate Change Committee (CCC) – the Government’s expert adviser on climate change – released the Seventh Carbon Budget.

This statutory report publishes the estimated amount of greenhouse gases (GHGs) that the UK can emit from within its borders between 2038 and 2042 to stay within the legally binding target of reaching net zero GHG emissions by 2050, compared to 1990 levels.

Shipping and aviation, first included in the Sixth Carbon Budget, have been notoriously hard to abate sectors and their emissions have continued to rise. Shipping currently contributes about 3% of total global emissions, and about 8% of the total UK transport emissions.

The Sixth Carbon Budget, covering the period from 2033 to 2037 requires a reduction in shipping related emissions of 78% by 2035 while the Seventh, covering 2038-2042, stipulates an 87% reduction by 2042.

UK’s Maritime Decarbonisation Strategy (UK MDS)

On 25 March 2025, the UK Government released the first domestic shipping decarbonisation targets, the UK’s Maritime Decarbonisation Strategy (UK MDS).  This document sets out the blueprint for transitioning the shipping sector to net-zero emissions by 2050, a strategy which aligns with the ambitions of the International Maritime Organization (IMO).

The targets set include a reduction of GHG emissions of 30% by 2030, 80% by 2040, and net-zero by 2050, relative to 2008 levels. Its implementation is expected to significantly impact the marine cargo industry, particularly shippers and receivers who are likely to bear the majority of the associated increase in costs.

The UK’s strategy is based on three guiding principles: (i) building on domestic expertise and innovation; (ii) coordinating the approach across all relevant stakeholders including the Government, regulators, international organisations and the maritime sector; and (iii) creating a policy framework that will allow for flexibility within the industry to help identify the most suitable decarbonisation route. The strategy outlines five key policy measures:

1. Regulating fuel use
The UK advocated for a GHG intensity fuel standard at MEPC 83 and introduced domestic regulations on maritime fuels, technologies, and energy sources to drive adoption of cleaner fuels such as hydrogen, electricity, and ammonia. The aim is to provide certainty to producers and suppliers of fuel and incentivise the switch away from fossil fuels.
2. Emissions pricing
Currently, the price of maritime fuels does not accurately represent the downstream impact of the associated GHG emissions and environmental impacts. The strategy includes expanding the UK Emissions Trading Scheme (ETS) to cover domestic maritime voyages from 2026 and the UK joined a coalition of States at MEPC 83 to push for a flat levy on carbon emissions from shipping.
3. Zero or Near-Zero emissions at berth
At present, almost half of UK domestic maritime emissions occur while vessels are at berth in ports. To address this, the Government is considering requirements for zero or near-zero emissions from vessels while in port.
4. Supporting smaller vessels
Smaller businesses face large barriers to meet decarbonisation targets, including a lack of resources and time for planning. To support this large portion of the sector comprised of smaller vessels, proportionate measures will be introduced to help smaller vessels decarbonise, driving the uptake of clean technologies in targeted subsectors. Initial focus will be on vessels with a clear route to decarbonisation, such as offshore wind vessels, whereas more difficult to decarbonise vessels may not be required until mid to late 2030s.
5. Energy efficiency
Driven by existing measures from the IMO, increasing energy efficiency across the maritime sector is a key focus and the UK MDS makes a commitment to work with the IMO to identify and agree how energy efficiency measures can be updated and strengthened.

The UK Government has committed to taking actions in support of these areas of focus. In addition, there will be a move to create an innovative regulatory environment, including collaboration with the wider sector to build green skills, alongside continued support for research and development.  The Government will also aim to develop at least one international green corridor from the UK by 2027/28 and three domestic green corridors in the same timeframe. This, coupled with working with international partners through the IMO to designate Emission Control Areas (ECAs), will support the goals of the strategy with future Government procurement of shipbuilding contracts.

MEPC 83 and its implications

The UK MDS was released in anticipation of the 83rd session of the IMO’s Marine Environment Protection Committee (MEPC 83), held in London from 7 to 11 April 2025. Notwithstanding a turbulent political environment, many key players were in attendance and seeking to establish a framework within which to achieve the IMO’s goals in reducing GHG emissions in the marine industry. At play were discussions around the world’s first global tax and stipulations on how and when shipowners need to switch to green fuels such as hydrogen, electricity or ammonia. The UK MDS broadly aligns with the global shipping sector requirements, as agreed at MEPC 83.

The decisions made at MEPC 83 are significant for and relevant to the marine cargo industry and are likely to impact the complexity and cost of shipping goods. Key decisions included:

1. Approval of MARPOL Annex VI amendments
The IMO agreed on draft amendments to MARPOL Annex VI, incorporating the Net-Zero Framework. This Framework mandates ships to reduce their GHG intensity of fuels used annually.
2. North-East Atlantic Ocean ECA Proposal
Consideration of the proposal for a new ECA in the North-East Atlantic Ocean.
3. Methane and Nitrous Oxide Emissions Guidelines
Finalization and adoption of draft guidelines for measuring methane and nitrous oxide emissions.
4. Onboard Carbon Capture and Storage (OCCS)
Approval of a work plan for a regulatory framework on OCCS.
5. Selective Catalytic Reduction (SCR) Systems Guidelines
Adoption of an MEPC resolution on 2025 Guidelines on SCR Systems.

While the outcome of the MEPC 83 Framework includes a historic first step, the reduction pathways laid out in the Framework do not set the industry on a path to meet the ambitions of the IMO’s own 2023 strategy and fall short of supporting the strategy laid out in the UKMDC. The outcome of the meeting suggests only a 10% emissions reduction by 2030, 60% by 2040, with net-zero emissions by 2050 likely out of reach within this current framework.

Impact on marine cargo operations

While the direction of travel is not unexpected, and notwithstanding the less ambitious MEPC 83 target, cargo owners and shippers will understandably be concerned about the impact these policies may have on their operations.

1. Integration into the UK ETS: The inclusion of the shipping sector in the UK ETS will require operators of larger vessels to pay for their GHG emissions. This cost is likely to be passed on to cargo owners through higher freight rates. Initially, the UK ETS will apply to vessels over 5,000 gross tonnes making domestic journeys and at berth in UK ports from 2026, with the threshold potentially lowered to 400 GT by 2037.
2. Shift towards cleaner fuels and technologies: The promotion of cleaner fuels and technologies may lead to higher initial costs. Investments in new vessels and port infrastructure will be necessary, potentially increasing shipping costs for cargo owners.
3. Green shipping corridors and ECAs: The establishment of green shipping corridors and new ECAs may involve specific requirements or higher costs affecting shippers using these routes and areas.
4. Regulatory changes and fuel standards: New regulations to increase the use of zero and near-zero GHG emission fuels could affect the availability and cost of different types of shipping, influencing logistical choices and expenses for cargo transport.
5. Impact on port operations and costs: Ports will need to invest in infrastructure such as shore power to meet the requirement for zero or near-zero GHG emissions from vessels at berth. These investments and associated port fees could indirectly affect the overall cost of shipping for cargo owners.

Conclusion

It remains to be seen how the UK’s Maritime Decarbonisation Strategy will support delivery of domestic targets without a more ambitious emission reduction pathway and larger penalties for non-compliance.

Both the MEPC 83 Framework and the UK MDS will have profound implications for the marine cargo industry. While the long-term benefits include more efficient and sustainable supply chains, cargo owners and shippers should prepare for short term increases in shipping costs as the industry transitions to cleaner fuels and technologies and adapts to new regulations, with new liabilities associated with vessel operation likely to increase the complexity of contracts of carriage.

The precise impact of these changes will depend on various factors, including technological development, alternative fuel costs, and the specifics of the regulatory framework implemented.
Source: Hill Dickinson