Green Shipping Corridors Face Cost Hurdles Despite Policy Support

While current and upcoming policies from the International Maritime Organization (IMO), European Union, and United States will improve the business case for green shipping corridors, additional support measures are still needed to make these initiatives commercially viable, according to a new report from UMAS, the UCL Energy Institute, and the Global Maritime Forum.

The study, titled ‘Building a Business Case for Green Shipping Corridors,’ examines how green corridor projects, which aim to establish maritime value chains for sustainable fuels like hydrogen-derived e-ammonia and e-methanol, continue to face significant cost barriers.

Key regulations, including the IMO’s new global fuel standard, the EU’s Emissions Trading System, and the US Inflation Reduction Act, will help reduce costs but won’t completely bridge the gap between e-fuels and cheaper compliance options.

The analysis covers three shipping sectors—gas carriers, containerships, and bulk carriers. While biofuels and blue ammonia currently offer lower-cost solutions, e-fuels like e-ammonia are expected to become more competitive as production costs decrease and compliance requirements strengthen.

With 62 green shipping corridor initiatives already announced, these early-mover projects could catalyze sustainable fuel production and development of necessary infrastructure, including storage and bunkering facilities.

Deniz Aymer, Senior Consultant at UMAS, emphasizes that “upcoming regulation will shift the business case for green shipping corridors,” but notes that “targeted support for e-fuels is needed” to fully bridge the cost gap.

Dr. Nishatabbas Rehmatulla from UCL Energy Institute warns that without clear demand signals and public support, green shipping corridors risk “failing to fulfil their crucial role as first movers” and may default to least-cost compliance options.

The report suggests several solutions to accelerate progress, including adapting business models and establishing long-term commitments from cargo and ship owners. Strategic partnerships across the value chain are considered essential for risk-sharing and advancing these projects.

Specific support mechanisms proposed include Contracts for Difference, e-fuel auctions, and multipliers for overcompliance with e-fuels. The IMO could potentially underwrite economic support through emissions levy revenues, though national governments might need to provide direct support in the absence of a global levy.

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