Economic Costs and Benefits of Fuel Transition in the International Shipping Sector Under the IMO Net-Zero Framework

To assess the economic impact of the draft Net-Zero Framework proposed by the International Maritime Organization at the 83rd session of the Marine Environment Protection Committee on shipping fuel transition, an economic assessment model incorporating fuel costs, carbon emission costs and newbuilding or retrofit investment costs was developed. The model compared the unit transition cost and net present value of alternative fuels. Four scenarios combining transport demand and surplus unit (SU) prices were established to analyze fuel transition costs and economic benefits from 2025 to 2050. Results revealed that a positive economic return was achieved only in the early stage under the high-demand and high-SU-price scenario. Under the other three scenarios, fuel transition would introduce additional costs to the shipping sector, up to USD 293.37 billion by 2050. Fuel price and greenhouse gas fuel intensity were identified as key parameters affecting transition costs, while the SU price had a limited impact on net-zero compliance. Biofuels exhibited better economic performance than e-fuels, and investments in all alternative-fuel-powered vessels were unlikely to be recouped. Targeted financial support mechanisms for electro-fuels and a phased flexible compliance framework are suggested.