Turning Challenge into Opportunity 2025

How CfDs work in practice and their role in the transition CfDs are well-established in the power sector, where they have driven down costs of offshore wind and solar in Europe. For example, the UK’s renewable CfD scheme created stable revenue conditions that unlocked billions in project finance and reduced technology costs through predictable demand.34 In a shipping context, they could operate similarly: if the cost of e-methanol or e-ammonia exceeds the reference fossil fuel benchmark, the CfD pays the supplier the difference; if the clean fuel price falls below the benchmark, the supplier pays back into the system. The IMO’s postponed yet anticipated NZF sets binding GHG intensity targets and compliance milestones in 2030 and 2040, effectively requiring significant uptake of low-carbon fuels.35 Without complementary price-support mechanisms such as CfDs, first movers could face cost exposures that discourage investment. Design considerations Implementing CfDs in the maritime context will require tailoring them to sectoral dynamics in the following ways: –Reference price or benchmark could be tied to regional fuel markets, for example the cost of VLSFO (the IMO’s conventional reference fuel for compliance) in Singapore (the world’s largest bunkering hub). –Eligibility criteria should prioritize zero- and near- zero fuels (e-methanol, e-ammonia, synthetic fuels) to avoid transitional lock-in. –Volume-tranching could allow both large and small suppliers to participate, reducing concentration risk.36 –Funding sources could include revenues from carbon pricing regimes such as the EU ETS. CfDs should be seen as a bridge mechanism: not a permanent subsidy, but a tool to accelerate early deployment until scale-up and learning reduce costs. Importantly, low-carbon suppliers increasingly recognize CfDs as critical for making offtake agreements bankable. They reduce reliance on buyers alone to absorb the green premium and create a shared-risk framework between public and private actors. If designed well, CfDs can complement offtakes, aggregation models and book-and-claim systems, forming a comprehensive toolkit to bring clean shipping fuels from pilot scale up to mainstream adoption. CfDs are critical for making offtake agreements bankable. They reduce reliance on buyers alone to absorb the green premium and create a shared-risk framework between public and private actors. Insight: Flexible, aggregated demand models can overcome infrastructure and market fragmentation Why flexibility and aggregation matter Shipping’s supply chain for low-carbon fuels is highly complex: production sites are often distant from ports, bunkering infrastructure remains uneven and suppliers themselves are fragmented, ranging from industrial-scale energy companies to emerging start-ups. On the demand side, buyers have diverse operational needs and fuel strategies. Rigid one- to-one offtakes do not fit this landscape. Instead, flexible, aggregated demand models that pool commitments, adapt to diverse supplier profiles and coordinate distributed logistics are important to make the transition commercially viable. Addressing infrastructure gaps Even if production costs fall and demand rises, the absence of adequate bunkering, storage and transport infrastructure can stall adoption. The uneven development of bunkering infrastructure is one of the biggest constraints on scaling-up clean marine fuels. Production of e-methanol, e-ammonia and synthetic fuels is geographically clustered near renewable energy hubs, but bunkering capacity is limited to a handful of ports. The cost of building a global fuelling network for these fuels is immense and will likely require coordinated action between suppliers, ports and shipowners to avoid stranded assets. Aggregation is a key tool for bridging this gap. Green corridor models concentrate demand along specific trade lanes, pooling commitments to justify investment in storage, blending and fuelling infrastructure. The Global Maritime Forum notes that more than 60 corridor initiatives are now under development, serving as focal points for coordinated infrastructure investment and shared logistics.37 By aligning these initiatives with the IMO’s NZF, which could introduce binding global fuel-intensity targets and compliance checkpoints in 2030 and 2040,38 suppliers and ports can ensure that Turning Challenge into Opportunity: Supplier Voices from Heavy-Emitting Sectors 18