Daily carbon costs set to rise sharply over a decade

The IMO has introduced new regulations aimed at achieving net-zero emissions for global shipping. These rules will have a direct financial impact on older, less efficient vessels that are more carbon-intensive.

Under the new agreement, by 2028, all ships over 5,000 GT – including those in EMF’s fleet and comparable market segments – must use fuel that is at least 17% less carbon-intensive than today’s standard Very Low Sulphur Fuel Oil (VLSFO). This requirement will rise to 43% by 2035.

Positive ramifications for modern fleets
Older vessels unable to burn lower-carbon fuels such as LNG or ammonia will face significant carbon costs. In contrast, modern, fuel-efficient ships – like EMF’s VLACs if operated on ammonia – could generate carbon credits, which may be: 1) Sold to other shipowners, or 2) Banked for up to two years to offset future emissions.

This regulatory shift is expected to:

• Increase the attractiveness of newer, dual-fuel vessels
• Accelerate scrapping activity among aging tonnage
• Tighten supply and support higher utilization across segments
  
  

Costs could become prohibitively high
As Clarksons notes: “The rising cost of operating on VLSFO could erode mid-cycle earnings for older, less efficient vessels, likely accelerating scrapping activity and strengthening demand for dual-fuel newbuilds.”

EMF’s portfolio of modern, eco-efficient vessels is well-positioned to benefit from these regulations – particularly our Very Large Ammonia Carriers (VLACs), which are capable of operating with near-zero emissions when using ammonia as fuel.