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Waves of change: Assessing the potential impact of a carbon levy on shipping costs

Regardless of the decision related to the carbon levy proposal, history has shown that the maritime industry will face new challenges each year.

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James Morgan and James (Jay) Campbell, both Directors of the Process & Technology practice at global energy business advisory firm Opportune LLP, on Thursday (29 October) shared with Manifold Times an original article on how a proposed carbon levy will affect the global shipping industry:

The year 2020 has been one of unexpected change and it has been no different for the maritime space. On January 1, the International Maritime Organization (IMO) started enforcing a new regulation (IMO 2020) that caps the allowable sulfur content of all global fuel oil used in ships from its former level of 3.5% m/m (mass/mass) to 0.5% m/m. The demand destruction in the oil markets led to a flood of traders chartering vessels for floating storage and high volatility in charter prices. Between March 2020 and May 2020, one-year very large crude carrier (VLCC) rates increased 100%. The spot rate was even more volatile, with the TD1 route (Arabian Gulf to U.S. Gulf Coast) seeing over a 500% increase.

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The most recent wave of change came in the form of a proposal to the IMO from Trafigura introducing a carbon levy of between $250 per metric ton (/mt) and $300/mt of CO2 equivalent on shipping fuels. 

What would the impact of this proposal be to the oil industry if this carbon levy were instituted?  According to Reuters, in 2018, the shipping industry was responsible for over 1 billion tons of CO2 emissions. Based on the United Nations Conference on Trade and Development, crude oil accounts for 17% of maritime cargo. This would imply that crude oil shipping is responsible for roughly 179,520,000 tons of CO2 emissions. In 2018, 1.886 billion tons, or 13,824 million barrels (bbls) of crude oil, were transported via ship. Considering the proposal has an undefined benchmark at which the levy would be applied, it’s not exact math, but even if only 20% were applied, a VLCC voyage would have cost up to $1.5 million more. Given today’s VLCC rates, a 30-day voyage only costs about $900,000 for freight only.

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In 2019, there were about 7,400 crude oil tankers in use globally, of which only about 175 of them are LNG-fueled vessels (just under 2.5%). The Trafigura proposal would impact 97% of the oil tanker fleet and give any owners or charters of LNG-fueled vessels a significant competitive advantage in the market. While these levies will be assessed to the ship owner, it’s all but certain that they will be passed along to any charterers. Ultimately, freight rates will be market driven, so this levy would be an additional hurdle for those owners using fuel with greater emissions. All of this results in increased cost to the end consumer.

Steering Towards Renewables

More energy companies are turning their focus to clean and renewable energy options. Companies like BP, Shell, and Total have invested close to $10 billion in renewable energy projects. While these investments have low initial returns, a proposal of a levy on high-carbon fuels, while providing subsidies for low-carbon fuels, may be a bit like Robin Hood—robbing from the traditional fuel oils to pay for their replacements and ultimate demise. It’s also interesting to note that the company proposing the high-carbon fuel levy recently announced plans to invest $2 billion into renewable energy projects.

What Are The Options For Low-Carbon Fuels?

  • LNG – Liquified natural gas (LNG) is a proven and available commercial solution. In recent years, both Shell and ExxonMobil have invested in projects to provide LNG bunker fuels. There are currently more LNG-fueled ships under construction than there are in production, but it’s still a small percentage of the total shipping capacity. While LNG has been hailed as the best fuel to meet the IMO 2020 regulations, there are concerns of how “green” LNG really is
  • Hydrogen – Shell recently published a report suggesting that liquid hydrogen was advantageous over other potential zero-emission fuels. 
  • Bio Fuel Oil – In September 2020, ExxonMobil completed a successful sea trial using marine bio fuel oil. Both hydrogen and bio fuel oil offer promise, but it hasn’t been as fully developed as LNG, so there’s still research to be done.

Regardless of the decision related to the carbon levy proposal, history has shown that the maritime industry will face new challenges each year. New regulatory changes will come and with those the continued need for companies to be able to timely and accurately track and report their voyages, fuel usage and emissions. What will the next wave be?


Photo credit: Opportune LLP 

Published: 30 October, 2020

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Alternative Fuels

Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

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Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Taiwanese shipping firm Yang Ming Marine Transport Corporation (Yang Ming) and South Korean shipbuilder Hanwha Ocean on Wednesday (2 September) signed a shipbuilding contract for six 13,000 TEU class LNG dual-fuel container vessels. 

The contract was signed by Dr. Chuck Tsai, Chairman of Yang Ming, and Mr. Charles Kim, CEO of Hanwha Ocean. The vessels are scheduled for delivery between 2028 and 2029. 

They will complement Yang Ming’s existing fleet of 10,000+ TEU vessels and serve as key vessels on East-West services, with deployment flexibility across trade lanes connecting Asia with the East and West Coasts of North America, South America, and the Mediterranean. 

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

“As Yang Ming transitions toward net-zero emissions, LNG provides a relatively mature and economically viable alternative fuel solution, capable of reducing greenhouse gas emissions by approximately 20%,” the company said. 

“At the same time, ammonia can serve as a carbon-free fuel by utilising converted LNG storage facilities, while offering relatively lower conversion costs and comparatively well-developed supply chains and infrastructure. The Ammonia Fuel Ready design will therefore provide Yang Ming with greater flexibility in responding to increasingly stringent international regulations on greenhouse gas emissions.”

In addition, the vessels will be equipped with Type B LNG fuel tanks with a design pressure of 1.0 bar to enhance the safety and efficiency of LNG operations, together with a range of energy-saving technologies, including Wind Shields, Rudder Bulbs, Pre-Swirl Stators, and Shore Power Systems. Smart ship technologies and cybersecurity protection features will also be incorporated to enhance operational efficiency, safety, and reliability while effectively reducing fuel consumption and greenhouse gas emissions.

Deliveries under Yang Ming’s next-generation fleet optimization plan commenced earlier this year. By 2030, a total of 24 new vessels are expected to enter service. 

This includes 18 LNG dual-fuel vessels—comprising five 15,500 TEU, seven 16,000 TEU, and the six 13,000 TEU vessels under this contract—alongside six 8,000 TEU methanol dual-fuel-ready ships. 

 

Photo credit: Yang Ming Marine Transport
Published: 4 September, 2026

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Alternative Fuels

LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Both secured AiP for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

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LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Lloyd’s Register (LR) and the Marine Design and Research Institute of China (MARIC) on Thursday (3 September) have secured Approval in Principle (AiP) for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

Announced at SMM 2026, the concept addresses one of the biggest investment challenges facing shipping today: the need to develop vessels and capabilities that can support a range of alternative fuel options and pathways as technologies, infrastructure and regulations evolve.

While LNG is already a mature fuel pathway, methanol and ammonia remain at an earlier stage of development, with questions around global fuel availability, infrastructure development, economics and long-term adoption.

The 114,000 DWT tanker concept has been designed as a product and crude oil carrier that can accommodate future conversion to LNG, methanol or ammonia as technologies, regulations and fuel supply chains mature. By incorporating conversion readiness at the design stage, the concept aims to reduce future retrofit complexity and provide owners with greater confidence when planning long-term fleet investments.

The design concept was reviewed against LR’s July 2026 class rules and regulations, including requirements relating to ships using gases and other low-flashpoint fuels, alongside relevant IACS Common Structural Rules for oil tankers. Final classification and statutory approval remain subject to full compliance with all applicable rules and regulations.

Theo Kourmpelis, Global Business Director for Tankers, Lloyd’s Register, said: “Shipowners are being asked to make major investment decisions today despite continued uncertainty around which fuels will dominate in the decades ahead. Alternative fuel solutions each offer potential pathways to compliance, but fuel infrastructure, regulation and economics continue to evolve at different speeds around the world.

“Designs that preserve flexibility will be critical in helping owners manage risk while preparing for multiple future scenarios.”

Si Nan, Marine & Offshore Marketing Department Vice Director, MARIC, said: “As the industry explores different decarbonisation pathways, shipowners need vessel designs that can adapt alongside technological and regulatory developments. This concept was developed specifically to provide greater fuel flexibility and long-term resilience, allowing owners to respond to changing market requirements without being locked into a single fuel strategy.

“Receiving Approval in Principle from Lloyd’s Register is an important milestone that validates the design concept and supports its future development.”

 

Photo credit: Lloyd’s Register
Published: 4 September, 2026

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Alternative Fuels

DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

LNG-fuelled vessels accounted for the vast majority of August activity while the strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year.

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DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

Latest data from classification society DNV’s Alternative Fuels Insight (AFI) platform alternative-fuelled vessel ordering was strong in August, with 52 new vessels added to the platform.

This is the highest monthly total since October 2024 and follows another active month in July, when 47 vessels were added to the database.

LNG-fuelled vessels accounted for the vast majority of August activity, with 46 orders recorded. The container segment led the way with 30 orders, while the car carrier segment contributed a further 12 LNG-fuelled vessels. In addition, four ethanol-fuelled bulk carriers and two hydrogen-powered bulk carriers were added during the month, as well as one LNG bunker vessel.

The strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year. In total, 242 alternative-fuelled vessel orders have been placed in the first eight months of 2026, representing a 27% increase compared with the same period in 2025.

LNG remains the dominant fuel choice, accounting for 63% of all alternative-fuelled vessel orders registered so far this year. Container vessels represent the largest share of these LNG orders (59%), followed by car carriers (30%).

Jason Stefanatos, Global Decarbonization Director at DNV Maritime, said: “The past two months have been particularly strong for alternative-fuelled vessel ordering, with August recording the highest monthly total we’ve seen since October 2024. This has helped lift year-to-date orders to a level well above the same period last year.

“LNG remains the leading fuel choice, driven largely by activity in the container and car carrier segments. These sectors have been among the earliest adopters of alternative fuels, supported by predictable liner operations and increasing demand from cargo owners to reduce emissions across supply chains. 

“For many owners, LNG offers a combination of emissions reductions, fuel availability and future flexibility while the longer-term fuel landscape continues to evolve. 

“At the same time, the latest figures include orders for ethanol- and hydrogen-fuelled vessels, highlighting that owners continue to explore a range of decarbonization pathways. Different segments are making different fuel choices, but the overall level of activity demonstrates continued investment in lower-emission shipping.”

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Photo credit: DNV
Published: 4 September, 2026

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