THE nerves are starting to show.

Ignore for the moment any political considerations influencing next month’s pivotal Net-Zero Framework decision and just consider the business cases at risk.

Regardless of how robustly executed they have been, or how hedged the positions, how conditional the agreements — most businesses have been working towards an assumption of an eventual net zero future.

Across multiple London International Shipping Week stages, myriad speeches and interventions, this week has been an exercise in restating a case that many thought had been made and agreed to years ago.

But it bears repeating, particularly to those advocating a last-minute pause.

Decisions on zero-emission fuels depend on the business case, and without sufficient government or public financial support mechanisms it currently just isn’t strong enough.

While the policy environment continues to evolve it isn’t providing the certainty needed to unlock large-scale shifts.

Right now, producers lack the long-term revenue certainty to make projects bankable. Shipowners face price risks that prevent them from signing offtake agreements. Governments have limited capital to derisk early markets.

This is why the forthcoming guidelines for the implementation of the IMO Net-Zero Framework are so crucial.

The details of incentives, penalties and rewards will make or break the business case. They are catalytic for suppliers, customers and financiers across the value chain.

We need global market incentives to make the switch to e-fuels, and a growing portion of the fleet adopting them in the early years of the framework.

Without alignment across supply, demand, finance and regulation, the tipping point envisioned for 2030 will remain out of reach. The business cases fail. Assets will be stranded.

And what follows will be much, much worse.

As we heard repeatedly this week, the alternative to the Net-Zero Framework is not no regulation, it’s every country for itself. Lots of carbon taxes overlapping, with no industry input into how the funds are spent.

And even assuming we do see a messy, slightly dysfunctional outline of a global carbon tax pass next month, there is no big bang.

Fuel suppliers do not wake up the morning after MEPC closes with a hangover and declare the net zero fuel revolution to have arrived.

There are years of complex, difficult detail to be ironed out.

The devil in that detail is yet to emerge.

None of this is automatic or guaranteed. It requires the big, difficult decisions to be taken and for everyone to hold their nerve.

Richard Meade
Editor-in-chief, Lloyd’s List

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