Setting Course, an ABS Podcast

Balancing Ambition and Reality in Shipping

• American Bureau of Shipping • Season 1 • Episode 27

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In this episode, Senior Project Manager Konstantinos Vouroutzis and Sustainability Engineer Tim Badalotti join host Brad Cox to explore the latest findings from the seventh edition of the ABS Outlook series, Beyond the Horizon: Vision Meets Reality.

As lead authors, Vouroutzis and Badalotti, discuss the maritime industry’s ambitious emission goals and the market realities that challenge these targets. They highlight key checkpoints on the horizon, emphasizing the role of alternative fuels, energy efficiency technologies and sustainability financing in achieving goals.

Download the full Outlook here.

Don’t forget to share this episode on social media, leave a review on your favorite podcast platform or send feedback to podcast@eagle.org. Discover how ABS is helping advance the maritime industry at www.eagle.org.

Key Points

  • There is a tension between high sustainability ambitions and market realities.
  • Total maritime emissions are increasing despite improvements in carbon intensity per unit of work.
  • Green fuels like ammonia and hydrogen are still in early developmental stages.
  • Energy efficiency technologies are crucial for decoupling emissions from growing seaborne trade.
  • Regulatory compliance costs are expected to rise significantly in the coming years.
  • LNG remains a key transitional fuel for the maritime industry.
  • Fragmentation in the shipping industry presents challenges for integration and efficiency.

GUESTS

Konstantinos Vouroutzis is a seasoned Naval Architect and manager with over 20 years of experience in the maritime and offshore industries. He possesses a diverse skill set including expertise in management, project management, decarbonization, performance and energy efficiency of ships, green shipping, naval architecture, structural design and analysis, as well as regulatory compliance. He is a registered European Engineer (EUR ING) and Chartered Engineer (CEng, MRINA). In 2023, he joined ABS as a Senior Project Manager – Global Sustainability, where he leads strategic sustainability projects and key initiatives, while being an integral part of the department’s Leadership Team. He also serves as ABS’s representative in the Working Group of the Maritime Technologies Forum (MTF). Prior to joining ABS, he held various roles in other Classification Societies and ship design firms, demonstrating a diverse and extensive professional background.

Tim Badalotti is Principal Engineer at the ABS Global Sustainability Center in Japan. His primary responsibility is to assist Japanese clients in decarbonizing their fleets by offering technical and regulatory guidance, helping ensure that these efforts remain economically viable. With a background in Aerospace Engineering, Tim was previously a researcher on Mathematical Models for Fluid Dynamics before joining the industry. He is passionate about infrastructure design, modeling and optimization. His career spans multiple sectors, including railway and shipping. He used to be in charge of high-speed train design for the European market at a major Japanese conglomerate before transitioning to the shipping classification sector, where he has been developing new technologies, rules, and guidelines aimed at improving ship safety and decarbonizing operations, all the while collaborating with private and public stakeholders, mainly in Japan and Europe.

Brad Cox (00:07)
Welcome to Setting Course, an ABS Podcast, where we're charting the future of the marine and offshore industries. I'm your host, Brad Cox, and today we're taking a deep dive into the latest ABS Sustainability Outlook: Beyond the Horizon: Vision Meets Reality. 

Released at the ABS Sustainability Summit during London International Shipping Week, the seventh edition of the annual report explores how the maritime industry's long-term sustainability goals are running into near-term market realities.

To discuss the current state of the industry’s sustainability efforts and how those market realities are shaping the future, I'm very pleased to have the lead authors of this year's Outlook join the show. 

Joining us from the ABS Sustainability Center in Greece is Senior Project Manager, Konstantinos Vouroutzis. Thank you for joining us, Konstantinos.

Konstantinos Vouroutzis (00:48)
Thanks Brad. Great to be joining from Athens. We'll try to go through what we have found in this year's Outlook, which by the way is the seventh from the Beyond the Horizon series. Tim and I are glad to unpack the key signals we are seeing across policy, markets and technology.

Brad Cox (01:03)
And you know, tipped off our other guests there — and joining us from the ABS Sustainability Center in Yokohama, Japan, is Sustainability Engineer, Tim Badalotti. Thanks for being on the show, Tim.

Tim Badalotti (01:14)
Hi, Brad. I'm very happy to be here with you and all the listeners to unpack some of the highlights from the Outlook.

Brad Cox (01:20)
So, let's jump right in here. You know, we kind of tip this off with the title of the publication, but you know, while the team was putting together this year's Outlook, what was the overarching theme that really emerged from the research? Konstantinos?

Konstantinos Vouroutzis (01:34)
The big theme is the widening gap between the ambition and execution and of course what it takes to close it. Shipping's total well-to-wake CO2 emissions today is still about 121 percent of the 2008 baseline. This is a reminder that the efficiency gains have not offset growth in terms of trade. We can say that at the same time, we see practical levers such as efficient technologies, wind propulsion technologies, early onboard carbon capture activity, starting to scale in ways that can reduce well-to-wake emissions while zero, near-zero fuels mature. We need to note also that nuclear is part of the long game, but beyond 2035.

Brad Cox (02:16)
And Tim, were there any other big takeaways that really stood out to you while you were writing it?

Tim Badalotti (02:21)
Yes, I think that there were a lot of highlights and a lot of things that we put together into the Outlook. One of the key aspects was that of seeing the impact of the recent developments and regulations and the impacts that they would have over the long term to decarbonization, whether or not and how likely we are to be on track.

A lot of the analysis that we did was on the importance of short-term measures and the energy efficiency technology. So overall, there are topics that have been discussed before and that take center stage at any discussions that we're having in terms of sustainability. I believe the Outlook is the first time where they've been put all together, analyzed, and seen what concrete results that might lead to.

Brad Cox (03:02)
Looking at the near-term situation, Konstantinos kind of mentioned this a little bit already, but Tim, what is the current state of maritime emissions? I understand carbon intensity per unit of work done has decreased, but that's really only part of the picture, right?

Tim Badalotti (03:15)
Yes, Brad, that's exactly part of the picture. That was one of the main highlights from the Outlook is that we have witnessed in the past two decades decreasing carbon emissions on average for the international fleet. 

There's different reasons to that. Mainly, there are commercial reasons, the fact that ships have become slower with time and the slower the ship the higher the efficiency. Another reason is that ships have been getting bigger, so when you have a bigger ship with lots of cargo carried on a single vessel, that is more efficient than having several smaller vessels. So overall we're seeing that efficiency has increased and as a result the carbon intensity has decreased and the way that we define carbon intensity is grams of CO2 per unit of transport work. So grams of CO2 per ton mile. But we have also witnessed an increase in seaborne trade, so increase in transport work due to longer routes, due to more cargo. And that means that an increase in the denominator has led to an increase in total net emissions.

So on the one hand, you have that the intensity per unit of transport work has been decreasing. On the other hand, you have that because the transport work, the amount of transport work has increased, then the total CO2 equivalent emissions have been also steadily increasing. We notice a very good correlation with the increase of emissions with the increase of tonnage on the water, which is related to the increase in sea trade. So, this is the two aspects that we must consider when we talk about emissions. 

Brad Cox (04:59)
So obviously the total emissions are certainly one hurdle, Konstantinos, what are the key hurdles to meeting those goals, given that near-term data on emissions?

Konstantinos Vouroutzis (05:10)
Great question, Brad. There are three clusters that are standing out. First, the emissions math in the real world. The rerouting around the Red Sea and Panama constrains lengthened voyages and boosts up fuel burn. Our Suezmax example shows about 76 (percent), if I recall correctly, increase in fuel consumption and CO2 when going via Cape, which also compounds compliance costs under the EU ETS, FuelEU Maritime, and prospective IMO mid-term measures, the so-called GFI. That's a headwind against 2030 goals. 

Second, capabilities and capacity. Ammonia and hydrogen infrastructure is embryonic. LNG and methanol are further along, but yard time for retrofits becomes a bottleneck under realistic scenarios as early as 2028 to 2030. 

Third, policy and market mechanics. The new well-to-wake greenhouse gas fuel intensity framework and regional schemes are moving fast. Owners are also navigating crediting, pooling and reward, other penalty structures, while about two-thirds of the fleet is CII C (grade) or better, which still leaves a sizable compliance task.

Brad Cox (06:20)
So you mentioned the fuels, and of course the pace of green fuel developments was a recurring theme during London International Shipping Week, and something that's addressed in the Outlook as well. So, Konstantinos, how do things sit now for green fuels and what's the timeline for those options to be practical solutions?

Konstantinos Vouroutzis (06:37)
Checking the situation today, we can see that availability and affordability favor LNG, biofuel blends and methanol over green ammonia and hydrogen. This year's ABS Outlook quantifies a green premium, showing that e-methanol is roughly 2 to 4 (times), and e-ammonia or hydrogen 3 to 8 (times) the cost of conventional fuels at today's scales. Over time, costs will ease as producers chase cheap renewable windows and as larger projects drive electrolyzer scale.

On infrastructure side, LNG is mature with more than 170 ports already and a dedicated bunkering fleet, while methanol bunkering is expanding. For instance, Singapore issued a national standard in 2024. Ammonia is at the pilot stage. Rotterdam ran a controlled 800 cubic meters transfer in April 2025. While hydrogen is still limited to demos. Meanwhile, low-emissions hydrogen production could scale substantially by 2030 if announced capacity and FIDs materialize, but project conversion and offtake remain the swing factors.

Brad Cox (07:42)
So of course, you mentioned that cost and I think this next question really kind of plays into that. So we recently had an episode discussing energy efficiency technologies and their role in broadly supporting efficiency for the industry. Tim, how do not just EETs but other innovative technologies factor into all of this? Can they help bridge that gap while green fuel production scales?

Tim Badalotti (08:05)
Absolutely. The point that we mentioned with respect to increasing seaborne trade and decreasing carbon intensity, that is one of the biggest problems. And that is a binomial coupling between these two correlated factors that if we want to actually have stable and robust decarbonization over the long term, we should decouple.

So we should have technologies that allow us to trade as much as we want without generating an amount of CO2 that would impact our long-term decarbonization goal. To do that, ideally, we would want to have net-zero technology. That is not always possible, but at least we want our technology, whether it's fuel or whether it's equipment that we have on board, to reduce emissions down to a level that, virtually, even if we trade a little bit more, a little bit less each year, we don't have any drastic impact on decarbonization. So the goal is to reduce the emissions. The more we reduce them, the closer we get to being below the threshold that allows to decouple these two factors. 

Standard EETs, they are very important, but they have a limited effect on that because they reduce usually consumption and emissions just by a few points percent. To have a higher degree of decoupling between seaborne trade and emissions, we need to further reduce emissions. 

Beyond standard EETs, we have other solutions that we support as ABS, such as wind propulsion and onboard carbon capture. Wind propulsion is a very interesting solution because in the right conditions, if properly designed and if properly operated, it allows us to reduce CO2 by up to 20 percent or even more, which takes us at least below the threshold that, for instance, the IMO set for the next few years. So it has a very strong decoupling effect. 

Onboard carbon capture, it decouples, if you will, in a different way because it's a technology that is still in the development stage, even if we have seen a range of installations that we also supported as ABS, but it is relatively flexible in that we can tune at times some of the parameters to capture more or less. So, depending on how much we trade, how much we consume, how much we emit, we can decide to increase, to ramp up the amount of emissions that we capture. So it still allows some form of decoupling between trade and distance and emissions that we release in the atmosphere. And that is a very good bridge, if you will, towards the final decoupling technology, which is zero or net-zero or close-to-net-zero fuels.

Brad Cox (10:47)
Branching off of that point is how the cost of compliance with various regulations is expected to compare to the cost of green fuels. So Tim, how are these regulations going to impact operational costs?

Tim Badalotti (10:59)
You have a tension, if you will, between two factors when it comes to operational costs. One factor is the cost of fuel per se. So, cost of production, cost of transportation, cost of bunkering. The other factor is what was just mentioned, the cost of regulation. So, the cost of compliance. How much do you have to pay according to the CO2 that that fuel has emitted?

All in all, the decision whether or not to take up a certain fuel is given by these two factors and the total cost that ship owners, charters have to bear the burden of. So, fuel cost plus cost of compliance. 

So we have both international regulations and local regulations that to some extent are going to sum up. We expect that because of these regulations, definitely, EETs and fuels will become more appealing. We still see challenges. 


Brad Cox (11:49)
So of course, when you talk costs, the financial aspects of the industry certainly factor into that and can be big drivers for what the industry does. So, Konstantinos, how is the financial landscape of the industry reacting to these big sustainability trends?

Konstantinos Vouroutzis (12:03)
Capital is moving but it is conditional, Brad. Market signals are tightening. More than two thirds of shipping debt now is aligned with climate-linked lending. Sustainability-linked loans are at record volumes and investor frameworks like the Sea Cargo Charter continue to expand. 

It is notable that charter party clauses are increasingly tying rates to emission performance. And alternative fuel share could rise from roughly 2 percent to about 10 percent of bunkering demand by 2030, concentrating on defined corridors. 

At the same time, the transition costs are unevenly distributed. Our analysis puts additional cumulative fleet investment at roughly $400-600 billion to align with net zero by 2050, with around 65 percent falling on owners unless new architectures spread the risk. Public programs are de-risking private capital via grants and concessional loans. And we are seeing growing use of green bonds and long-term fuel contracts to underwrite projects.

Brad Cox (13:03)
So, you know, I always like to ask my guests to predict the future. And, you know, we certainly want to put the outlook in the Outlook here. So, with the challenges laid bare, what does the next five years hold for the industry? Konstantinos?

Konstantinos Vouroutzis (13:16)
We expect a very execution-heavy period. Trade flows will continue to adapt to geopolitical and climate related constraints, which means voyage lengths and speeds will influence emissions and costs. We project a rapid scaling of efficiency retrofits. We see that already. Wind propulsion technologies and air lubrication installations continue to climb. While we see also early onboard carbon capture deployments. At the same time, yard capacity becomes a strategic variable owners will want to secure early. 

On fuels, LNG and methanol infrastructure expands along high-volume routes. Alternative fuels, as a share of demand, grow but remain corridor-led. 

The through line is practical. Convert monetization into mobilization. Recycle revenues into bunkering, safety, training and corridors, and keep safety and reliability front and center as technology and policy converge.

Brad Cox (14:15)
Okay, great. So, wrapping up our time here, I'd like to get some closing thoughts from each of you. Maybe one big takeaway from the Outlook or what the industry can do to prepare for the future. Tim, would you like to start on that one?

Tim Badalotti (14:27)
Yes, absolutely. There's a couple of points that I think are very relevant because they came up in recent analysis that we did as ABS, but they would not have been straightforward if we had the same discussion, the same podcast a couple of years ago. And the first one is about fragmentation. Fragmentation is a very wide topic and we see fragmentation in the shipping industry across several of the aspects, of the facets that define shipping. 

So on the one hand, we have, for instance, ship types. have some ship types that are taking up decarbonization technology, sustainable technology, at a very faster rate than other ship types. 

We have fragmentation across ownership, so asset ownership. Most of the investment in decarbonization has been made by larger ship owners, which is natural because they have access to financing that smaller shipowners do not always have. 

We see fragmentation across the supply chain in shipping because we have system integrators such as shipping companies that then outsource part of the work to different suppliers. We have different suppliers that come from different regions. There's not always exchange of data that allows for the kind of optimization that we see in other sectors like the automotive sector. It is very well integrated. 

So what we see is that sharing resources and collaborations that are more flexible would allow for small and agile and flexible shipowners and shipowner/operators to still leverage regional and fragmented dynamics and decarbonize your fleet. This is something that we're going depth into in the Outlook, fragmentation and opportunities for decarbonization in a fragmented market. 

The second point, which I also think is very interesting, is that about nuclear. Nuclear is still nascent to some extent. But one interesting point is that we see now a lot of interest on floating nuclear power units. And that's something that we expect to see coming online in the coming few years. So maybe nuclear propulsion is still a way off, but we do believe that nuclear power barges and power units, they represent a technology that will open up the way to nuclear propulsion in the medium term. 

So these are two trends that are not straightforward, not often talked about, but are very important to us as ABS.

Brad Cox (16:47)
And, Konstantinos, any closing thoughts for our listeners?

Konstantinos Vouroutzis (16:50)
Sure, Brad. If I leave listeners with one thought, it's about sequencing with discipline. Let me elaborate more. The ABS Outlook points to a practical way to decarbonize safely, credibly, and affordably. Line up the steps in the right order and keep them coordinated. In the near term, that means using the tools that are already working at scale, operational measures, and energy efficiency technologies to cut fuel burn now.

Targeted retrofits where they pencil out and fuel choices that match today's infrastructure on specific routes. In parallel, the transition keeps building through ports, corridors and cost curves. We are going to see more places where vessels, bunkering and safety frameworks come together and those are the lanes where alternative fuels will move first. 

As that happens, it is important to synchronize the different policy frameworks so the same emissions aren’t charged twice and to de-risk retrofit programs in what is likely to be a tight yard market. Getting those basics right helps capital flow and keeps ships trading reliably while the next wave of fuels scales.

So the close is simple. Act on what's ready, prepare for what's next, and keep safety and reliability at the center as technologies and regulations converge. That's the path the outlook lays out for the next few years. 

Brad Cox (18:14)
Okay, great. So, I really enjoyed diving into the details of the latest Outlook with you guys. It'll be very interesting to see how things play out over the next few weeks, months, years. So, Konstantinos, Tim, I want to thank each of you for joining me for this episode.

Konstantinos Vouroutzis (18:28)
I would like to thank you, Brad. I appreciate the chance to walk through the findings. We hope that Outlook help stakeholders plan the next steps with a clear view on what's real now and what's coming.

Tim Badalotti (18:39)
Thank you very much, Brad. And I would encourage the listeners if they have any question or anything they want to discuss, definitely contact ABS. We're aware of the fact that no one may agree with everything that is in the outlook. No one has a crystal ball to know the future. But I will say that part of the Outlook is to engage in a conversation with the audience and whoever reads it. 

Brad Cox (18:58)
And for everybody listening, thank you for joining us for another episode of Setting Course. Be sure to subscribe, leave a review, and share this episode. To read the new ABS Sustainability Outlook or its executive summary, visit us at www.eagle.org. Thank you for listening.