Ship Finance: an essential tool for the sustainability of EU shipping

EU’s industrial competitiveness, economic security and autonomy requires the sustainability and global competitiveness of the European shipping sector. Sufficient and affordable access to ship finance is a major factor and an important prerequisite for this. Against the substantial decrease in commercial bank ship financing in the EU, especially since 2008, EU legislators should seek to introduce a sustainable overall financial framework. The ultimate objective should be to increase commercial bank lending to the shipping companies that rely on this form of financing as well as to introduce complementary funding instruments via the capital markets and alternative fit-for-purpose financial tools.

The sector’s decarbonisation entails high transition costs and uncertainty about the availability of alternative fuels. Existing estimates show that an additional $8 billion-$28 billion will be required annually to decarbonise vessels by 2050. More investments, ranging from $28 billion to $90 billion annually, will be needed to develop infrastructure for 100 per cent carbon-neutral fuels by 205013.

Access to competitive ship finance and public funding for the energy transition of the shipping sector will be crucial. At EU level, the earmarking of 20 million emission allowances for projects supporting the decarbonisation of shipping is a small but positive step forward. Nevertheless, the EU Innovation Fund which will manage these funds, needs to prioritise fit-for-purpose projects that primarily ensure the production and deployment of alternative fuels at competitive prices for all ships and bridge their price gap with conventional marine fuels.

Access to affordable and sufficient ship finance is key to the sustainability and continued international prominence of EU shipping.

13UNCTAD, Policy Brief No. 112, November 2023