Decarbonising Near-Shore Fleets: Challenges and Opportunities

by Andrew Southwood, Marine Finance, Siemens Financial Services UK

Following the government’s maritime decarbonisation strategy, the industry is planning around three milestones:

• 30 per cent reduction in greenhouse gas emissions by 2030

• 80 per cent reduction by 2040

• Net-zero emissions by 2050

Speed is therefore key in the industry’s transformation.

The scale of investment

Achieving decarbonisation will require substantial investment in new vessels, retrofitting existing fleets and developing supporting infrastructure.

For context, an estimated £75 billion ($99 million) will be required over the next three decades for the UK’s domestic maritime sector to achieve net-zero.

By comparison, the size of the marine finance market for UK SMEs is only around £2 billion ($2.6 billion) – highlighting the scale of the funding gap.

Risk factors

Unlike deep-sea shipping, which benefits from economies of scale and global fuelling infrastructure, near-shore fleets operate smaller vessels on shorter routes, with limited refuelling or recharging options – complicating decarbonisation choices. Uncertainty around future fuels, infrastructure and regulations further increases investment and lending risk.

Despite these challenges, decarbonisation is unavoidable. The industry therefore needs immediate, medium and long-term solutions, supported by financial institutions that understand its unique challenges.

READ: Maritime Leadership: Longevity, Talent and Sustainability

Near-term engineering solutions

In the short term, efficiency gains offer the most straightforward progress. Design improvements – such as weight reduction – can lower fuel consumption with relatively modest upfront cost, and in some cases deliver direct savings.

Battery systems also remain among the most scalable solutions for smaller vessels. Near-shore operations with predictable, short routes are currently best-suited for battery technology.

Barriers to adoption remain – including limited onshore grid capacity, energy density, weight, and cost. However, continued improvements in battery performance, pricing, and infrastructure are steadily strengthening battery systems’ viability.

Medium-term engineering solutions

Medium-term options reduce emissions today while providing future flexibility. For instance, any operators are adopting hybrid systems that pair diesel engines with battery packs.

These enable “silent running” in ports and peak shaving during high-demand operations. They offer measurable fuel savings and reduced emissions without full electrification – a flexible ‘bridge technology’.

Other transitional solutions include: diesel-electric propulsion for easier future integration with batteries or fuel cells; using methanol as a marine fuel to reduce emissions without significant changes to vessel design and bunkering infrastructure; or digital energy management systems that optimise power use across batteries, generators, and propulsion.

For larger vessels, wind-assisted propulsion also offers proven fuel and emissions savings, with affordable costs and payback within the equipment’s useful life.

READ: UK Chamber warns ETS risks costs without cutting emissions

Evaluating future fuels

Several options are emerging, each with advantages and trade-offs, but none yet satisfy all operational, environmental, and economic needs.

For small and medium commercial vessels – including workboats, ferries, service craft, and near-shore cargo carriers – the future fuel landscape presents unique opportunities and limitations, summarised below:

Fuel type	Pros	Cons
Hydrogen	Feasible for short-range, small vessels in regions with early hydrogen infrastructure	Storage constraints and safety regulations pose challenges
Ammonia	May eventually play a role in larger coastal vessels, subject to major regulatory and engineering developments	Less suitable for smaller vessels in the short term due to toxicity concerns, high safety requirements, and a lack of proven small-engine technologies
Methanol	Greater near-term potential for smaller vessels because it is liquid at ambient temperatures, compatible with modified diesel engines, and relatively easy to handle	Lower energy density
Biofuels	‘Drop-in’ capability means small vessel operators can reduce emissions today without changing equipment or infrastructure (though)	Concerns about sustainable sourcing remain
Synthetic/ E-fuels	A potential long-term solution for smaller vessels, offering a path to decarbonisation without major changes to vessel design	Currently expensive and limited availability

Assessing lending partners

Alongside technology choices, shipowners must secure appropriate financing. Because the transition is regulation-driven rather than cost-led, new technologies may not deliver immediate savings. Financing partners, therefore, need the appetite to share the risks of sustainable investment.

Specialist lenders with maritime expertise can support the shift to low-emission technology, but owners must identify those capable of structuring affordable, cash-flow-friendly solutions.

Developing strengths

As the UK Government places itself at the forefront of maritime decarbonisation, regulation is likely to tighten faster than in many other markets. At the same time, customers increasingly expect suppliers to support supply-chain decarbonisation, making low-emission vessels essential for winning contracts.

While near-shore operators face challenges, they also have advantages. Shorter routes may make them better suited to batteries, hybrid systems and alternative fuels that remain impractical for deep-sea shipping. The focus now is to turn those advantages into opportunities.

Learn more about vessel and marine financing here.

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