New analysis by UCL Energy Institute, with the assistance of UMAS, analysing voluntary insetting schemes in the maritime sector suggests that they could play a vital role in catalysing shipping’s decarbonization during the critical pre-regulatory period, provided they incorporate strong guardrails that lead to uptake of long-term fuel options.

The report, which synthesizes existing literature on insetting with a focus on maritime applications, defines insetting as investments that directly reduce emissions within the value chain. The analysis highlights that maritime insetting schemes, such as book and claim, offer significant opportunities by stimulating value chain thinking and providing early market signals during the emergence phase of the energy transition. These schemes can mobilize private investment into low and zero-emission solutions before compliance-driven measures become dominant.

Professor Tristan Smith (UCL Energy Institute) said: “with the approval of IMO’s NZF, there’s now greater, if not perfect, clarity on the role regulation will play in shipping’s energy transition and therefore key gaps for voluntary action to assist with. One key risk discussed in this report relates to how GHG emission reduction efforts are recognised in both regulation and voluntary initiatives, and therefore the benefit if voluntary actions can increasingly align with the likely form IMO GHG emissions accountancy will take.”

As well as presenting opportunities, including in the case of maritime insetting, there are risks. The report highlights several potential areas of risk and provides recommendations that can maximise the success and value of maritime’s use of voluntary insetting schemes.

Setting clear boundaries: Current schemes often lack clear guidance on defining value chain boundaries and the study recommends using GHG Protocol guidance restricting insetting boundaries to “within the value chain, not adjacent to it” and Smart Freight Centre Book & Claim Methodology, which recommends transactions be restricted by mode.

Verification: Limited examples of transparent and universal standards have led to concerns about emissions accounting integrity and of schemes “marking their own homework” and the report recommends using recognised independent third-party verifiers and transparent reporting processes

Promoting long-term solutions: Current insetting schemes predominantly rely on transitional fuel choices such as biofuels due to their immediate availability, relative ease of use as a drop-in fuel and cost-effectiveness but face scalability constraints due to limited supply and competing demand from other hard-to-abate sectors. This focus on transitional fuels creates significant risks of technological lock-in and diverting investment away from Scalable Zero-Emissions Fuels (SZEFs) such as green hydrogen, ammonia, which are essential for long-term decarbonization. The study recommends maritime insetting schemes should have clear guardrails that promote the uptake of fuels that are scalable and zero/close to zero emissions.

Dr Nishatabbas Rehmatulla (UCL Energy Institute) said: “The emergence phase of shipping’s energy transition requires ambitious voluntary action, and insetting schemes offer one mechanism to deliver this. To realise this potential, schemes must be grounded in the latest available science, governed by reliable third parties, and designed to promote scalable, long-term decarbonisation solutions.”
The study concludes that while insetting can be a valuable tool for creating a pathway to fully decarbonise shipping, its ultimate value will be measured not by the emissions credits generated, but by its ability to quickly accelerate the maritime industry’s transition to a zero-emissions future.
Full report available at: https://www.shippingandoceans.com/post/new-report-highlights-the-important-role-of-insetting-in-accelerating-shipping-s-transition

Source: UCL Energy Institute