A lack of consumer visibility and the extraterritorial nature of shipping explain in part why the industry’s has lacked regulation on Greenhouse Gas emissions to date. Ships account for over 1 billion tons of CO₂e annually, or around 3% of global anthropogenic emissions, in addition to being a major emitter of other pollutants such as SOx, NOx, Particulate Matter and Soot (that contains black carbon).

Moreover, shipping has a number of agency problems blocking demand for fuel-efficient technologies that are increasingly widely available:

• “The landlord and tenant scenario”: The shipowner or ship operator rarely pay for marine, or “bunker” fuel. Rather bills are picked up by the customers (charterer) meaning few incentives to owner / operators to improve efficiency
• Shipyards: The majority of shipyards, located mainly in Asia, build to standard type and charge a prohibitive premium to owner / operators for new technologies and vessel designs
• Charter party agreement: In some cases as old as 150 years, charter party agreements are outdated and focus on cost, speeds, age and tonnage – not eco-efficiency and fuel burn over a vessel’s lifespan or charter-span
• Indexing and Rating: To encourage educated decisions, shippers, ports and other stakeholders such as insurers need access open and transparent environmental performance ratings
• Information flows: According to the International Maritime Organisation (IMO), the UN body that governs shipping, the industry has an opportunity to make money reducing the first 250 million tons of its CO2e; but how many companies in and connected to the industry know this?

The shipping industry is the largest emitter of NO_x and is also one of the largest emitter of SO_x. Under business-as-usual, harmful emissions from this sector will continue to rise as demand for freight increases. According to the IMO, CO₂e emissions from ships will reach 18% of all manmade Greenhouse gas emissions by 2050 under “business as usual”.

Moreover, despite some regulation for the reduction of SO_x and NO_x, shipping pollution poses serious human and environmental health risks, providing additional motivation to reduce emissions. Particulate Matter emissions from ships contribute to an estimated 60,000 premature deaths annually, as reported in a 2007 study by Corbett, et al., published in Environmental Science & Technology. Reducing emissions is technically feasible using current technology, and, in the case of efficiency measures to reduce fuel consumption, can contribute cost savings that make it economically attractive with appropriate financing of upfront costs. The IMO GHG Study 2009 estimates that eco-efficiency technologies could reduce CO₂e emissions from shipping by between 25% and 75%. Of those emission reductions, the first approximate 25% of reductions could be achieved, according to the study, “profitability”.