A new report by the UCL Energy Institute and UMAS suggests that voluntary insetting schemes could play a pivotal role in accelerating the decarbonisation of the maritime sector during the period before regulations come into force. It notes, however, that long-term effectiveness will depend on the introduction of robust guardrails that promote the uptake of low- and zero-carbon fuels.
Insetting, defined as investments that directly reduce emissions within the company’s own value chain, could enable early investment in low- and zero-emission fuels prior to the implementation of regulatory measures under the International Maritime Organization’s (IMO) Net Zero Framework (NZF). If well-designed, these schemes could also help to aggregate demand and provide useful market signals during the sector’s emergence phase.
Dr Nishatabbas Rehmatulla, Principal Research Fellow at UCL Energy Institute, stated: ‘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 IMO NZF, approved in April 2025 at MEPC 83 and scheduled for formal ratification in October, is expected to establish a global regulatory baseline for emissions reductions across international shipping. However, the report cautions that if the IMO’s forthcoming lifecycle assessment (LCA) guidelines link compliance exclusively to the physical fuels consumed on board vessels, insetting schemes will operate on a fundamentally different accounting basis. This discrepancy could reduce the appeal of insetting as companies prioritise regulatory compliance.
Professor Tristan Smith of UCL Energy Institute, noted: ‘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.’
The study highlights several areas where current insetting initiatives fall short. These schemes often lack consistent methodologies for defining value chain boundaries. This creates ambiguity over whether emission reductions can genuinely be attributed to a company’s operations. The report recommends applying the Greenhouse Gas Protocol’s guidance, which limits insetting to projects ‘within the value chain, not adjacent to it’, and following the Smart Freight Centre’s Book & Claim methodology, which advises that transactions be restricted by mode of transport.
Verification also remains a significant concern. Few schemes incorporate independent third-party auditing, and the absence of universally recognised standards has raised questions about the reliability of emissions data. The UCL study recommends the adoption of independent verification mechanisms, potentially involving class societies or equivalent organisations, alongside clear and consistent public disclosure.
Closely related is the principle of additionality, which is often overlooked. This concept states that emissions reductions must go beyond what would occur in the absence of the intervention and must exceed current regulatory obligations. Without adherence to this principle, there is a risk that insetting schemes merely repackage offsetting measures without delivering genuine climate benefits.
The research also draws attention to the reliance on transitional fuels, such as biodiesel, which are favoured due to their availability and operational convenience as drop-in fuels. However, these fuels face supply constraints and are subject to demand competition from other hard-to-abate sectors.
Despite these challenges, the researchers conclude that voluntary insetting has the potential to complement regulatory efforts and accelerate early investment. However, its effectiveness will depend on timely implementation and alignment with future regulatory frameworks.
