Executive summary
KEY FINDINGS
- The central financing barrier for decarbonisation in Inland Waterway Transport (IWT) is a weak business case: clean technologies generally require higher upfront investment costs and operating costs, resulting in materially higher costs than business as usual, while lower-emission transport rarely generates additional revenue.
- Climate policies such as carbon pricing and Renewable Energy Directive III (REDIII) can improve the long-term cost competitiveness of clean technologies, but do not necessarily make near-term investments financeable. Financiers assess repayment capacity over shorter periods, while clean technologies are still expected to face higher costs and policy-driven cost improvements remain uncertain.
- Existing public support is fragmented and largely focussed on research, infrastructure and upfront investment: it generally does not resolve the structural operating-cost gap.
- Uncertainty about technologies, regulation and the availability of alternative fuels and charging infrastructure increases the risks of clean-vessel investments, making future revenues and vessel values more difficult to predict.
- Small operators face particularly strong financing constraints: they have less ability to provide security for loans (collateral), lower financial capacity and limited administrative resources.
- Making green IWT investments financeable requires a coherent EU policy package rather than a single instrument: measures are needed to reduce upfront investment costs, narrow operating-cost gaps, create predictable demand, reduce financing risks and coordinate policy implementation across Member States.
Background
Inland waterway transport (IWT) is an important part of the European freight system, particularly on the Rhine and Danube corridors and in European countries with dense inland waterway networks. The sector is diverse and geographically concentrated, with around 13 400 freight vessels, 408 river cruise vessels and over 4 000 other vessels.
Decarbonisation of IWT will require substantial investments in clean fuels, alternative propulsion systems, retrofitting of existing vessels and supporting infrastructure. This study assesses the investment needs and financing barriers for decarbonising IWT, reviews existing funding and financing mechanisms, and identifies policy measures to strengthen the business case, reduce investment risks and improve access to finance.
Main findings
The central finding of this study is that the main barrier to financing IWT decarbonisation is not only access to finance, but also the weak underlying business case:
- Low and zero-emission technologies and fuels remain more expensive than fossil diesel, while green transport generally does not yet generate higher or more stable revenues. Fossil diesel retains a significant near term cost advantage under current and planned policy conditions. Fiscal reform is further complicated by international navigation regimes, while EU Emissions Trading System (EU ETS2) arrangements for inland navigation are not harmonised across Member States.
- This weak business case is reinforced by a highly competitive IWT market with narrow profit margins, in which clients currently focus primarily on cost efficiency.
- Long-term prospects for reliable navigation on European inland waterways are uncertain. Reliable IWT services depend on sufficient fairway depth, functioning locks and bridges, well-maintained channels and adequate climate adaptation, while significant maintenance needs and fairway bottlenecks persist in several countries.
- Many IWT operators are small companies or owner-operators with limited collateral[1], limited balance-sheet capacity and limited administrative resources. They are often exposed to short-term contracts or spot-market conditions, which reduces revenue certainty and makes it difficult to commit to capital-intensive greening investments.
Existing EU and national funding instruments provide useful support but are insufficient for large-scale IWT decarbonisation. Many programmes focus on capital expenditure, research, innovation or infrastructure, while the operational expenditure gap often remains the decisive barrier. Improving bankability[2] therefore requires an integrated policy package that strengthens the business case, creates more predictable demand and revenues, reduces technology, regulatory and infrastructure risks, and improves access to capital.
[1] Collateral is the asset pledged to secure a loan similar to a mortgage. In IWT, the collateral is usually the vessel itself. For owner-operators with older, smaller vessels, its collateral value may be limited.
2 Bankability refers to the extent to which an investment can attract financing, given its expected cash flows and the risks faced by lenders or investors.
Policy recommendations
Improving the bankability of low- and zero-emission inland navigation requires an integrated EU policy package. Based on the findings of this research and suggestions from stakeholder interviews, the following recommendations are provided:
- The operational cost gap relative to diesel should be reduced through a combination of coordinated carbon pricing, energy taxation and renewable-fuel obligations, complemented, where necessary, by temporary operating support and price-stabilising instruments such as fuel or carbon contracts for difference[1]. The implementation of European policy, such as EU ETS2, REDIII and related national measures, should be aligned across Member States to prevent fuel tourism, fragmented incentives and unequal competitive conditions. In addition, measures should be balanced with other modes to prevent an undesirable modal shift.
- EU policy should also create a market framework in which verified emission reductions generate economic value for the vessel owner or operator making the investment. Supply-side obligations under REDIII should therefore be complemented by measures that create demand for low- and zero-emission inland navigation, such as shipper-side targets, verified emission-reduction credits, public procurement requirements and, potentially, FuelEU-type[2] greenhouse-gas-intensity standard adapted to IWT. Monitoring and verification requirements should remain proportionate to the fragmented structure of the sector.
- Vessel support and infrastructure deployment should be coordinated. Connecting Europe Facility, Alternative Fuels Infrastructure Facility and national programmes should support charging, bunkering and shore-side electricity in locations where credible vessel demand exists, while vessel-support schemes should take account of route-specific infrastructure availability and operational requirements.
- The EU should consider establishing a blended-finance facility to address the specific financing risks associated with inland-vessel decarbonisation and support investment at scale. It could be developed within InvestEU, the proposed European Competitiveness Fund or another appropriate EU instrument. It should complement and help align national schemes by combining grants, concessional loans, guarantees and private finance for both newbuild vessels and retrofits. The facility should address IWT-specific risks, including limited collateral, uncertain residual values, retrofit completion risk and temporary income losses during installation. It should also allow support for phased transition pathways that deliver verifiable emission reductions in the short term while preserving the technical possibility of later conversion to zero-emission operation.
Finally, access to finance and technical support should be improved, particularly for small owner-operators. Simplified procedures, portfolio-based financing and project aggregation through cooperatives, shipping companies or sector organisations can reduce transaction costs. An IWT-specific one-stop shop, potentially developed by expanding the existing Ship Financing Portal, should combine information on financing instruments with technical advice, total-cost-of-ownership assessment and project-preparation support.
[1] Contracts for difference focus on offsetting the difference between the fluctuating market price of an energy carrier and a price defined in a contract and are often agreed between private companies and public authorities.
[2] FuelEU Maritime is a European Union regulation that progressively reduces the greenhouse-gas intensity of energy used by seagoing ships. A FuelEU-type standard for inland waterway transport would apply a similar approach by setting and gradually lowering a maximum greenhouse-gas-intensity limit for the energy used by inland vessels.
Please give us your feedback on this publication
Selection of visuals:
0 Comments