Bridging the Gap: Solving the ‘Who Pays?’ Dilemma in Maritime Tech Investment

Introduction: A Barrier to Maritime Innovation

The maritime industry faces growing pressures to adopt innovative energy-efficient technologies. Yet, a fundamental issue remains: Who should pay for these innovations—the shipowner or the charterer?

Frederik, Managing Director at Njord, highlights this core challenge:
"The main barriers preventing our industry from rapidly adopting technologies at scale remain centered around the 'who pays?' principle."

This dilemma, known as the 'split incentive,' continues to slow the uptake of crucial environmental technologies in shipping.
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Understanding the Split Incentive Problem

The split incentive arises when benefits and costs are unevenly distributed. Shipowners bear the investment, yet charterers reap the savings, creating misaligned incentives.

Frederik elaborates:
"Owners chartering out their vessels face a persistent dilemma: how much technology installation should they finance versus the charterer? Finding a commercial agreement that suits both parties remains complex."
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Historical Hesitation to Current Action

Historically, maritime innovation faced resistance partly due to this misalignment. Energy efficiency was seldom prioritised, seen as an uncertain investment with unclear benefits. Additionally, few energy efficiency technologies were considered sufficiently proven or reliable for installation, restricting widespread adoption and slowing progress on emissions reduction.

Frederik recalls:
"Three years ago, energy efficiency wasn't a significant topic of discussion. Now, shipowners genuinely see value and actively pursue these technologies."

This shift indicates a changing mindset but still doesn't resolve the fundamental 'who pays?' issue.
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Why Resolving the 'Who Pays?' Dilemma is Essential

Resolving split incentives is crucial for shipping to achieve zero emissions. This urgency is intensified by:

• The need to meet increasingly stringent regulatory requirements (e.g., IMO 2030 and 2050 targets).

• Heightened scrutiny from financial institutions prioritising sustainability.

• Growing charterer demand for measurable efficiency improvements.

Unless addressed at scale, the split incentive continues to significantly constrain industry-wide technology adoption and innovation.

Successful Approaches to Overcoming Split Incentives

Some companies have navigated this barrier successfully by:

• Creating contractual agreements clearly allocating technology investment and benefit-sharing.

• Leveraging transparent performance data to clarify return-on-investment for both parties.

Frederik observes promising progress:
"We've seen several successful commercial frameworks enabling shipowners to invest confidently in new technologies, knowing that costs and benefits are fairly balanced."
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Njord’s Role: Facilitating Clarity and Confidence

Njord actively bridges the gap between owners and charterers by:

• Offering tailored technology recommendations based on specific vessel requirements.
  
  Frederik emphasises, "Many shipowners still struggle with understanding which technologies actually complement each other. At Njord, we select combinations specifically tailored to each vessel's unique operational needs and validate them through performance measurement."
  

• Independently measuring and validating technology performance, providing clear evidence of benefits.
  
  Saurabh, Head of Operations at Njord, provides further detail: "By independently validating performance against KPIs, we offer unbiased insights, helping stakeholders see precisely the value and effectiveness of their investments. This simplifies negotiations between owners and charterers, building mutual trust."
  

• Facilitating open and unbiased dialogues between shipowners and charterers. Njord acts as an independent mediator, encouraging open communication on technology choices, cost-sharing and transparent data evaluation to foster mutual understanding and smoother collaboration.  
  
  Frederik highlights Njord’s role, "Split incentives create natural tension between stakeholders. By acting as a neutral facilitator, Njord helps both sides navigate commercial negotiations, share past examples of successful collaborations, build trust through transparent data sharing, and align interests so agreements can move forward more effectively."
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The Power of Independent Performance Measurement

Transparent, verifiable performance measurement reduces risk perception significantly:

• Confirms whether technologies deliver promised savings.

• Provides credible data to stakeholders, simplifying negotiations.

Frederik notes the impact clearly:
"Having verified performance data is essential. It confirms whether technologies are effective and deliver as expected, which eventually ensures that both parties can confidently execute the contracted funding/profit-sharing mechanisms."
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Action Checklist for Owners and Charterers

To effectively navigate the ‘Who Pays?’ challenge and accelerate technology adoption, shipowners and charterers should consider these practical steps:

• Clarify Investment Responsibility: Clearly define cost-benefit splits using contractual frameworks. Several proven templates are readily available for straightforward implementation.

• Establish Neutral Performance Measurement: Use independent validation of technologies to build trust and reduce uncertainty.

• Align Commercial Objectives: Engage in open, transparent discussions to align incentives and commercial interests between both parties

• Identify Proven Technologies: Prioritise technologies with verified track records and measurable returns to reduce perceived risk.

• Commit to Continuous Evaluation: Regularly assess technology performance and adapt your approach based on clear, measurable outcomes.

• Engage a Trusted 3^rd Party: Leverage independent expertise to facilitate smooth communication, collaboration, and faster decision-making.
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Industry Bravery: Building Trust through New Commercial Approaches

True bravery in the maritime industry is fundamentally about building trust between shipowners and charterers, fostering openness to explore new ways of collaborating commercially around technology installations.

Frederik advocates for trust-driven innovation:
"Real bravery in shipping today means owners and charterers trusting each other enough to explore unconventional commercial frameworks and jointly embrace new technologies."

Frederik further explains how trust and transparency together can dramatically accelerate the pace of technology implementation:
"With transparent performance data and mutual trust, stakeholders gain the confidence required to proactively invest in innovative solutions that were previously considered too risky."

By prioritising trust and collaborative frameworks, the maritime industry can significantly accelerate innovation and improve both environmental and commercial outcomes.
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Future Outlook: Innovative Financing and Contract Models

Looking ahead, overcoming the split incentive challenge will likely require:

• More flexible contractual frameworks clearly defining cost-benefit splits.

• Regulatory frameworks that incentivise investment in EETs.  

• Third-party facilitation and validation to mediate discussions.

• Greater industry collaboration and transparency, building collective confidence.

Frederik summarises the industry's required next steps succinctly:
"The 'who pays?' dilemma isn't going away by itself. It demands courage, clarity, and collaboration to build new standard agreements that benefits all stakeholders."

By proactively addressing split incentives, the maritime industry can unleash rapid, large-scale adoption of both proven and novel decarbonisation technologies, ultimately transforming the industry's environmental and commercial future.

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Want to Learn More?

✅ Reach out to Njord for expert guidance on bridging the gap between shipowners and charterers.

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