No single route to lower-carbon freight as risk profiles diverge

No single technology is likely to provide the answer to decarbonising global freight, with different transport modes facing very different trade-offs as they move away from fossil fuels.

A new Reuters Events report, produced in association with AXA XL, finds that some of the most readily available alternatives offer only limited emissions reductions, while technologies with greater decarbonisation potential can bring significant cost, safety, infrastructure and regulatory challenges.

Freight in a low-carbon economy: Managing the risks examines the different pathways available across maritime, road, rail and air transport, finding that technologies are developing at varying speeds and creating distinct risk profiles for operators.

Transport is the world’s second-largest source of carbon emissions and remains heavily reliant on fossil fuels. While road and rail transport can, in theory, be powered largely by electricity, the route away from fossil fuels is considerably less clear for shipping and aviation.

Vicky Roberts-Mills, global head of energy transition at AXA XL, said: “Freight operators are assessing technologies that are advancing at varying speeds, creating distinct risk profiles. Insurers can help create confidence to invest by improving understanding of those risks and helping businesses deploy new technologies safely and at scale.”

No clear winner at sea

The challenge is particularly acute in shipping because of both the difficulty of replacing bunker fuel and the sheer scale of maritime transport. The report cites a 2023 estimate from DHL that around 90% of the world’s freight is transported by sea, while noting that a lack of reliable global data makes the precise proportion difficult to establish.

It compares nine alternative fuels and propulsion technologies for commercial shipping, including LNG, biofuel, methanol, ammonia, hydrogen, batteries, wind-assisted propulsion and nuclear power. None performs strongly across all the criteria assessed, which include cost, carbon reduction, infrastructure readiness, scalability, safety and regulatory maturity.

Some of the most technically and economically viable alternatives available today offer only limited emissions reductions. Ammonia, by contrast, could cut greenhouse gas emissions by around 90% compared with traditional marine fuel oil if produced using hydrogen created through renewable-powered electrolysis.

However, ammonia is less energy dense than conventional marine fuel, meaning ships would need to carry greater volumes, potentially reducing cargo capacity. It is also highly toxic, while interim guidelines for its use as a shipping fuel were approved only in May 2026.

AXA XL is part of the ARISE consortium, which is investigating the potential impact of an accidental ammonia release into the sea, with the research intended to improve understanding of the risks associated with alternative marine fuels.

The report says there is a growing consensus that future shipping may rely on a range of power sources depending on vessel type and journey, with the mix likely to change as technologies mature and costs fall.

That will also require changes to supporting infrastructure. Jan Scharrer, marine risk consultant at AXA XL, said bunkering ammonia or hydrogen would be “different from the way we did it in the past”, adding: “It will be more like chemical tankers, with special jetties in remote locations.”

Different risks on land

Road transport appears to have a clearer technological direction. The report cites DNV research suggesting battery-electric vehicles will outcompete hydrogen fuel-cell vehicles across most road transport segments.

But electrification creates its own loss profile. AXA XL says collision frequency for EVs appears comparable with, or potentially better than, conventional vehicles, but loss severity can be significantly higher.

Electric vehicles can cost between 20% and 25% more to repair than equivalent internal-combustion models after similar levels of damage. Battery replacement, supply-chain constraints and shortages of specialist repair technicians can also increase both cost and downtime.

In the wider UK motor market, the report cites an average three-month repair time for one major electric vehicle manufacturer. Although that example does not relate specifically to freight vehicles, lengthy repair times could have particularly significant consequences for fleet operators, which need to keep expensive trucks on the road to recoup their upfront investment.

Rail electrification is already established in some markets, but progress remains highly uneven. The report says electrification rates across Europe range from 100% in Switzerland to just 3% in Ireland, while overhead power systems may not be practical on some freight routes.

Aviation has fewer alternatives. Electrification is currently an option only for very short routes, leaving the industry looking largely to alternative aviation fuels based on biofuels, which can be difficult to scale, or synthetic compounds that remain expensive and in short supply. In June, International Air Transport Association director general Willie Walsh said progress towards the sector’s 2050 transition goal was becoming more challenging.

The report calls for closer collaboration between transport operators, energy providers, technology developers, regulators, investors and insurers as these pathways develop. It points to risk consulting, captive insurance and political risk, credit and bond cover as potential tools for managing emerging technological, operational and financial exposures.

For freight operators, the transition is therefore unlikely to be a straightforward switch from one power source to another. Businesses may instead have to manage several generations of technology simultaneously, while infrastructure, repair networks and regulation develop at different speeds and insurers build their understanding of the exposures those technologies create.