Net Zero vs Reality: Are We Still Backing Fossil Fuels?

There is a growing disconnect at the heart of the energy transition. 

On the one hand, governments and industries are committing to net-zero targets, investing in clean technologies, and setting increasingly ambitious decarbonisation pathways. On the other hand, the global economy continues to direct substantial financial and policy support toward fossil fuel systems. 

Nowhere is this contradiction more visible than in the relationship between energy policy, shipping, and capital allocation. 

Consider the role of maritime transport. Oil tankers alone account for roughly 30% of global ship tonnage, and a significant proportion of the fleet is directly tied to the movement of fossil fuels. As demand shifts over the coming decades, this creates a very real risk: stranded assets on a global scale. 

Some estimates suggest that up to 32% of the tanker fleet could become economically unviable as the world moves toward decarbonisation. These are long-life, capital-intensive assets, often financed on the assumption of stable, long-term demand. If that demand erodes faster than expected, the consequences will not be limited to ship owners; they will ripple across investors, insurers, ports, and supply chains. 

At the same time, policy signals remain mixed. In Australia, the Federal Government has committed to unlocking billions in additional investment in renewable energy through mechanisms such as the Clean Energy Finance Corporation. This is a critical step in accelerating the transition and scaling low-emissions technologies. 

However, this sits alongside ongoing support for fossil fuel consumption. Analysis from The Australia Institute highlights the scale of fossil fuel subsidies embedded throughout the economy, raising questions about whether current policy settings align with long-term climate objectives. 

Further complexity arises in the structure of fuel incentives. Under schemes administered by the Australian Taxation Office, fuels with lower biodiesel or ethanol content can attract significantly higher subsidies than cleaner alternatives in certain contexts. In some cases, these incentives drop to zero for fuels used in heavy vehicles on public roads, creating inconsistencies that can distort decision-making. Individually, these policies may have rational foundations. Collectively, they send a fragmented signal to the market. 

For businesses and investors, this creates a challenging environment. Capital is being deployed on both sides of the transition simultaneously, supporting the growth of clean energy while also extending the life of fossil-fuel systems. The result is a heightened risk of misallocation, in which assets that appear viable under current conditions may not remain so under future policy or market shifts. 

The current geopolitical landscape is already stress-testing these assumptions, sending prices above $100 per barrel and triggering what some analysts describe as the largest supply disruption in modern energy markets. 

For shipping, the impact is immediate. Tanker routes are being rerouted, vessels are delayed or idled, and insurance and freight costs are rising sharply. About a fifth of global oil and LNG normally transits the Strait of Hormuz, meaning any sustained disruption reverberates across the global economy. 

This is not a future transition risk. It is a present-day market shock. 

This is particularly relevant for sectors with long investment horizons, such as shipping and infrastructure. Decisions made today, on vessel procurement, port development, and fuel infrastructure, will shape emissions profiles and financial outcomes for decades to come. 

The question, then, is not whether the transition will happen, but how orderly it will be. A delayed or uneven transition increases the likelihood of abrupt corrections. Demand shocks, policy shifts, or technological breakthroughs could rapidly change the economics of fossil fuel-dependent assets, leaving parts of the system exposed. 

For organisations operating across complex value chains, this means looking beyond immediate compliance requirements. Transition risk is no longer a theoretical concept; it is a strategic consideration that should inform investment decisions, asset management, and long-term planning. 

The contradiction is no longer abstract. We are investing in a system that is not only emissions-intensive but also increasingly volatile economically, politically, and operationally. The question is no longer whether fossil fuel dependency carries risk, but whether organisations are adequately accounting for how quickly that risk can materialise.