Shipbuilding is a strategic sector for multiple OECD countries. Connected to maritime transport and trade, broader manufacturing, and national security, remaining competitive in shifting global and technological contexts is an important objective for shipbuilding economies.
2 key transformations are impacting competitiveness in shipbuilding: (1) maritime decarbonisation and (2) digital technologies. New technologies and a shift towards the production and operation of more energy-efficient ships have created new opportunities and risks for being competitive in regional and global markets.
Three common targets for policy action can address challenges that exist:
Innovation and commercialisation. Developing and adopting new technologies require risk-taking, R&D funding, and firm network support to bridge innovation to commercial production.
Investment confidence. Reliable policy outlooks backed by action, regulatory clarity, coordination between industry and government, and infrastructure development can encourage firms and investors to commit to transformations in the face of uncertainty and risks.
Evolving skilled labour needs. Coordinated information, planning, and support among education, government, and industry can help address underlying problems and ensure a future-oriented application of human skilled labour.
Strategic and evidence-driven use of industrial policy which centres these transformations and challenges may be key to success. Doing so has supported accelerated transformation and improved competitiveness.
Industrial policy for the future
Competitiveness is a challenge for OECD shipbuilding economies. Globally, shipbuilding has grown significantly in the twenty-first century. Key shipbuilding economies are heavily engaged in guiding and supporting the sector. With the growing demand for large cargo vessels in recent decades, production increasingly moved to South and East Asia, notably to the People’s Republic of China (hereafter China), Korea, and Japan. Some European shipbuilding economies have historically succeeded in securing a piece of the global market by focusing on niche submarkets and proactively maintaining production capabilities and an innovative edge in those sub-sectors.
Two transformations offer new opportunities and risks for competitiveness. Maritime decarbonisation and digital transformation of the sector may reshuffle the playing field – by creating new and altering existing markets, there are opportunities for shipbuilding economies to reposition themselves.
Industrial policy is becoming an important lever for boosting competitiveness and assisting firms through major transformations. Industrial policy has resurged in popularity as a way to foster healthy, thriving economies in the current global context. By structurally improving various sectors within an economy, governments seek to boost economic resilience and directed growth. This can include supply-side, demand-side, and governance instruments which support, incentivise, derisk, connect, and otherwise guide strategic changes in one or more sectors. While industrial policies carry costs and risks, they may be effective in addressing market failures and promoting future-oriented sectoral transformation, particularly in sectors where barriers to change are significant (Millot, 2024[1]).
Applied to shipbuilding, industrial policies may be effective in fostering competitiveness by addressing key challenges related to these two transformations impacting the sector.
Maritime decarbonisation is reshaping shipbuilding
A recent OECD report details the role of shipbuilding in maritime decarbonisation: with 80% of goods transported by ships which contribute to 3% of global greenhouse gas emissions, the construction of low-carbon ships and retrofitting of existing ships is a key factor to maritime decarbonisation (OECD, 2025[2]). Evolving international and national decarbonisation policies alter incentives and cost considerations for operators and producers across the shipping-shipbuilding supply chain.
Maritime decarbonisation involves complex choices around technical adaptations, input materials, infrastructure, and regulatory compliance. This often involves high upfront costs and uncertainty, including the potential risk of stranded assets. On the other hand, there is an opportunity for first mover advantage in emerging markets, electric vessels or vessels powered by renewable fuel.
While adoption of green vessels remains low globally (around 7% of the fleet, though more than 50% of the orderbook), industrial policy can accelerate uptake, strengthen competitiveness, and align the sector with broader environmental objectives.
Case study: Electric ferries in Norway
Norway’s development of a domestic market for electric ferries illustrates how proactive government action can drive sector transformation. In the early 2010s, the Norwegian government used support measures and public procurement to create a market for electric ferries. This, combined with a decline in oil prices which lessened confidence in offshore oil structures and vessels, created favourable market and government-driven incentives for change (Sæther, 2021[3]).
A combination of multiple industrial policy tools was used to build up domestic production capabilities. First, public procurement was used to spur domestic demand and stimulate development of domestic production capabilities via innovation, accelerated and coordinated uptake of key technologies, and derisking initial production for proof-of-concept. Second, the PILOT-E joint funding programme (for innovation and commercialisation) and EKSFIN’s loan scheme (a new risk loan scheme) served as supply-side support mechanisms for domestic production and operation of electric ferries. Finally, through progressive regulatory emission requirements, greater clarity for future investment was achieved.
The result was a shift towards greater domestic production of ferries and cruise vessels, and a significant increase in the share of the ferries fleet which consists of electric, hybrid, or alternative fuel vessels. By aligning policy with market incentives, Norway created a strong foundation for the growth of green maritime solutions, demonstrating the tangible impact of a mission-based industrial strategy on sectoral development.
Note: This graph combines sea-going vessel from below 100 GT from Sea-web, with World Fleet Register for sea-going vessel above 100 GT. The databases may not encompass all vessels worldwide, particularly those of a smaller size.
Source: OECD calculations based on World Fleet Register (Clarksons), and Sea-web, S&P Global, https://www.spglobal.com/market-intelligence/en/industries/maritime5 (Accessed in February 2025).
Note: This graph combines sea-going vessel from below 100 GT from Sea-web, with World Fleet Register for sea-going vessel above 100 GT. The databases may not encompass all vessels worldwide, particularly those of a smaller size.
Source: OECD calculations based on World Fleet Register (Clarksons), and Sea-web
Digital transformation has become key to competitiveness. The application of advanced digital technologies is transforming maritime transport and shipbuilding, in terms of design and production processes as well as the capabilities of the vessels themselves. Stakeholder engagement suggests that digitalisation of design and production processes1 has become key to being globally competitive because of the improvements to productivity. Application of digital technologies to vessels – such as greater autonomy – may offer substantial benefits to ship owners and operators, stimulating demand for vessels with these capabilities.
Government strategy is emerging for the digital transformation of the maritime sector, with an emphasis on boosting innovation (OECD, 2025[2]). This includes funding mechanisms for R&D and technology commercialisation, regulatory development for new technologies and vessel types, and international collaborations and technology transfers.
Case study: Autonomous vessels in Korea
Autonomous vessels constitute an important emerging submarket, promising improved efficiency, remote control, and safer vessel management. Though universal standards and regulations are still in early development, patent activity in autonomous ship technology has increased steadily since 2011, with Korea and the United States holding relatively strong positions over this period:
Source: Espacene, European Patent Office, https://worldwide.espacenet.com/patent/search?q=cpc%3DB63B%20autonomous
Korea has comprehensively applied mission-oriented industrial policy to boost digital transformation in shipbuilding. Through significant specific funding opportunities, public-private partnerships, an innovation sandbox, and comprehensive legislative support, there is a clear, dependable framework for innovation and commercialisation of technologies and products.
In the design of strategies which are effective for navigating the above two transformations, it is important to understand the key challenges and available policy levers. Markets can become distorted as a result of multiple reasons, including significant foreign subsidies, disproportionate market power in respect to other countries, sectors, or firms, and other factors relating to the general political economic, global, and technological contexts. This is the case in shipbuilding, which may hinder the natural market-driven progression of these transformations on a global or national scale.
Evidence from global shipbuilding economies has uncovered three common challenge areas:
1. innovation and adoption of new technologies,
2. ensuring confident and sustained investment, and
3. skilled labour.
Addressing these challenges proactively may be essential to accelerate the sector’s transformation.
The development and adoption of new technologies is still at an early stage. A majority of vessel orders are still for traditional fuel ships and the level of digital transformation in shipyards appears to be low and variable.
The level of innovation which occurs may be lower than ideal because of initial high costs, risks, and diffuse spillover effects. The initial costs and risks may be high, though the advantages of becoming a ‘first mover’ can yield substantial benefits. Many of the broader benefits to the sector (or related sectors) may also not be redeemable by the original innovator to cover these high initial costs.
A related challenge is the successful transition from initial innovation to viable commercialisation. Successfully transitioning from R&D to a profitable product is complicated by intense competition for shared inputs from other manufacturing sectors (e.g. aerospace), lagging or unclear regulations for new technologies and vessel types, and insufficient investment.
Policies which reinforce the benefits while assuaging the costs and risks may successfully stimulate innovation. This involves internalising positive spillover effects by supporting early innovators, using demand-side tools to help overcome the innovation-to-commercialisation step, and addressing coordination failures among innovators and producers, upstream suppliers, public and private funding, and commercial and public buyers. R&D funding, effective intellectual property protections, public procurement, and further guidance for start-ups are commonly applied policies.
Significant investment is required for these transformations, yet stakeholders face unclear information, shifting plans, miscoordination, regulatory ambiguity, and insufficient infrastructure. These function as barriers to confident investment, slowing sector transformations.
When information is not clear, stakeholders experience uncertainty, generating hesitancy in the absence of greater consensus within the industry.
When government-issued plans are unclear, volatile, or not substantially put into practice at pace, the industry loses trust in them, weakening their impact.
An absence of clear regulation for newer technologies and products can hinder streamlined innovation, increase production costs, and risk unintentional noncompliance.
Developing broader infrastructure for these transformations – such as fuel bunkering, electric grid, and network connectivity – carries high financial and organisational costs, yet its absence hinders broader buy-in to transformations by the industry.
Offering clear policy outlooks supported by funding, dependable timelines, regulation, and broader infrastructure development may spur on greater investment. Evidence from Norway and Korea shows that targeted policies—such as predictable regulations, public-private partnerships, and financing mechanisms—can reduce uncertainty, accelerate adoption, and support long-term sector growth.
Skilled labour is critical to competitiveness and is required to evolve as a result of these transformations. Shipbuilding requires diverse and highly specialised skills, which must adapt to the decarbonisation and digitalisation trends in the industry. In particular, digital transformation of production processes may alter skills needs and the role of human skilled labour.
Skilled labour is already a primary challenge for many shipbuilding economies. For example:
The demand for certain skills and occupational skills profiles may not match its supply, resulting in skilled labour that is relatively expensive.
The complexity of skillsets required in this sector can create externalities in relation to age and experience that may not effectively be captured in the price.
Information and coordination failures may exist among education providers, skilled labour, and shipbuilding firms.
A negative reputation of the sector can exacerbate these difficulties.
To support a smoother transition and boost competitiveness, policies must take into account both existing challenges and future shifts in skilled labour. This includes comprehensive documentation of skills supply and demand, improved coordination among education providers, employers, and government, and future-oriented education and workforce planning.
Support initial innovation and commercialisation. Through tools such as R&D funding, intellectual property protection, and public procurement, provide demand signaling for and de-risk development and adoption of new technologies.
To boost investment confidence: streamline information, planning, coordination, regulation, and infrastructure.
Improve information clarity and distribution among government and industry actors,
Provide a clear, dependable policy outlook backed by action (such as financing mechanisms),
Ensure effective coordination among government, industry, and research institutions (such as via public-private partnerships),
Create and apply clear, up-to-date regulations for new technologies, products, and risks,
Support infrastructure development, particularly in regard to energy and information.
Strengthen skills and workforce planning. Improve information and coordination among education, industry, government, and labour to account for evolving industry needs.
In addition to the broader work by the OECD on industrial policy, many of these insights are from a recent research collaboration between the OECD Shipbuilding Unit and the United Kingdom’s National Shipbuilding Office. For further information please refer to the declassified report on UK Shipbuilding Strategic Insights: NSO & OECD Collaboration.
OECD (2025), UK Shipbuilding Strategic Insights: NSO & OECD Collaboration, forthcoming.
References
[1] Millot, V. (2024), “The return of industrial policies: Policy considerations in the current context”, OECD Economic Policy Papers No. 34, https://doi.org/10.1787/051ce36d-en.
[2] OECD (2025), The Role of Shipbuilding in Maritime Decarbonisation: Impacts of Technology Developments and Policy Measures, OECD Publishing, Paris, https://doi.org/10.1787/0c8362c0-en.
[3] Sæther, S. (2021), “A green maritime shift: Lessons from the electrification of ferries in Norway”, Energy Research & Social Science, Vol. 81, https://doi.org/10.1016/j.erss.2021.102282.
Contact
Laurent Daniel (
laurentc.daniel@oecd.org)
Leonie Finke (
leonie.finke@oecd.org)
Hugo Vitrac (
hugo.vitrac@oecd.org)
← 1. These are often characterised by technologically advanced facilities and seamless integration of digital modelling, communication, and automated production.