Busy shipping lane by Karl Baron

‘Shipping’s Decarbonisation Costs at Least One Trillion Dollars’

A new study puts a price tag on shipping’s decarbonisation. At least one trillion US dollars of capital investments in land-based and ship-related infrastructure is required to halve international shipping’s greenhouse gas emissions (GHG) by 2050.

The study was conducted by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition.

Shipping needs to make a radical shift to zero carbon energy sources in the coming three decades to reduce the sectors total GHG emissions by at least fifty per cent of 2008 levels by 2050 – a target set by the International Maritime Organization (IMO). This transition requires significant infrastructure investments in new fuel production, supply chains, and a new or retrofitted fleet.

A Price on Decarbonisation

Depending on the production method, the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions amounts to approximately one to 1.4 trillion US dollars, or an average of fifty to seventy billion US dollars annually for twenty years. If shipping is to fully decarbonise by 2050, this will require further investments of some 400 billion dollars over twenty years, bringing the total to 1.4 to 1.9 trillion.

Within Reach

‘We need to understand the scale of the challenge to solve it,’ says Johannah Christensen, Managing Director, Head of Projects & Programmes at the Global Maritime Forum, a partner of the Getting to Zero Coalition. ‘Shipping’s shift to zero carbon energy sources calls for significant infrastructure investments. The investment needed should be seen in the context of global investments in energy, which in 2018 amounted to 1.85 trillion dollars. This illustrates that shipping’s green transition is considerable, but certainly within reach if the right policy measures are put in place.’

Disruptive

Dr Tristan Smith, Reader at the UCL Energy Institute, adds: ‘Energy infrastructure and ships are long-life capital-intensive assets that normally evolve slowly. In the next three decades however, our analysis suggests we will see a disruptive and rapid change to align to a new zero carbon system, with fossil fuel aligned assets becoming obsolete or needing significant modification.’

‘Even though regulatory drivers of this system change such as carbon pricing are only starting to be debated, the economic viability of today’s investments and even the returns on recent investments will be challenged, and the sooner this is factored in to strategies and plans, the better.’

Land-based Infrastructure Needs Most Investments

The analysis also sheds light on where investments need to take place. These can be broken down into two main areas: ship-related investments and land-based investments.

The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87 per cent of the total. This includes investments in the production of low carbon fuels, and the land-based storage and bunkering infrastructure needed for their supply.

Only thirteen per cent of the investments needed are related to the ships themselves. These investments include the machinery and onboard storage required for a ship to run on low carbon fuels in newbuilds and, in some cases, for retrofits. Ship-related investments also include investments in improving energy efficiency, which are estimated to grow due to the higher cost of low carbon fuels compared to traditional marine fuels.

Author: Mariska Buitendijk

Mariska Buitendijk is one of SWZ|Maritime's journalists as well as the magazine's copy editor.