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WHAT PRICE CAN BE PUT ON DECARBONISATION OF SHIPPING?

Friday, January 31, 2020 

The cost of the shipping industry's shift to zero-carbon emissions in order to meet the IMO greenhouse gas (GHG) target reduction will require a minimum of US$ 1 trillion, mostly for land-based infrastructure, according to a study by University Maritime Advisory Services (UMAS) and the Energy Transitions Commission for the Getting to Zero Coalition.

The study points out that shipping needs to make a radical shift to zero carbon energy sources in the coming three decades to reduce the sectors total greenhouse gas emissions by at least 50% of 2008 levels by 2050 – the target set by IMO. This transition will require significant infrastructure investments in new fuel production, supply chains, and a new or retrofitted fleet. Depending on the production method, the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions amounts to about US1-1.4 trillion, or an average of US$50-70bn annually for 20 years. If shipping is to fully decarbonise by 2050, this will require further investments of some US$400bn over 20 years, bringing the total to US$1.4-1.9 trillion

“We need to understand the scale of the challenge to solve it. 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. This illustrates that shipping’s green transition is considerable, but certainly within reach if the right policy measures are put in place,” said Johannah Christensen, MD and Head of Projects and Programmes at the Global Maritime Forum.

The analysis sheds light on where investments need to take place. The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87% of the total. This includes investments in the production of new fuels, and the land-based storage and bunkering infrastructure needed for their supply.

Only 13% 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.

At the Global Maritime Forum’s recent Annual Summit, maritime leaders proposed a global carbon levy to accelerate shipping’s decarbonisation through investments in technology and design of new propulsion systems, alternative fuels, and scaling and infrastructure to deliver these fuels – while taking into consideration the impact on trade and developing states. The starting level for a carbon levy should be US$10/t CO2, and US$50-75/T CO2 around 2030. A price of US$10/t CO2 would correspond to an annual fund of US$8 bn. A price of US$75/t CO2 would correspond to an annual fund of US$70bn.

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