Shipping sector urged to demonstrate far more climate ambition and step up investment in zero carbon fuels and technologies
The global shipping industry could face up over $25bn in damages every year from worsening climate impacts such as rising sea levels and destructive storms by the end of the century, which could in turn put a major dent in the sector’s growth potential, fresh research has today warned.
Without ambitious action to reduce emissions in the coming years, the research warns that ports, shipping firms, and carriers are set to suffer major economic losses due to physical damage to shipping infrastructure and soaring costs for operators and their customers.
Carried out by non-profit research institute RTI International on behalf of US NGO the Environmental Defense Fund (EDF), the research estimates that based on past impacts and anticipated climate change scenarios, annual damages to port infrastructure could reach almost $18bn by 2100.
Storm-related port disruptions, meanwhile, could add another $7.5bn in losses to the shipping sector each year, it added.
Taken together, these additional costs of over $25bn are roughly the equivalent to the total annual net earnings of the entire container port sector in 2019, underscoring the scale of the threat that the climate crisis poses to the shipping industry and global trade more broadly, the report warns.
Mroeover, George Van Houtven, director for ecosystem services research at RTI International, said the projected economic losses facing the shipping sector as a result of worsening climate impacts were likely to be an underestimate.
“While our report uses the best information available to paint a picture of the true economic cost of climate change on international shipping, the reality is that these figures are likely underestimating the total scale of the consequences,” he said. “Considering the unpredictable volatility of climate change and the immense complexity of the shipping sector, we simply need more data to show the full picture. However, the available evidence strongly indicates that the costs will be great.”
The international shipping sector has enjoyed significant growth over the past 25 years, with trade volume more than doubling. But due to ships’ reliance on polluting fossil fuels, the sector has also become a major greenhouse gas emitter, accounting for around a fifth of all transport emissions worldwide, according to the report.
Assuming a steady growth rate over the coming decades, the report estimates the volume of shipping trade could reach 120 billion tonnes by 2100. However, it warns that worst-case climate scenarios could see growth curbed by nearly 10 per cent.
In total, shipping is thought to be responsible for around 2.5 per cent of the world’s total CO2 emissions, but to date the sector has faced intense criticism for failing to introduce sufficiently ambitious decarbonisation policies via its UN-affiliated governing body International Maritime Organisation (IMO).
At present, countries have agreed through the IMO to cut the carbon intensity of all ships by at least 40 per cent by 2030, and to pursue efforts towards 70 per cent emissions intensity reduction by 2050. In total, it is targeting a 50 per cent cut in the sector’s emissions by 2050, compared to 2008. But environmental campaigners have long argued that the targets are not in line with the temperature goals of the Paris Agreement and are not accompanied by sufficiently robust policies that would encourage operators to accelerate the transition to cleaner shipping technologies.
Marie Hubatova, senior manager for EDF’s global transport team, called on shipping operators to rapidly step up their climate efforts in order to cut emissions, and thereby reduce the major economic threats facing the industry from worsening climate impacts.
“Just as the Covid-19 pandemic threw our ports and the global supply chain into crisis mode, the climate emergency will have major consequences for international shipping,” she said. “In the face of climate breakdown, however, the shipping industry has an early warning bell and an opportunity to act.”
The report calls on shipping firms to commit to full decarbonisation by 2050, in line with the Paris Agreement, and to support a market-based mechanism to reduce shipping emissions via the IMO, in addition to a major ramp up of investment in zero emissions fuels and technologies. A number of leading shipping firms have set their own net zero targets and are calling on the IMO to deliver more ambitious targets, but to date their efforts have been stymied by opposition from a number of governments that have repeatedly blocked proposals for more ambitious targets and policies.
As such, today’s report stressed that the transition to greener shipping should be equitable, so as to ensure developing nations do no bear the brunt of climate damages and adaptations costs.
“By stepping up to reduce emissions and invest in zero-carbon fuels, shipping leaders could help avoid these costly consequences and build a more sustainable future for the industry,” said Hubatova.
As a number of progressive shipping firms have already recognised, rapid decarbonisation is in their long interests, especially as technologies such as green hydrogen and wind-based propulsion mature and soaring oil costs make them more cost competitive. But the reluctance of some governments and operators to embrace more ambitious low carbon shipping policies could yet see the entire industry and the global economy that relies on it condemned to an era of worsening climate-related risks.
Want to find out more about how the net zero transition will impact your business? You can now sign up to attend the virtual Net Zero Finance Summit, which will take place live and interactive on Tuesday 29 March and will be available on demand for delegates after the event.
