The decarbonisation of the global shipping industry will require coordinated action across regulation, infrastructure, shipyards, financing and commercial incentives throughout the value chain, a new study by EY-Parthenon has said.
The report, Shipping decarbonization and the challenges of the green transition, by EY Greece’s Ioannis Bitzis and Yannis Pierros, describes decarbonisation as one of the ‘critical challenges’ facing the shipping industry, and one that will require a ‘multilayered transformation’.
A key sector
As the authors note, shipping accounts for more than 80% of global trade by volume and around 45% by value, while contributing approximately 2% to 3% of global greenhouse gas emissions, and around 11% of transport-sector emissions. Given the importance of the sector, any transition to alternative fuels will need to ensure that it doesn’t disrupt maritime transport and international trade flows.
‘The key challenge is that compliance obligations are largely imposed at vessel level, while many of the factors that determine the success of the transition lie outside shipowners’ direct control,’ they state.
‘In this context, critical variables include the availability and cost of alternative fuels, the development of bunkering infrastructure, the ability of shipyards to deliver newbuilds or retrofits, and the willingness of charterers and cargo owners to absorb higher costs.’
Regulatory environment
The regulatory environment is also changing, with shipping firms facing increasing regulatory obligations, such as the International Maritime Organization’s emissions framework, FuelEU Maritime and the EU Emissions Trading System.
These measures ‘integrate carbon considerations into the day-to-day operations of shipping, affecting not only investment decisions, but also transport costs and market functioning’, the authors note.
However, the transition to alternative fuels is also constrained by the availability and cost of said fuels. EY-Parthenon estimates that demand for low- and zero-emission marine fuels could increase by as much as 25 times by 2030, while overall supply is expected to expand by only around 2.3 times.
‘The challenge, therefore, is not only regulatory, but also economic,’ the authors state. ‘Alternative fuels are currently three to seven times more expensive than conventional marine fuels, while total transport costs may increase significantly by 2050, reshaping competition between markets and sectors.’
Managed transition
Rather than advocating an immediate transition to a specific fuel type, the authors advocate for a ‘managed transition’ that combines energy efficiency, operational improvements, transitional fuels and technological flexibility.
They note that measures such as route optimisation, speed management, digital technologies and waste heat recovery could reduce fuel consumption and carbon emissions by up to 40% by 2030, regardless of the fuel type ultimately adopted.
As they put it, ‘There is no single solution that can lead the sector toward decarbonisation on its own. Instead, the transition requires a combination of energy efficiency, operational improvements, transitional fuels, technological flexibility and the gradual deployment of zero- and near-zero-emission solutions, as these become available at scale.’ Read more here.
