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Zero-carbon shipping to double freight costs

Climate change goals imply a one ship-generation earlier transition to green fuels, the International Chamber of Shipping conference is told

Shipping is one of the most expensive sectors of the economy to decarbonise, says the chair of the UK’s Energy Transitions Commission, Lord Turner

SHIPPING emission targets need to be brought forward a generation earlier than expected to meet world climate change goals, while freight rates will likely double during the transition to greener, zero-carbon marine fuels, an International Chamber of Shipping conference has been told.

Policy makers and climate change scientists outlined the challenges faced by owners and charterers of the world’s 60,000-vessel commercial fleet to decarbonise shipping, and the enormous scale and pace of change needed.

Despite environmental and regulatory imperatives to reduce maritime greenhouse gas emissions, shipowners were told freight rates would likely double to fund zero-carbon fuels, even as the commercial viability of these remained uncertain. Carbon taxes were also probable, the conference on future fuels held in conjunction with London International Shipping Week was told.

Emanuele Grimaldi, managing director of the Italy-based Grimaldi Group, told Lloyd’s List: “I’m really concerned about these extra costs.” 

The group operates a fleet of more than 100 ro-ro and short-sea shipping vessels, and higher prices could divert freight to road or air, which was more carbon intensive, he said.

Leading climate change scientist Anders Hammer Strommen suggested greenhouse gas emissions from international shipping must be cut 50% by 2030 and reach zero by 2050 if global average temperatures were to rise no more than 1.5°C. The 50% cut is some 20 years earlier than agreed at the International Maritime Organization last year.

Norway-based Mr Strommen contributed on shipping to the Intergovernmental Panel on Climate Change that assessed the difference between a 1.5°C rise in global temperature over the next generation versus an increase of 2°C.

He said a 2°C rise equated to once-a-decade summer when Arctic ice completely melted, accelerating global warming, versus a once-a-century summer of no ice under a 1.5°C scenario.

Meeting the 1.5°C target “implies a one ship-generation earlier transition”, he said.

The technology to shift international shipping to zero emissions by 2050 is there, but freight rates will have to double to fund the higher cost of green marine fuels, according to the chair of the UK’s Energy Transitions Commission. Lord Turner said: “Shipping is one of the most expensive sectors of the economy to decarbonise.

“That is reflected in the fact that when we work out the cost of the [alternative fuel] product, the cost of providing a voyage and the freight rates, we think the decarbonisation of shipping might have to produce a significant increase in freight rates over the time, as much as a doubling of freight rates.”

This would add very little to the overall price to consumers for purchasing sugar, smart phones or jeans, he added. 

“Even if you assume that the freight rates go up very significantly, the total cost of the global economy is very small. We may be able to get that cost down with good technological innovation, by driving the efficiency improvements of the ship... but I suspect there will be always a cost.''

Lord Turner — who as Adair Turner was chairman of the UK financial regulator the Financial Services Authority, but is also a past chairman of the Committee on Climate Change and former director-general of the Confederation of British Industry — said the challenge facing the industry was one of co-ordination.

“As long as you all move together, then that’s not a threat to your profitability,” he said.

UK shipping minister Nusrat Ghani told the conference that global shipping industry was not doing enough research on alternative fuels, nor was there consensus on appropriate fuels.

“The sector can work at a pace that isn’t in step with what the world wants it to look like,” she said, noting that the UK’s shipping decarbonisation target aimed for zero emissions by 2050. That compares to the IMO’s 50% target.

Green hydrogen and ammonia emerged as the preferred alternative fuels with the most potential to meet emissions targets and reach commercial scale. Financing the development of the fuels for use in ship engines and then developing the infrastructure to supply them to vessels remained problematic.

Inevitably some form of tax may need to be placed on the industry, said Bryony Worthington, the Environmental Defense Fund executive director, Europe.

“Quite frankly, this is a sector that enjoys tax-free propulsion at the moment,” she said on the conference sidelines. Shipping needed to contribute to any solution to reaching a zero-carbon economy.

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