Can shipping turn the tide in reducing green house gas emissions?
The shipping industry has committed to an historic reduction in greenhouse gas emissions.
Over the last few years, the transport sector has been the main focus of changes to climate policy. The aviation industry announced targets to halve greenhouse gas emissions by 2050 and a string of countries have unveiled bans on future sales of petrol and diesel cars and vans.
In April 2018, the shipping industry joined the fight for carbon reduction. For the first time in history, the 170 nations of the International Maritime Organization (IMO) struck a deal to cut greenhouse gas (GHG) emissions by 50% by 2050. While currently contributing 2.5% of global GHG emissions, marine CO2 emissions are expected to account for 17% of anthropogenic emissions in 2050, if left unchecked. Under the new resolution, international shipping would only comprise between 3.8% and 5.8% of global GHG emissions in 2050. This implies large-scale development and adoption of low- and zero-carbon fuels and propulsion technologies.
Increases in Efficiency Have Not Reduced Absolute CO2 Emissions from Ships
Source: Olmer, Comber, Roy, Mao & Rutherford, ‘Greenhouse Gas Emissions from Global Shipping, 2013-2015’
However, as shown in the chart above despite improving operational efficiency, rising demand for shipping and the associated consumption of fossil fuels have led to an increase in GHG emissions from shipping in absolute terms over the recent years.
With increasing globalisation and given that 80% of global trade by volume and more than 70% of global trade by value is currently carried on board ships and handled by seaports, it is hard to imagine a reduction in shipping. Rather, it is most likely the mode of shipping that will have to change.
Technologies capable of delivering the needed change are already available. Studies already show that - when combined with slow-steaming - a 50% reduction of CO2 can be achieved. Most prominently, one way to reduce CO2 emissions is by replacing currently-used high fuel oils with lower-carbon fuels such as liquefied natural gas, biofuel and biogas, or alternatively nuclear.
There are, however, several additional promising technologies that could be used. These include renewable energy for propulsion and auxiliary power, such as sails, kites, Flettner rotors, energy storage and fuel cells. Another example is so-called “cold ironing”, which allows ships to be supplied with power from the seaport while at berth, hence enabling the main and auxiliary engines to be turned off while running on sustainably sourced power.
All of the above further corroborates our conviction in the long-term growth of low-carbon transport; shipping in particular. While the overall market is expected to expand further (likely fueled by a decline in aviation), it is the applied technologies that will yield the greatest opportunities for growth. However, given the sector’s complexity and technological lock-ins, it will be crucial to focus on companies well-positioned for a low-carbon shipping industry across its entire value chain, looking beyond manufacturing, including suppliers and infrastructure alike.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.