Global investment of $50-70 billion a year will be needed to halve emissions from shipping by 2050, a scale 100 times greater than an industry-proposed $2/t levy would raise but a level experts say has already been borne by the maritime sector within living memory.
Researchers UMAS for the non-profit think-tank consortium Getting to Zero Coalition published a study on Monday into the costs of meeting the UN shipping agency IMO’s target to cut industry emissions 50% under 2008 levels by 2050.
The researchers estimated that the cumulative investment needed between 2030 and 2050 would be between $1-1.4 trillion, or an average of $50-70 billion annually for 20 years.
If the shipping industry was to fully decarbonise by 2050 – a goal some think necessary to meet the 1.5C temperature limit of the Paris Agreement – this would require further investment of some $400 billion over the 20 years, bringing the total to $1.4-1.9 trillion.
“Our analysis suggests we will see a disruptive and rapid change to align to a net zero carbon system, with fossil fuel aligned assets becoming obsolete or needing significant modification,” said Tristan Smith of the University College London’s (UCL) Energy Institute, which was involved in the study.
But Smith insisted the costs were within a range already borne by the shipping industry in recent times, and should be seen in the context of global energy investments overall, which amounted to $1.9 trillion for 2018 alone.
“I don’t think this needs to be a shock. Our latest estimates are that a zero GHG fuel might be around $800 per tonne – HFO (heavy fuel oil) equivalent prices – in the 2030s, which is around the level of historical highs of HFO prices,” he told maritime news service Splash 24/7, referring to record-high fuel prices in mid-2008, just before the global financial crash.
“If the transition of fleet and infrastructure is well managed and any cost/price experienced evenly, then our estimates – and that of many others – are that globally the impact on trade and demand would be negligible,” he added.
But the scale of the required funding represents a level some 100 times higher than the $500 million/year that shipping industry associations have proposed to raise over the next decade to prepare for such a transition.
Several shipping associations, including BIMCO and the International Chamber of Shipping (ICS), have floated the idea of a $2/tonne bunker fuel levy, the proceeds of which would go into a fund to channel research and development for the sector’s emissions abatement.
Industry associations have suggested charging ships a $2/tonne fuel tax, in one of several measures to be discussed at the IMO this year as the sector strives to avoid regulation under the EU ETS.
WORK AHEAD
The industry groups hope the levy will be among the measures considered for meeting the IMO’s 2050 climate goal.
The intergovernmental UN body is set to resume discussions on the issue at its London headquarters during a closed-door working group session on Mar. 23-27, with the IMO’s full decision-making environmental committee meeting (MEPC) to be held the week after.
That meeting is expected to agree on short-term measures up to 2023, though negotiators are also turning their attention to medium-term policies that could help stimulate the required investments.
If carbon pricing is correctly developed and managed there could be a role for it that could buy the shipping industry some time, oil major Shell told shipping news outlet Lloyd’s List on Monday.
Well-designed carbon offsets in the early stages could enable the industry to decarbonise while developing some of the longer-term, lower-cost fuel solutions, Lloyd’s List added.
It is not clear how offsets could play a role, as the 2018 IMO deal explicitly stated that the 2050 emission target should be met “in sector”, differentiating it from the CORSIA offsetting programme for international flight emissions agreed by aviation regulator and sister organisation ICAO.
The UMAS study said that to meet the IMO’s mid-century emission goal, around 87% of shipping’s investments needed would be in onshore infrastructure and production facilities for low-carbon fuels, with the remainder related to the ships themselves.
The estimates were based on ammonia being the zero-carbon fuel choice most likely to be the lowest cost.
FACTFILE:
- In Apr. 2018, the IMO agreed to headline goals for international shipping:
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- To cut the carbon intensity of shipping by at least 40% under 2008 levels by 2030, pursuing efforts towards 70% by 2050
- To peak GHG emissions as soon as possible and to cut shipping emissions by at least 50% by 2050 compared to 2008, while pursing efforts towards phasing them out as a point on a reduction pathway consistent with the Paris Agreement temperature goal
- International shipping emissions account for an estimated 3-4% of worldwide GHG output, but that share is expected to rise as much as five-fold by 2050, according to the IMO.
- Along with international aviation, shipping is not addressed in the Paris Agreement. However, the 2015 Paris pact has sharply increased the pressure on transport sectors to take action to curb their rising emissions.
- In 2018, the EU launched its own MRV requirements for shipping that front-load the IMO’s looser global efforts introduced from 2019.
By Ben Garside – ben@carbon-pulse.com
