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Over USD 1 trillion needed to decarbonize shipping by 2050

At least USD 1 trillion of
capital investment in land-based and ship-related infrastructure is required to
halve international shipping’s greenhouse gas emissions by 2050, a new study

Shipping needs to make a radical
shift to zero-carbon energy sources in the coming three decades to reduce the
sectors total greenhouse gas emissions by at least 50% of 2008 levels by 2050 –
a target set by the International Maritime Organization (IMO).

This transition requires
significant infrastructure investments in new fuel production, supply chains,
and a new or retrofitted fleet, the Getting to Zero Coalition said. The study
by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition
spells out the scale of the challenge.

Depending on the production
method, the cumulative investment needed between 2030 and 2050 to halve
shipping’s emissions amounts to approximately USD 1-1.4 trillion, or an average
of USD 50-70 billion annually for 20 years. If shipping is to fully decarbonize
by 2050, this will require further investments of some USD 400 billion over 20
years, bringing the total to USD 1.4-1.9 trillion.

“We need to understand the scale
of the challenge to solve it. Shipping’s shift to zero carbon energy sources
calls for significant infrastructure investments. The investment needed should
be seen in the context of global investments in energy, which in 2018 amounted
to USD 1.85 trillion. This illustrates that shipping’s green transition is
considerable, but certainly within reach if the right policy measures are put
in place,” Johannah Christensen, Managing Director, Head of Projects &
Programmes at the Global Maritime Forum, a partner of the Getting to Zero
Coalition, commented.

“Energy infrastructure and ships
are long-life capital-intensive assets that normally evolve slowly. In the next
3 decades however, our analysis suggests we will see a disruptive and rapid
change to align to a new zero carbon system, with fossil fuel aligned assets
becoming obsolete or needing significant modification,” Tristan Smith, Reader
at the UCL Energy Institute, said.

“Even though regulatory drivers
of this system change such as carbon pricing are only starting to be debated,
the economic viability of today’s investments and even the returns on recent
investments will be challenged, and the sooner this is factored into strategies
and plans, the better.”

The analysis also sheds light on
where investments need to take place. These can be broken down into two main
areas — ship-related investments and land-based investments.

The biggest share of investments
is needed in the land-based infrastructure and production facilities for low
carbon fuels, which make up around 87% of the total. This includes investments
in the production of low carbon fuels, and the land-based storage and bunkering
infrastructure needed for their supply.

Only 13% of the investments
needed are related to the ships themselves. These investments include the
machinery and onboard storage required for a ship to run on low carbon fuels in
newbuilds and, in some cases, for retrofits. 
Ship-related investments also
include investments in improving energy efficiency, which are estimated to grow
due to the higher cost of low carbon fuels compared to traditional marine
“Sustainable investing is here to
stay. We foresee that there will be a great appetite for investments in
sustainable infrastructure projects that help reduce greenhouse gas emissions,“
Michael Parker, Chairman of Global Shipping Logistics & Offshore at Citi,

Much of shipping’s decarbonization
will take place on land. It is a systemic transformation that goes beyond the
capabilities of the maritime industry alone. We need to bring together the full
range of upstream and downstream fuels value chains to unlock shipping’s shift
to zero carbon energy sources. Done right, this represents a trillion-dollar
market opportunity,” Lord Adair Turner, Chair of the Energy Transitions
Commission, explained.

At the Global Maritime Forum’s
recent annual summit, maritime leaders proposed a global carbon levy to
accelerate shipping’s decarbonization through investments in technology and
design of new propulsion systems, alternative fuels, and scaling and
infrastructure to deliver these fuels – while taking into consideration the
impact on trade and developing states.

The starting level for a carbon
levy should be USD 10 per ton CO2, and USD 50-USD 75 per ton CO2 around 2030. A
price of USD 10 per ton CO2 would correspond to an annual fund of USD 8
billion. A price of USD 75 per ton CO2 would correspond to an annual fund of
USD 70 billion.
World Maritime News.

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