Decarbonizing the shipping industry will cost more than $1 trillion

Fueling all shipping ships with zero-emission fuels by 2050 would reduce industry emissions, but would require between $1 trillion and $1.4 trillion in investment


September 22, 2022

To move away from fossil fuels by 2050 will require substantial global financial investment

Air movement

According to a report released Sept. 21 at the Global Maritime Forum summit in Brooklyn, New York, during Climate Week NYC, more than $1 trillion in investment would be needed to decarbonize the shipping industry by 2050.

The global shipping industry is responsible for about 3 percent of total global greenhouse gas emissions, roughly equivalent to Japan’s total annual emissions. Most of the industry’s emissions come from fossil fuels burned to power the more than 100,000 large ships in the ocean, and total emissions could more than double by 2050 without efforts to decarbonise.

Improving energy efficiency could significantly reduce shipping emissions, but full decarbonisation will ultimately require fossil fuels to be completely replaced by zero-emission fuels such as hydrogen and ammonia produced using renewable energy and methanol, says Domagoj Baresic of University Maritime Advisory Services, a shipping consultancy in the UK.

Baresic and Katharine Palmer of Lloyd’s Register, a maritime services provider in the United Kingdom, reviewed the progress the shipping industry has made to date, highlighting what they call a “breakthrough” target of using zero-emission fuel for 5 percent of international marine fuel and 15 percent of domestic marine fuel by 2030.

“While 5 percent sounds small, it means that all the necessary conditions are met” for a rapidly increasing use of zero-emission fuel from then on, says Baresic. Almost no zero-emission fuel is currently used for shipping, he says.

The International Maritime Organization, the UN agency that regulates international shipping, has adopted a strategy to reduce emissions from shipping by 50 percent by 2050. A more ambitious plan to cut emissions from shipping by 100 percent by 2050 has been signed by at least 14 countries, including the US and the UK.

“Two years ago literally nothing happened in the shipping space [on decarbonisation]” said Rasmus Bach Nielsen of Trafigura, a global commodities trading company headquartered in Singapore. “I think you have to realize how fast things go.”

However, despite commitments, the industry is only “partially on track” toward its 2030 targets, the report finds.

“Now we are at the stage where it is about turning commitments into concrete actions,” says Baresic. ‘Is the money there? Do we actually see the construction of the ships and the infrastructure?”

The report lists at least 203 ongoing green shipping pilot projects, but says those should now translate into longer-term commitments, such as investments in zero-emission fuel infrastructure. Some ships can be powered by electric batteries, nuclear power or even old-fashioned wind-powered sails, although the report sees zero-emission fuels as the central strategy.

Twenty-two countries have also committed to creating six zero-emission shipping routes by 2025, including one between Shanghai, China and Los Angeles. These routes can help create the initial infrastructure needed to scale up green shipping.

In total, the report estimates that decarbonising global shipping would require between $1 trillion and $1.4 trillion in investment by 2050.

“It’s a big number,” Baresic says, but it would come from global investment from multiple industries spanning decades.

“Now we have a common destiny,” Palmer says. “The question is how fast we will get there.”

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