New Analysis Puts Price Tag on Shipping Decarbonization

At least $1 trillion of capital investment in land-based and ship-related infrastructure is required to halve international shipping’s greenhouse gas emissions by 2050, according to a new study by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition.

Radical change is needed to meet the IMO goal of reducing shipping's total greenhouse gas emissions by at least 50 percent of 2008 levels by 2050. The transition requires significant infrastructure investments in new fuel production, supply chains and a new or retrofitted fleet.

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

The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87 percent 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 percent of the investments needed are related to ships. 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 fuels.

Hydrogen and ammonia have multiple applications and likely increasing roles in the global economy across energy storage, low carbon heat, transport fuels and, in the case of ammonia, as a key input in the production of fertilizer. A major component of the investments anticipated is related to the production of low/zero carbon hydrogen, which can either be produced from natural gas using steam methane reformation combined with carbon capture and storage (blue hydrogen) or from renewable electricity and water through electrolysis (green hydrogen).

“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 $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,” says Johannah Christensen, Managing Director, Head of Projects & Programmes at the Global Maritime Forum, a partner of the Getting to Zero Coalition.

At the Global Maritime Forum’s recent Annual Summit, maritime leaders proposed a global carbon levy to accelerate shipping’s decarbonization while taking into consideration the impact on trade and developing states. The Forum says that the starting level for a carbon levy should be $10 per ton CO2, and $50-$75 per ton CO2 around 2030. A price of $10 per ton CO2 would correspond to an annual fund of $8 billion. A price of $75 per ton CO2 would correspond to an annual fund of $70 billion.

The analysis is available here.