Shipping Industry Grapples with Lack of Clarity On Future Fuels, Regulations

The shipping industry is facing pressure to decarbonise faster, but it is being held back by a lack of clarity on future clean fuels and regulatory systems. This is according to the United Nations Conference on Trade and Development (UNCTAD), which released its Review of Maritime Transport for 2023 on Wednesday.

The report found that the global shipping fleet is aging, with commercial ships on average 22.2 years old at the start of 2023. This is two years older than a decade ago, and more than half of the world's fleet is now over 15 years old.

Shipowners are facing the challenge of renewing the fleet, but they are hesitant to do so without clarity on future clean fuels and regulatory regimes. Port terminals are also facing similar challenges in making vital investment decisions.

In July, countries adopted a revised greenhouse gas strategy for shipping that set a net zero emissions target by or around the middle of the century. However, environmental groups have criticised the target as not ambitious enough.

Decarbonising shipping by 2050 will require large investment, and the UNCTAD report cited estimates from Norwegian risk manager DNV indicating additional annual costs of USD 8 billion to USD 28 billion.

The industry is exploring a number of different clean technologies, including ammonia and methanol, as well as wind assisted propulsion. However, scaling up fuel production, distribution, and marine bunkering infrastructure to supply 100 per cent carbon neutral fuels by 2050 would require estimated annual investments of around USD 28 billion to USD 90 billion.

As per reports by Reuters, it has been found that estimates suggest that full decarbonisation could raise annual fuel costs by 70 to 100 per cent compared to current levels. "Shipping cannot decarbonize on its own," the report said.

Despite the challenges, the UNCTAD report projected that maritime trade volume would grow by 2.4 per cent in 2023, with moderated growth of 2.1 per cent-2.2 per cent forecast between 2024-2028.

The shipping industry is a vital part of the global economy, transporting over 80 per cent of world trade. However, it also accounts for nearly 3 per cent of the world's carbon dioxide emissions. The industry needs to take action to decarbonize, but it needs clarity on future fuels and regulatory systems in order to do so.