Global policies could make zero-emission shipping commercially viable

A new report for the Getting to Zero Coalition, an initiative for accelerating international shipping decarbonisation, outlining policy measures that could close the competitiveness between fossil fuels and zero-emission alternatives in shipping has been launched.

The report titled “Closing the Gap” was prepared by a maritime consultancy UMAS for the partnership between the Global Maritime Forum, Friends of Ocean Action, and the World Economic Forum.

It highlights the need for zero-emission fuels to become the dominant fuel source by the 2040s in order to achieve international shipping decarbonisation and underlines the importance of the development of policies that can close the competitiveness gas and accelerate the maritime zero-emission trajectory.

The report presents multiple potential policy options for closing the gap noting that the preferred way to support shipping decarbonisation is to adopt a policy package that combines the strengths of the different policy options whilst mitigating their weaknesses.

It suggests a policy package consisting of a global market-based measure that collects revenue which is then used fairly to support the transition, and a direct command-and-control measure to send an unequivocal signal to the market that a fuel transition will take place.

According to the report, this could be complemented by voluntary initiatives, information programs and national and regional policy measures to stimulate investments, encourage knowledge sharing and support capacity development.

The report also emphasises the need to consider equitability of the transition when designing measures and combining policy options.

“Decarbonisation policy for shipping needs to be as much about equity and fairness as it is about climate change mitigation. Vast inequalities exist globally, many of which are worsening in the face of climate change. With careful policy design and the use of carbon pricing revenues, we can ensure that maritime climate policies do not exacerbate these inequalities. Furthermore, embedding equity into policy measures will help secure the multilateral agreement that is urgently needed”, said Isabelle Rojon, principal consultant at UMAS and lead author of the report.

The report estimates the carbon price required under full decarbonisation by 2050 or 50% decarbonization by 2050 and finds that there is no big difference in the average price level between the two scenarios. An average carbon price of just under $200 is required for shipping’s full decarbonisation, whereas under the 50% reduction scenario it is around 10% lower.

Kasper Søgaard, managing director of Global Maritime Forum, said: “The report shows that the introduction of a relatively low carbon price in the 2020s that is gradually increased to around $200 will make it possible to fully decarbonize shipping and create an industry that is powered solely by net-zero energy sources by 2050. This level of carbon price is in line what is estimated by for instance the IEA to be needed across all industries achieve the Paris Agreement goals, indicating that shipping is not a unique case“.

Finally, the work on a global package of policies to close the gap is considered to have a key role in the energy transition.

“This year will be critical for decisions on climate policy in the IMO. Our report shows that there is no single perfect policy and that a successful transition will likely hinge on developing and deploying a mix of policies that can address different aspects of the transition”, commented Alison Shaw, research associate at UCL and co-author of the report.

“The imposition of market-based measures on the shipping industry is relatively uncharted, so the sooner policy-makers can surmount this challenge together, the better for the transition, the industry, and the environment”.