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Shipping’s green $1trn is a profitable investment, not a cost

Marie Hubatova, a research analyst at the Environmental Defense Fund, discusses the zero-carbon shipping opportunity ahead of us.

Earlier this month, the Global Maritime Forum presented its report on the level of investment required to decarbonise the shipping sector. But instead of being discussed as a giant global investment opportunity, the headline figure of over $1trn was instead reported by some as a threat. This misleading interpretation of the paper potentially damages and undermines efforts to decarbonise the industry.

Shipping annually emits about 2.6% of global greenhouse gas emissions, similar to the emissions of Germany, and is not included in most national climate commitments. In 2018, the International Maritime Organization (IMO) agreed to cut shipping’s emissions by at least 50% by 2050, compared to 2008 levels, however to date there are no concrete measures to deliver on this target. Without action, emissions from shipping will potentially increase by as much as 250% in the next three decades.

The report, featuring analysis from the University Maritime Advisory Services and Energy Transitions Commission, shows that meeting the IMO’s 2050 target represents $50bn to $70bn per year for 20 years spending, but this is also a revenue opportunity. We need this crucial investment to build renewable plants and other infrastructure. As Environmental Defense Fund found in our latest reports Sailing on Solar and Electrofuels for Shipping, implementation of zero-carbon fuels such as green ammonia and hydrogen, produced from untapped renewable energy and avoiding the creation of upstream emissions, could unlock trillions of dollars of investment globally, and tens of billions at national levels.

The entire financial sector is looking for green investments more than ever, as governments, asset managers, and the public pile on the pressure over climate change. Demand for green bonds currently far exceeds supply. Smart companies in the maritime sector will position themselves to benefit from the growing tidal wave of green cash. However the benefits brought by the clean shipping transition go far beyond the shipping sector. These include new job opportunities and increasing demand for higher-skilled jobs, such as engineers, that will help transform labour markets. The expansion of renewable electricity will push prices of clean electricity down and drive down the cost of decarbonisation in other sectors. Many countries will reduce their dependence on imports of fossil fuels, which will increase their energy security while securing a wider distribution of wealth to renewables-rich developing countries globally, outside the narrow band of oil exporters.
All of this is a part of the global effort to address the climate emergency. A trillion dollars is a large sum, but shouldn’t be seen as intimidating. To put it into context, in 2018, global fossil fuel consumption subsidies were over $400bn. That equates to almost eight times the annual estimate needed for decarbonising shipping. In this comparison, the investment needed for shipping is really just a drop in the ocean.

Continued growth and mitigating climate change are no longer at odds with each other. Countries and industry can do both simultaneously. Some shipowners have known this for a while and aim to decarbonise voluntarily by choosing to address remaining safety concerns linked to electrofuels, potentially giving them first mover advantage. It is time for countries to understand this as well. The technological race has started and first movers will reap the financial benefits and establish themselves as progressive leaders and clean shipping hubs.

Ultimately, the shipping industry will have to move away from fossil fuels. To ensure everyone does their part, we will need a strong set of policies to drive and manage the transition. It is now up to the IMO and Member States to make sure comprehensive measures are in place. These measures should include a carbon price mechanism where emitters pay and the money collected is then redistributed for research, development and deployment of clean shipping technologies. It should also support countries who might struggle to afford them, such as developing countries, least developed countries and small island developing states. The IMO negotiations start this March, and we will hopefully see new, ambitious policies drafted in advance.

Comments

  1. Note: The whole picture comes down to logical thinking: Engineering, calculating, bookmaking and politicians.
    Unfortunately, the shipping’s $1trn comes together with the “European Green Deal” a “Billion Euro” bill for the next decades, which at the end will be for sure many billions more for both. As one can read, money is available in the EU and all can ‘benefit’ from this. For which finally and logically all tax payers need to bleed. This article has in common that it seems to see no problems to fund all the new jobs and investments related to new fuel solutions too. Questionable is, if this is valid in all parts of the world. Comparing amounts of CO2 in shipping and Germany, as the writer does, one need to get an idea of the amount of energy and investment we talk about. – – – A qualified calculation shows that an 80% renewable energy solution only in Germany by 2050 would mean 5% of its surface would be covered by 585.075 ‘green’ solar parks = 17,552 qkm of each 5 MW worth 643.582.500.000 € (30 years, ~40 M tax payers ) = about 536 €/tax payer per year. Plus ‘green’ wind energy; adding to the 1.465 offshore wind turbines, an additional number of 38.358 units which is 3,45 wind turbines per square kilometer of North Sea at a cost of 765.160.000.000 €. No wonder that in the wind shadow of another unit, total electrical production will stay behind. This all at a 637 €/year extra. Total 1173 € per year to be performed per tax payer within Germany on average; the one less, the other more. And already now, 10% of the tax payers in Germany are paying 90% of the total sum. You can count 1 plus 1 to know who will pay the final bill within shipping. Let me show figures of Wikipedia to show related costs per 1kWh:
    (source: https://en.wikipedia.org/wiki/Cost_of_electricity_by_source)
    —qoute—
    Capital costs
    For power generation capacity capital costs are often expressed as overnight cost per watt. Estimated costs are:
    gas/oil combined cycle power plant – $1000/kW (2019)[10]
    onshore wind – $1600/kW (2019)[10]
    offshore wind – $6500/kW (2019)[10]
    solar PV (fixed) – $1060/kW (utility),[11] $1800/kW (2019)[10]
    solar PV (tracking)- $1130/kW (utility)[11] $2000/kW (2019)[10]
    battery storage power – $2000/kW (2019)[10]
    conventional hydropower – $2680/kW (2019)[10]
    geothermal – $2800/kW (2019)[10]
    coal (with SO2 and NOx controls)- $3500–3800/kW[12]
    advanced nuclear – $6000/kW (2019)[10]
    fuel cells – $7200/kW (2019)[10]
    —unqoute—
    Every single solution away from oil/gas will be more expensive, as shown above !
    Electricity to gas? One can produce H2 with superfluous energy on windy days.
    But what about total cost and efficiency of the fuel cell and weight?
    Electricity to gases and combustion where needed has only about 30% efficiency.
    Logically for the latter; the amount of green electrical power needs to be tripled and subsequently costs too !
    But wasn’t the electricity of wind and solar parks not ment for the households?
    So where to take the green electrical power from?
    Questions over questions for which no answer has been given.
    Perhaps, since the real answer is clear: Fossil fuels are endless, coal might be there for 1000 more years. It is not the CO2, that’s only the ‘vehicle’. The answer to the contribution of human-related CO2 to the present natural rise in global temperature after the ice age (~13.000 years ago) is not clear: Scientifically seen, there is still no evidence, not in temperature measured (non-adjusted) not in sea level rise and if, perhaps a mere 0,1%, but this is even within computational accuracy. What can be seen is that the earth becomes greener (source: NASA) which is logical, since vegetation needs CO2 as a basis for growth and in order to produce oxygen. And hey, there are also a few more hungry mouths to feed.
    Remains the question: Are we backing the wrong horse and are we listening to the wrong bookmakers and politicians.
    Replacement for fossil fuels should be left over to engineers and not needlessly invested by politicians and bookmakers into a castle in the air. That helps nobody whose mouth is yet to feed.

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