An additional $8 billion to $28 billion will be required annually to decarbonize ships by 2050, and even more substantial investments of upto $90 billion annually, will be needed to develop infrastructure for 100% carbon-neutral fuels by 2050, according to United Nations Conference on Trade and Development (UNCTAD).

 

The shipping industry accounts for over 80% of the world's trade volume and nearly 3% of global greenhouse gas emissions, with emissions escalating by 20% in just a decade, it stated.

 

In its Review of Maritime Transport 2023 launched ahead of World Maritime Day (September 28), the UNCTAD highlighted the pressing need for cleaner fuels, digital solutions and an equitable transition to combat continued carbon emissions and regulatory uncertainty in the shipping industry.

 

The review comes ahead of the United Nations climate conference (COP28) this November.

 

Calling for a just and equitable transition to a decarbonized shipping industry, UNCTAD Secretary-General Rebeca Grynspan said: "Maritime transport needs to decarbonize as soon as possible, while ensuring economic growth. Balancing environmental sustainability, regulatory compliance and economic demands is vital for a prosperous, equitable and resilient future for maritime transport."

 

The UN body advocates for a shift towards cleaner fuels in shipping, emphasizing the need for an environmentally effective, procedurally fair, socially just, technologically inclusive and globally equitable transition strategy. 

 

The organization underscores the importance of system-wide collaboration, swift regulatory interventions, and robust investments in green technologies and fleets.

 

While the transition to cleaner fuels is in its early stages, with nearly 99% of the global fleet still reliant on conventional fuels, the report cites promising developments, including 21% of vessels on order designed for alternative fuels.

 

However, the transition comes with substantial costs. Full decarbonization could elevate annual fuel expenses by 70% to 100%, potentially affecting small island developing states (SIDS) and least developed countries (LDCs) that heavily rely on maritime transport.

 

To ensure an equitable transition, UNCTAD calls for a universal regulatory framework applicable to all ships, irrespective of their registration flags, ownership or operational areas, thereby avoiding a two-speed decarbonization process and maintaining a level playing field.

 

Shamika N. Sirimanne, UNCTAD's director of technology and logistics, said "economic incentives, such as levies or contributions paid in relation to shipping emissions may incentivize action, can promote the competitiveness of alternative fuels and narrow the cost gap with conventional heavy fuels."

 

"These funds could also facilitate investments in ports in SIDS and LDCs, focusing on climate change adaptation, trade and transport reforms, as well as digital connectivity," he added.

 

Despite a 0.4% contraction in total maritime trade volumes in 2022, the industry anticipates a 2.4% growth in 2023, with containerized trade (which declined by 3.7% in 2022) expected to expand by 1.2% in 2023 and more than 3% between 2024 and 2028.

 

Oil and gas trade volumes showed robust growth in 2022, while tanker freight rates saw a strong revival driven by geopolitical events. Dry bulk rates experienced volatility due to shifting demand, port congestion, geopolitical tensions and weather disruptions, said the report.

 

In conclusion, UNCTAD's call for a just and equitable transition to a low- and zero-carbon future in global shipping serves as a call for system-wide commitment and regulatory action to combat the escalating environmental challenges faced by the maritime sector. 

 

Bold and timely actionnd collaborative efforts are essential to ensure a sustainable, resilient and prosperous future for maritime transport, it added.