The global shipping industry will see billions of dollars added to freight costs in the future on the back of forthcoming emissions regulations, according to a new analysis by Drewry.
Pressure to decarbonise and reduce emissions of greenhouse gases (GHG) is growing in all sectors but in shipping, specifically, the International Maritime Organisation targets to reduce GHG emissions by 50% by 2050 (from a 2008 baseline).
This will then be complemented by regional and national regulations.
"The imperative to decarbonise the global shipping industry is clear and present, however, many of the world's largest importers and exporters are insufficiently informed about the full implications of the forthcoming new emissions regulations and the billions of dollars that will be added to freight costs in the future," Drewry said.
The maritime research consultancy firm noted that besides regulatory changes resulting from decarbonisation policies, emissions limits and related taxes, there will be an enormous technological change in the design of ships and their propulsion systems, with a transition to engines powered by low or zero-carbon fuels.
"Overall, the transition towards low or even zero carbon shipping will result in higher costs," said Philip Damas, managing director of Drewry, adding that the company put together the first independent cost model to help shippers forecast and quantify additional medium-term direct costs.
Drewry said in its report that the European Union will be the first region to enforce "carbon taxes" in shipping via its Emission Trading System, which will penalise users of high-carbon fuels such as conventional fossil fuels and apply not only to shipments within Europe but also to all shipments to and from Europe.
As shipowners look to comply with tighter environmental rules, several "candidate" green fuels are being considered, and they will have different implications and costs for shipping lines and for shippers.
US$3.5B to US$14.5B cost to shipping industry
In consultation with ocean carriers and representatives of shippers and industry associations, Drewry also launched the first industry-wide costing of both the European carbon taxes and for transitioning all European container shipments to a greener fuel type.
"The cost for 2024 ranges between US$3.5 billion and US$14.5 billion depending on the extent to which the industry switches to LNG and other greener ships instead of keeping to conventional fuel oil," the maritime research consultancy firm said.
Drewry said LNG is the main 'intermediate' fuel type on the journey to decarbonise container shipping as technology and fuel supply infrastructure are currently not ready for either green methanol or green ammonia.
Though future LNG prices will depend heavily on the ultimate future energy market.
The European Union Commission and Parliament have considered introducing new carbon taxes as early as next year, but it is now expected the new taxes will not come into effect until 2024.
In July, Maersk announced it was planning to introduce surcharges of 170 euros/40ft container for its Asia to North Europe services and 185 euros/40ft for North Europe to US services, thereby passing on the extra regulatory costs.
Last week, MSC also announced that it was planning to introduce surcharges of about 138 euros/40ft container for its Asia to North Europe services. Other major carriers, however, have yet to announce their intentions following the regulatory changes.
Drewry then urges ocean carriers to be as "transparent with shippers as possible" about the costs associated with sustainability while retaining confidentiality over any sensitive, technology-related data.
