The global shipping industry requires more than $1 trillion in investments to implement the International Maritime Organisation (IMO) Paris Agreement on climate change.
According to a study conducted by University Maritime advisory Services (UMAS) and the Energy Transition Commission (ETC, for the sector to implement the climate change strategy, with a vision to decarbonise shipping within this century, annual average investments needed would be $40 to $60 billion over the next two decades.
More than 87 per cent of the total investments are needed for land-based infrastructure and production facilities for low carbon fuels, while the remaining should be invested on the machinery and on-board storage required for a ship to run on low-carbon fuel.
The commitment by the United Nation's Shipping Agency to reduce total GHG emissions from shipping by an average carbon intensity (carbon dioxide per tonne-mile) by 40 per cent in 2030 and 70 per cent by 2050, compared with 2008 also require investments to improve energy efficiency, which are estimated to be more due to higher fuel costs compared with traditional marine fuels.
A major component to achieve the mission is the investment related to the production of low or zero carbon hydrogen, which can either be produced from natural gas using steam methane reformation combined with carbon captured and storage or from renewable electricity and water through electrolysis (green hydrogen).
The Paris Agreement set a goal to limit global warming to well below 2°C, with the ambition of meeting a lower limit of 1.5°C in the next two decades and to zero carbon emissions by 2050.
The shipping agency has already partnered with banks to finance ship decarbonisation through the Poseidon Principles—a global framework for integrating climate consideration into lending decisions—which was launched in June by 11 banks, including Citi, Société Générale and DNB, representing 20 per cent of global shipping finance.
The main obstacle to industry-wide decarbonisation lies within the sector's composition, which is largely privately-owned, and both shipowners and charterers are driven by short-term cyclical patterns.