Randall Krantz, Kasper Søgaard and Dr Tristan Smith of Global Maritime Forum, University College London on Monday (20 January) published a study reporting on the scale of investment needed to decarbonised international shipping based on International Maritime Organization (IMO)’s greenhouse gas (GHG) emissions reduction target.
Below is the key summary of the study:
The scale of cumulative investment needed between 2030 and 2050 to achieve the IMO target of reducing carbon emissions from shipping by at least 50% by 2050, is approximately USD 1-1.4 trillion, or on average between USD 50- 70 billion annually for 20 years.
- This estimate should be seen in the context of annual global investments in energy, which in 2018 amounted to USD 1.85 trillion.
- If shipping was to fully decarbonize by 2050, this would require extra investments of approximately USD 400 billion over 20 years, making the total investments needed between USD 1.4-1.9 trillion dollars.
- The estimate of investments required is based on ammonia (NH3) being the primary zero carbon fuel choice adopted by the shipping industry as it moves towards zero carbon fuels². Under different assumptions, hydrogen, synthetic methanol, or other fuels may displace ammonia’s projected dominance, but the magnitude of investments needed will not significantly change for these other fuels.
- To avoid shifting emissions upstream, it is important that efforts to decarbonize shipping also include the decarbonization of fuel production.
- The analysis is therefore based on the use of low/zero carbon hydrogen as input to the production of ammonia.
Investment needs can be broken down into two main areas:
- Ship related investments, which include engines, on-board storage and ship- based energy efficiency technologies, and;
- Land-based investments, which include investments in hydrogen production, ammonia synthesis and the land based storage and bunkering infrastructure.
Investment breakdown across vessels and land-based infrastructure:
- The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87% of the total investment³.
- Hydrogen production make up around half of the total land-based investments needed, while ammonia synthesis and storage and bunkering infrastructure make up the other half.
- Only 13 % of the investments needed are related to the ships themselves. These investments include:
- The machinery and onboard storage required for a ship to run on ammonia both in newbuild ships and, in some cases, for retrofits.
- Ship Related investments also include investments in improving energy efficiency, which are estimated to be higher due to the higher fuel costs of ammonia compared to traditional marine fuels.
Whilst research and development is valuable across all technology areas pertinent to shipping’s decarbonization, the opportunity to reduce the overall costs of decarbonization:
- Is greatest in the upstream production of fuels.
- This emphasizes the need to involve stakeholders across the full fuel value chain to make the transition possible in the most economically efficient manner.
- Hydrogen and ammonia have multiple applications in today’s economy and likely increasing roles in the global economy across energy storage, low carbon heat, transport fuels and, in the case of ammonia, as a key input in the production of fertilizer.
- This means that investments in hydrogen and ammonia production can serve other purposes than supplying fuels for shipping, which can create synergies and reduce the investment risk, especially in the early phase of the transition.
“Finally, it is important to note that the significant investments needed to decarbonize shipping can only be expected to happen if there is a long term commercially viable business case,” states the authors.
“Technological developments alone – although very important – are not expected to be enough to create such a business case as the costs of zero emissions fuels are expected to be significantly higher than traditional fossil fuels used in shipping in the coming decades.”
The full study report can be downloaded from the link Aggregate investment for the decarbonisation of the shipping industry
Source: Global Maritime Forum
Published: 21 January, 2020