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The cost of decarbonisation in the maritime environment
There is widespread disagreement about how far and how fast to decarbonise maritime operations. But what is certain is that it will come with considerable costs that someone will have to pick up
would be $173 a tonne on average. It should be noted that many believe that the IMO’s goals are too timid and thus unacceptable. The research indicates that fully decarbonising shipping would require a carbon price of $18 a tonne higher than that needed to halve emissions. These figures are higher than the Marshall Islands’ proposed $100 carbon tax plan, but below the $300 proposed by Trafigure last year. Complex situation Where it becomes particularly interesting is how these charges would be applied. If a flat rate of $194 a tonne was to be imposed it would give certainty; if a phased approach were implemented the initial rate might be $11 per tonne, but could increase to $360 a tonne to achieve the 100% reduction. It is a complex situation and more than one technology will need to be used to achieve decarbonisation, with the monies generated by the surcharge being recycled back into the decarbonising costs. Effectively business, and ultimately the consumer, will be asked to pay for decarbonisation, and they will have little say in how and on what projects it will be spent. However, what is clear is that there will be cost increases and that will have an impact on goods, whatever their nature. Undoubtedly business will look at how to minimise these cost impacts, which could change the type of products available, where they are manufactured and how they are shipped.
Hardly a day goes by without some reference to reducing greenhouse gas (GHG) emissions and decarbonising the environment. It seems that some businesses and their leaders are proposing ever more ambitious targets, on occasion far in advance of what governments are advocating. One area that will prove particularly difficult to reach agreement on is the best way to achieve a substantial reduction or complete decarbonisation of maritime transport. We have already seen bitter exchanges between the EU and International Maritime Organisation (IMO) on this very issue. The EU favours a regional approach, while the IMO believes that to ensure consistency there needs to be a global approach. One of the major differences between the two organisations is the speed at which it is anticipated that decarbonisation will occur. Forwarders tend to be pragmatic people and it has been noted that in many cases we are given the problem and a hypothesis, but nothing concrete on which to start planning, let alone make decisions. In many cases the technology, whilst developing, is simply not available to facilitate these ambitious plans. Headlines may appear that such and such
company has ordered X number of battery- powered vehicles, but buried away from the headline is a comment such as “for delivery between 12 and 24 months from now”. The other thing that many are very quiet about is cost – yes, we have to decarbonise but until technology improves and production costs reduce it is not going to be cheap. We have already seen DP World at Southampton impose a relatively modest surcharge on inbound containers to cover the significant cost difference of moving from fossil-fuelled to electric straddle carriers in the port.
Considerable debate, In the maritime sector, the cost of de-
carbonisation and who pays for it are subject to considerable debate, particularly at a time when rates are at historically high levels. Whilst nobody knows what the final figures will be, financial modelling by various organisations indicates that the cost implications are likely to be significant. According to the University Maritime Advisory Services, an average carbon price of $191 per tonne is needed to reach zero emissions by 2050. To comply with the IMO’s current target of halving emissions from 2008 levels, the cost
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January 2022
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