Estimated minimum investment of USD1 trillion for shipping to meet 2050 requirements

Increasing environmental costs. Credit: Freepik

An insight briefing has just been published, based on analysis carried out by the University Maritime Advisory Services (UMAS) and the Energy Transitions Commission which outlines the estimated investment costs of the shipping industry to meet IMO 2050 decarbonisation requirements.

The briefing estimates that the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions will amount to approximately USD1-1.4 trillion, or an average of USD50-70 billion annually for 20 years. If the shipping industry is to fully decarbonise by 2050, this will need a further additional investment of around USD400 billion over 20 years, updating the total to between USD1.4-1.9 billion. These estimates are dependent on the production methods used.

The analysis also sheds light on where investments need to take place. These can be broken down into two main areas: ship-related investments and land-based investments.

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. This includes investments in the production of low carbon fuels, and the land-based storage and bunkering infrastructure needed for their supply.

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 low carbon fuels in newbuilds and, in some cases, for retrofits. Ship-related investments also include investments in improving energy efficiency, which are estimated to grow due to the higher cost of low carbon fuels compared to traditional marine fuels.

The proposed estimated investments come from the UMAS shipping model GloTraM, this model simulates decisions from a shipowners’ perspective to identify the fuel, technology and operation combinations that maximise their profits and therefore identifies the likely pathways for the sector’s evolution under a combination of macroeconomic and policy drivers. The model includes a detailed representation of the different ship types within the global fleet, and the production pathways, their capital and operating costs, for a range of potential low and zero carbon fuels. From this, the investment implications for fleet and land-side infrastructure of the model-identified likely pathway are then obtained.

This briefing is taken from a larger study currently being carried out for the Getting to Zero Coalition, an industry-led platform made up of stakeholders across maritime and fuels value chains and the financial sectors committed to making commercially viable zero emission vessels scalable by 2030.

The full insight briefing can be found here.