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Greater investment needed to slash shipping’s carbon footprint, UNCTAD claims

The maritime transport sector needs more investment in infrastructure and technology to prepare it for the transition to low-carbon energy, a report from the UN Conference on Trade and Development (UNCTAD) has found.

While the “most immediate way to reduce emissions is slow sailing”, the report notes that retrofitting ships with technology enabling them to use alternative fuels like LNG, ammonia or electricity will “drive up costs and affect insurance coverage, as well as future access to investment and capital”.

Alternative fuels are not currently commercially viable, costing between two and five times as much as conventional fuel, UNCTAD reports in its annual Review of Maritime Transport.

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The agency, which promotes developing countries’ access to trade, adds that in 2021, 30% to 40% of container ships and dry bulk carriers were deemed non-compliant with the new carbon intensity indicator rules due to take effect from January 1 2023.

Dual-fuel vessels are emerging as a popular option, however, with close to 40% of the orderbook comprising ships capable of running on one or more fuels at March 1 this year, UNCTAD says.

The International Maritime Organisation is targeting a 40% reduction in carbon emissions from 2008 levels by 2030. The maritime sector currently represents 2.9% of total global carbon dioxide emissions.

According to the report, total carbon emissions from the world maritime fleet jumped by 4.7% between 2020 and 2021, with container ships, dry bulk and general cargo vessels driving the increase.

“Ports, carriers and everyone involved in maritime supply chains can redefine the competitive landscape for low-emission shipping” by providing infrastructure for low-emission energy, the report says. But warns that this might “create a two-tier system of ports and corridors” where only a few are equipped for alternative energy and potential routes are limited.

“We need to learn from the current supply chain crisis and prepare better for future challenges and transitions. This includes enhancing intermodal infrastructure, fleet renewal and improving port performance and trade facilitation,” says UNCTAD secretary general Rebeca Grynspan, adding that “we must not delay the decarbonisation of shipping”.

The organisation predicts maritime trade growth will be 1.4% for 2022, rising to a yearly average of 2.1% in the period between 2023 and 2027 – slower than the previous three-decade average of 3.3%, but a significant improvement on the 3.8% decline in 2020.

The report also found that port congestion persisted well into 2022, with 37% of the world’s containership fleet capacity held at ports by July 2022, up from 32% during the period 2016–2019.

Container freight rates have dropped since reaching record levels in 2021 – for example, the rate per twenty-foot equivalent unit (TEU) for the China to Brazil route rocketed from US$2,000 in 2019 to US$10,196 in December 2021 – but are not yet back to pre-pandemic levels, UNCTAD says.

Increased capacity in the container shipping sector has also led to industry consolidation and reduced competition among shipping carriers, which could lead to restricted supply, higher rates for consumers and “market power abuse”, the agency says, adding that the trend for oversized vessels is a risk for competitive markets, as they tend to push out smaller carriers.

Between 2006 and 2022, the world’s largest container ships more than doubled in size, increasing from 9,380 TEU to 23,992 TEU, with ships growing faster than there is cargo available to fill them.

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