Global Shipping Industry Sticks with Green Investments, Despite Carbon Price Delay

by Enes Tunagur and Jeslyn Lerh (Reuters) Shipping accounts for nearly 3% of greenhouse gas emissions; IMO to consider carbon price again this year; Shipping, energy companies forge ahead with green investments; Rules may change again over ships' 30-year lifespans, Wartsila CEO says

The shipping industry's biggest players are shrugging off Trump administration opposition to a global carbon price and are forging ahead with billions of dollars in emissions-reducing investments, according to company officials and a Reuters analysis of data.

Europe, Brazil and a host of other nations are pushing the sector, which is responsible for nearly 3% of the world's greenhouse gas emissions, to go green. But, in October, the U.S. and Saudi Arabia, the world's two largest oil producers, successfully spearheaded efforts to postpone by one year a decision on the International Maritime Organization's proposal of a $380-per-metric-ton levy.

Some analysts and industry observers initially warned that the absence of such a global framework added complexity to companies' planning and could cause some to pause their green investments.

But in interviews with 15 shipping companies, ports, bunker suppliers and marine technology companies, 10 told Reuters that regional regulations, long investment lead times, and expectations of a continuing trend towards decarbonisation all argued in favour of staying the course.

And a Reuters analysis of vessel delivery data through 2028 showed orders of ships capable of running on alternative fuels dominating new shipbuilding.

Most of the nearly 50,000 commercial ships operating globally today run on fuel oil or gas oil. But in a unanimous decision in 2023, IMO member states set a target of net-zero emissions by or around 2050.

Firms have, in anticipation, begun ordering dual-fuel ships that can use both fuel oil as well as greener alternatives like liquefied natural gas, methanol and ammonia.

By the end of December, companies had invested over $150 billion in dual-fuel vessels, according to a Reuters analysis of data from the World Shipping Council, an industry group for container shipping and vehicle carriers.

In total, 1,126 dual-fuel container ships and vehicle carriers have now been either delivered or are on order, the data showed. That marks an increase of 28% compared with the previous year, indicating that newbuilding orders for lower-emission fuel vessels continued even after the IMO delay.

They also continued to outpace orders for traditional ships, with dual-fuel vessels now accounting for 74% of the overall container ship and vehicle carrier orderbook.

Many companies cited regional green fuel regulations among the main reasons for moving ahead with investments.

The European Union's FuelEU Maritime, which requires vessels to pay penalties for failing to achieve lower emissions, makes a business case for greener fleets, ship owners and fuel suppliers said. And the EU Emissions Trading System and voluntary initiatives provide further incentives.

Ship owners with dual-fuel vessels will likely use them on EU voyages to avoid paying FuelEU Maritime penalties, and some should also receive rewards for over-compliance, said Kenneth Tveter, an analyst at shipbroker Clarksons.

"The case for low-carbon fuels such as ammonia and methanol is still alive if you have a trade concentrated around Europe," he said.

Major Horn of Africa port Djibouti and OPEC member Gabon have also introduced levies on maritime emissions.

And current momentum could see punitive regulations and incentive schemes introduced in other important shipping hubs soon.

Britain, notably, has proposed to expand its emissions trading system to international shipping from 2028. And Turkey is considering a scheme similar to the EU's.

Such factors should drive demand for LNG, bio-LNG and biofuels over the next five years, said Nacho de Miguel, head of alternative fuels at bunker supplier Peninsula. READ MORE