Accelerated decarbonisation of the maritime transport industry
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Market Insight 08 January 2024 08 January 2024
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Asia Pacific, Latin America, Middle East, North America
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Predictions 2024 - Climate Change
When the European Union’s Emissions Trading System (ETS) comes into force for the maritime transport industry on 1 January 2024, it will have a seismic impact as shipowners and operators struggle to come to terms with the implications and effects of the new regulations
There are concerns raised by some EU countries that the regulations will drive business away from European ports. The need to amend contracts, allocate costs and establish liability for regulatory infringements is likely to give rise to disputes under charters, management agreements and other commercial contracts.
The move to decarbonise the shipping industry will increase the cost of trading in the EUwhich will ultimately be passed on to customers: some container companies have introduced per-container ETS surcharges.
The shipping industry will be encouraged to explore diverse fuel options, with a likely uptick in the use of methanol and ammonia. This raises questions about supply chain resilience, lack of bunkering infrastructure and the availability and sustainability of those fuels.
Financing options for shipowners will diminish, as the availability of finance will be increasingly contingent on transparency and accountability around emissions. This may push out smaller players who cannot afford to transition towards greener and more efficient technologies and could trigger M&A activity from bigger players who have the budget for decarbonisation.
It is expected that the International Maritime Organisation will issue new regulations for decarbonisation that will exist in parallel with the ETS, creating additional burden for owners and operators with a risk of duplication of compliance and costs.
Inevitably, unknowns triggered by geopolitics will also have an impact on the shipping industry. Will it come out fighting from all of this? Yes – in a different shape to the industry of a few years ago. The shipping industry is resilient and versatile and has always been able to adapt quickly to new demands.
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