Greenhouse gas emissions in shipping

The International Maritime Organization (IMO) has set the ambition of reducing the shipping industry’s greenhouse gas emissions by at least 50% by 2050 compared to 2008, and reducing the carbon intensity of emissions by 40% by 2030, and 70% by 2050 compared to 2008 levels. 

Decarbonising Shipping: All Hands On Deck”, a report by Shell and Deloitte, identifies practical measures to cut carbon emissions based on more than 80 interviews across the shipping industry. In this article, we take a look at greenhouse gas emissions in shipping. Read the full report for more information.

Where we are: The shipping industry has set an ambition to halve international shipping GHG emissions by 2050.

In 2018, the IMO announced the initial strategy to reduce GHG emissions. The strategy outlines an ambition to at least halve international shipping GHG emissions by 2050, while reducing CO₂ emissions intensity by at least 40% by 2030, and pursuing efforts towards 70% by 2050, relative to a 2008 baseline[1]. While this is not binding, the IMO is expected to follow up with more specific measures by 2023. The IMO is the first regulatory body to adopt a global ambition for an entire industry, which is of critical importance given the role of shipping in the global economy.

Where we are: Shipping is critical to the global economy and accounts for around 2.7% of global emissions.

In the words of one interviewee of the Decarbonising Shipping: All Hands On Deck” report, shipping is the “backbone of the global economy,” allowing the world to trade more goods over greater distances than any other mode of transport. It has historically grown in lockstep with economic activity. For instance, between 2000 and 2018, global GDP increased by approximately 65% while international shipping volumes increased by 93% over the same period (see chart below)[2].

Shipping volumes, emissions and GDP Growth

Source: UNCTAD; World Bank; IEA; Deloitte analysis

Notes:

  1. Shipping volume indicates ton-miles (how many tons of cargo were shipped over how many miles)
  2. World GDP in constant 2010 $, to eliminate effect of inflation
  3. International shipping shown, accounting for over 80% of global shipping

The industry currently accounts for around 2.7% of global CO₂ emissions, but emissions are geographically concentrated across East-West trade routes and a relatively small set of vessel types3 . Bulk carriers, oil tankers and container ships account for around 85% of all shipping activity (see chart below)4 , while around 45% of international maritime trade passes through the 20 largest global ports5 .

Shipping volumes, emissions and GDP Growth

Source: UNCTAD; IMO; IEA; Deloitte analysis

Notes:

  1. Ships of >1,000 gross tons, representing 99% of global ­tonnage
  2. DWT = Dead Weight Tonnage, an indicator of ­capacity
  3. General ­cargo includes multipurpose transport and other unclassified vessels
  4. Large ferries included. There is another ~8k+ of ferries < 1,000 gross tons

Interviewees believe this concentration of emissions from specific uses and on specific routes creates an opportunity. An operator from Asia-Pacific region said, it allows us to focus our efforts on a small number of vessels and ports for the greatest impact.”

Where we are: Shipping is the most efficient means of transport and continues to make efficiency improvements as volume grows.

Due to the colossal size of ships and the continual drive for efficiency, shipping is by far the least emissions-intensive mode of transport (see chart below). A large vessel emits 1% of the CO₂ per ton-km that is emitted by a plane and 14% of the CO₂ emitted by the next most efficient transport alternative – a cargo train6.

 

Shipping volumes, emissions and GDP Growth

Source: IMO GHG study 2009.

Notes:

  1. Energy-efficient transport is much dependent on the load factor, vehicle efficiency and cargo type; heavier cargo and larger vehicles will improve the cargo/vehicle weight ratio, resulting in better CO₂/ton-km values
  2. Air = Boeing 747, Road = Truck > 40 ton, Rail = 3-4 hp / short-ton, Shipping = Average of very large container vessel (3 gCO₂/ton-km), oil tanker (6), bulk carrier (8)
  3. Estimations assuming current energy mix

The shipping industry continues to improve its efficiency. Over the last two decades, shipping volumes have increased by 101% while emissions only grew by 40% over the same time frame. This is due to increased scale, technical innovation and far-reaching operational improvements.

For instance, today’s largest container vessels can carry around 22,000 containers, compared with a maximum of around 1,000 containers in the early 1970s. Ship sizes have doubled over the past decade alone, reducing their carbon intensity and also reducing the average shipping cost per container by roughly a third7.

The industry has also become more efficient through operational and technical improvements. Between 1976 and 2008, the carbon efficiency per weight-distance of some vessels improved by 75%8. Interviewees believe an additional 10 to 20% reduction in emissions can be achieved with technical innovations and digitalisation opportunities such as just-in-time arrivals, to cut the time that ships spend waiting outside ports.

Efficiency improvements are a central way to meet the IMO’s 2030 ambition, but the industry will require a more fundamental shift in fuel as shipping volumes continue to grow.

Where we are: The growth in shipping volumes will increase pressure to accelerate decarbonisation.

Interviewees say that several trends in demand will influence shipping volumes and emissions in the coming years. For instance, automation and 3D printing could improve production efficiency and reduce the benefits of having factories in distant, lower-cost locations. This could lead to a reduction in subcontractor layers and bring production closer to end markets, resulting in lower demand for shipping services. Shifting consumer preferences and trade protectionism may also have a similar negative impact on shipping volumes.

The impact of the COVID-19 pandemic significantly reduced shipping volumes. By April 2020, up to 60% of China’s shipping capacity in Asia-Europe routes was idle9. While the impact has been acute, interviewees believe it will be a relatively short-term disruption and the industry will show signs of recovery by 202110.

While these demand-side factors may individually decrease demand for shipping, interview participants do not believe they will fully offset growth in demand. Trade volumes and, in turn, shipping emissions are expected to continue to grow, increasing the importance of addressing barriers to decarbonisation.

Decarbonising Shipping: All Hands On Deck”, a report by Shell and Deloitte, reflects the perspectives of 82 senior shipping leaders that represent almost all segments of the shipping industry. The full report is available on www.shell.com/DecarbonisingShipping

1 IMO (2018), Initial IMO Strategy on reduction of GHG emissions from ships.
2 UNCTAD (2018), Review of Maritime Transport.
3 International Council on Clean Transportation (2017), Greenhouse gas emissions from global shipping, 2013-2015.
4 Deloitte analysis based on UNCTAD (2019), Review of Maritime Transport; IMO (2014), Third IMO Greenhouse Gas Study; IEA (2019), Oil Information 2019.
5 Deloitte analysis based on UNCTAD (2019), Review of Maritime Traffic; Shanghai International Shipping Institute (2019), Global Port Development 2018, April.
6 IMO (2009), Second IMO GHG Study.
7 International Transport Forum (2015), The Impact of Mega Ships.
8 World Shipping Council (2009), The Liner Shipping Industry and Carbon Emissions Policy.
9 Alphaliner data as reported by Wall Street Journal (2020), Shipping’s Smaller Operators Are Most Susceptible to the Coronavirus Financial Impact.
10 IMF (2020), World Economic Outlook, April 2020: The Great Lockdown.

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