Ocean freight costs are likely to remain high in 2022 as
investors and regulators scramble to accelerate decarbonization of the shipping
industry and companies grapple with green financing, sources say.
Shipping, which transports about 90% of world trade and
accounts for nearly 3% of the world's CO2 emissions, is under growing pressure
from environmentalists to deliver more concrete action including a carbon levy.
The International Maritime Organization (IMO), the UN's
specialist shipping agency, has said it has made progress on short-term
greenhouse gas (GHG) reduction measures.
But that timeline is not seen as fast enough by
environmentalists and a number of the IMO's 175 member countries.
"At the MEPC (IMO committee) meeting in June next year
there will be a lot of heat and pressure on regulators to ensure that they come
prepared to negotiate a solution rather than kicking the can down the road
because of misalignment or negotiation tactics. It is really not
acceptable," said Christian Michael Ingerslev, chief executive of Maersk
Last month countries including the United States at the COP
26 climate summit pushed for the IMO to adopt a zero emissions target by 2050.
So far, its goal is to reduce overall GHG emissions from
ships by 50% from 2008 levels by 2050.
"As far as the IMO is concerned, the negotiations
process in 2022 will likely be very slow and onerous," said Faig Abbasov
with green group Transport & Environment.
"The problem is in the very belief that a U.N.
organisation with 175 members can come together and take tough decisions to
decarbonise an entire economic sector."
The IMO said concrete progress was made in 2021 on combating
climate change including new regulations to improve the energy efficiency of
the world fleet, adding that it would "work very hard" next year on
the development of a revised GHG strategy, which will be finalised in 2023.
"Where this is willingness to act, then processes can
move faster," said Roel Hoenders, head, air pollution and energy
efficiency with the IMO.
A proposal submitted at the IMO to create a $5 billion
research and development fund to find the right technology to meet the targets
is still under discussion with further talks kicked forward to next year.
Underscoring the challenges ahead will be the impact on
poorer countries such as Pakistan.
While the country was a small carbon emitter, climate change
had "directly impacted us hard", Pakistan's Federal Minister of
Maritime Affairs Ali Haider Zaidi said.
"Developing countries cannot afford to spend on the
type of infrastructure needed and therefore, developed countries must support
the process at the IMO," he told Reuters referring to the R&D fund.
Financing the path ahead is another hurdle. Shipping will
need $2.4 trillion to achieve net-zero emissions by 2050, with around $500
billion required by 2030, according analyst estimates.
"Certainly, the European banks at least and not far
behind the American banks will have to meet criteria that satisfy sustainable
finance," said Tony Foster, chief executive of specialist asset manager
"When it comes to new assets it is going to be
increasingly difficult to fund anything that does not quite qualify and the
same will be true, perhaps even more so, with existing assets."
Darren Maupin, founder of leading fund manager Pilgrim
Global, said companies in the shipping sector were grappling with how to secure
finance with more ESG pressure.
"Capital is afraid - how do you invest in a 25-year
asset when you have no idea what the IMO is going to do in five years,"
"The industry has a far reduced ability to build ships
and limited capital available to do so. Simple supply-demand suggests rates are
going to be higher and the industry is going to have to generate more capital
to fund itself."