COP26 side-event: Seizing opportunities for developing countries in providing zero-carbon fuels to global shipping
10 November 2021
Organized by UNCTAD and the International Maritime Organization
Excellencies,
Ladies and gentlemen,
The decarbonization of maritime transport is the most important transition of the shipping industry in decades. It compares to the move from sail to steam, or from steam to oil.
The shipping industry is exploring renewable energy to power the fleets of the future. Many technologies are being explored, including alternative sources of low carbon fuels, more streamlined hulls, more efficient propeller design, improved voyage planning to make savings on fuels, better hull coatings and even air cushions to reduce friction.
Using new ship designs and new fuels to cut fossil fuel dependency and reduce carbon emissions will likely be more expensive during the early stages of the transition. This will have implications for ship operators and shippers, as well as for trade costs and trade competitiveness.
Our Impact Assessment, undertaken at the request of developing country members of the IMO, has provided evidence that measures taken to reduce CO2 emissions from shipping could result in higher transport costs and lower connectivity, especially for small island developing states and least developed countries. We need to work together to mitigate these additional costs.
I am very pleased to see that in this year’s COP, there are many initiatives covering maritime transport issues.
Early on, UNCTAD has argued that in shipping, it is also possible to assign emissions to responsible parties. The right price for carbon will provide the right signal for industry to invest in the right ships and infrastructure.
Moreover, we need to ensure that decarbonization efforts in shipping strike the right balance and trade-offs between the economic, social and environmental dimensions of sustainable development.
I want to share three key messages:
First, there is an opportunity. Zero-carbon shipping represents a business and development opportunity for several developing countries. In the past, the bunker fuel market was a very non-inclusive market: countries with large oil reserves could participate, others could not.
In the future, with the emergence of zero-carbon bunker fuels, the renewable energy potential of a country will be important. And we know that developing countries have a lot of potential for zero-carbon bunker fuel production. This can allow some of them to enter this market.
It is not only a business opportunity, but also a great opportunity for development. It can be linked to national and regional programmes on grid decarbonization, other hydrogen applications, infrastructure modernization, etc.
Second, we need to set the right price for carbon. There are several proposals on so-called “market-based measures”. A carbon price, or a carbon levy, implemented at the global level, helps create a level playing field between fossil fuels and zero-carbon bunker fuels. It makes the polluters pay and acts as an incentive to move toward alternative sources of low carbon fuels. Such measures can also help raise revenues for urgently needed Research and Development to support the energy transition in developing countries, and help the most vulnerable economies, SIDS and LDCs, fund mitigation measures during the process of decarbonization. UNCTAD’s latest impact assessment of currently negotiated GHG reduction measures at the IMO shows that SIDS and LDCs will likely be more affected by increasing costs and lower connectivity resulting from the short-term GHG reduction measures.
Third, we need a predictable multilateral regulatory framework for the transition. And we need it fast. The current supply chain crisis has shown that a shipping capacity shortage can have severe impacts on freight rates and cargo flows. It is important that investors in ships, ports and energy distribution know early on in which direction to invest, so as not to delay the decarbonization transition, and avoid unnecessary increases in trade costs.
Ladies and gentlemen,
Today, 40% of maritime cargo is energy – including oil, coal, and gas. With the energy transition, bulkers, tankers and gas carriers will continue to trade, but will likely carry different cargoes than coal, gas and oil.
The energy transition in shipping will require high investments ashore and at sea, spanning ship design, propulsion systems, engines, and alternative fuels. We need a life cycle approach to energy production and distribution to ensure that the gains of the energy transition towards cleaner fuels are not eroded by carbon leakages that may occur at the production and distribution stage.
UNCTAD and the IMO have a long-established partnership which we highly value. We look forward to continuing collaborating on many fronts – such as the assessment of the impact of decarbonization measures, and jointly supporting sustainable and resilient maritime transport.
Thank you for your attention.
