UNCTAD’s Review of Maritime Transport 2023 calls for a “just and equitable transition” to a decarbonized shipping industry.
The sector, whose greenhouse gas emissions have risen 20% over the last decade, operates an ageing fleet that runs almost exclusively on fossil fuels.
As global leaders prepare for the next UN climate conference (COP28), UNCTAD advocates for system-wide collaboration, swift regulatory intervention and stronger investments in green technologies and fleets.
Full decarbonization by 2050 will require massive investments and could lead to higher maritime logistics costs, raising concerns for vulnerable shipping-reliant nations like small island developing states.
The report emphasizes the need to balance environmental goals with economic needs but underscores that the cost of inaction far outweighs the required investments.
Beyond cleaner fuels, the industry needs to move faster towards digital solutions like AI and blockchain to improve efficiency as well as sustainability.
In its analysis of global maritime trends, the report highlights shipping’s resilience despite major challenges stemming from global crises, such as the war in Ukraine. Maritime trade is expected to grow 2.4% in 2023 and more than 2% between 2024 and 2028.
Towards greener shores:
The need for an energy transition
The maritime sector stands at a pivotal moment, facing the daunting challenge of decarbonization while navigating economic and geopolitical headwinds.
The industry’s greenhouse gas emissions, which account for 3% of the global total, have increased by 20% over the last decade. Without action, emissions could reach 130% of their 2008 levels by 2050.
Complicating matters is an ageing world fleet. As of early 2023, the average ship’s age was 22.2 years. With over half now older than 15 years, many ships are either too old to retrofit or too young to scrap.
The urgency of decarbonization is evident, yet the sector faces multibillion-dollar investments amid uncertainty about the best transition methods.
Alternative fuels show promise, but their adoption remains in the early stages, with 98.8% of the fleet still sailing on fossil fuels. The silver lining is that 21% of vessels on order will operate on cleaner alternatives like liquefied natural gas, methanol and hybrid technologies.
Another layer of complexity is the question of who is responsible for the transition. The major flag states Liberia, Panama, and the Marshall Islands, which account for a third of shipping's carbon emissions, will be responsible for enforcing new green shipping standards. But the onus for investing in alternative fuels, bunkering facilities and greener ships falls largely on ship owners, ports and the energy-producing industry.
Navigating this complex tangle of economic, regulatory and environmental priorities is the industry's next big test. Decisions on decarbonization measures are taken by the International Maritime Organization (IMO) and its members.
UNCTAD calls on
1The industry to continually assess the viability of low-carbon shipping green technologies and identify the best energy transition pathways.
2Regulatory bodies to craft a global decarbonization framework that ensures equality for all ships to ensure a level playing field and avoid fragmentation in the industry.
3Maritime industry leaders to collaborate across sectors to increase demand for low-carbon fuels and technologies, encouraging investments.
4Investors and financial institutions to substantially boost funds for the research and development of clean fuel shipping technologies and infrastructure.
Navigating the costs:
Ensuring a just and equitable transition
The heavy financial burden of moving the shipping sector towards cleaner energy could disproportionately impact the most vulnerable nations.
Estimates show that decarbonizing the world’s fleet by 2050 could require $8 billion to $28 billion annually. The infrastructure for 100% carbon-neutral fuels could need an even heftier $28 billion to $90 billion each year. If achieved, full decarbonization could double yearly fuel costs.
The daunting price tag raises concerns, especially for small island developing states (SIDS) and least developed countries (LDCs), already burdened by higher shipping costs.
These vulnerable nations on the front lines of climate change are heavily reliant on maritime transport for trade and economic growth. They could face significant economic setbacks from the increased costs.
The report advocates for targeted support to mitigate the impacts, including a levy or contributions on fuel emissions, which could be used to help make ports in SIDS and LDCs more climate ready, efficient and digitally connected.
It also calls for global collaboration through green shipping corridors – designated routes for sustainable vessels – underscoring the importance of ensuring such initiatives benefit vulnerable economies.
Such financial and technical support is essential to ensure the maritime sector’s energy transition is just and equitable.
UNCTAD calls on
1Nations to consider adopting an economic measure, such as an emissions levy, and to allocate part of the funds to make shipping infrastructure more climate ready in vulnerable countries.
2Policy and regulatory bodies to establish a global decarbonization framework that gives attention to the needs of vulnerable countries.
3The global community to provide financial and technical support to developing countries most affected by energy transition costs.
Charting the future:
Optimizing port operations
Container ships tend to wait less time in ports in developed economies than in developing countries, due to a combination of faster clearance times, better infrastructure and higher labour productivity.
During the COVID-19 pandemic, however, wait times surged more in developed countries and in some cases even exceeded those in developing nations.
But by late 2022, turnaround times generally began to recover from the pandemic.
The report’s analysis at the country level shows port performances vary primarily because of different levels of automation – normally higher in developed country ports – and traffic types, with imports and exports tending to take longer than transshipments.
UNCTAD’s latest Liner Shipping Connectivity Index shows China as the top performer, followed by the Republic of Korea, Singapore, Malaysia and the US. Europe saw Spain, the Netherlands and Belgium climb in the index, while the UK fell.
Rebounding from COVID-19's shipping disruptions, many countries in Asia, Latin America, the Caribbean and Oceania posted their best performances.
Meanwhile, inefficiencies continue to hamper many ports in Africa and SIDS. Despite improvements, their performances remain below pre-pandemic levels.
Factors like ships moving to European and North American markets and drops in tourism affected the scores of SIDS. While some hubs like Jamaica and the Dominican Republic improved, others such as the Bahamas and Mauritius continued to lag.
UNCTAD calls on
1Port authorities and operators to fast-track digitalization and invest more in advanced technologies like AI and blockchain and single windows systems.
2The global community to support developing countries to adopt smart maritime logistics and accelerate trade facilitation reforms.
3African countries and SIDS to enhance port productivity by, for example, upgrading capacity and strengthening regional transport connections.
4Ports and international organizations to cooperate in generating data and indicators for port performance and trade facilitation reforms.
Anchoring resilience amidst
In a turbulent global landscape marked by geopolitical events like the war in Ukraine, the maritime industry showed remarkable resilience, adapting to new, lengthier trade routes.
Maritime trade volumes dipped 0.4% in 2022 but are on track for a 2.4% rebound in 2023 and above 2% growth through 2028.
A sector-specific analysis shows that containerized trade, vital for transporting everything from electronics to food to medical devices, is also bouncing back, forecast to grow 1.2% this year after suffering a 3.7% drop in 2022. Trade volumes remain, however, below pre-COVID-19 levels.
In the energy sector, the oil and gas trades surged 6% and 4.6% respectively in 2022 as pandemic restrictions eased.
Tanker and dry bulk rates, key industry barometers, have also shown positive trends.
Tanker freight rates, crucial for oil and gas transport, peaked in 2022 and remain strong in 2023. But uncertainties due to the energy transition and new regulatory requirements could limit future carrying capacity.
Dry bulk rates, affecting commodities like grain and coal, were volatile in 2022, peaking in May before falling to pre-pandemic levels by the year's end. Rates have since rebounded as demand surged and China’s industries recovered.
To sustain resilience against future challenges, especially climate change, the sector must not only accelerate decarbonization but also enhance port efficiency and adopt new technologies, focusing on the needs of developing economies.