Evaluating the Costs of Decarbonizing the Shipping Industry: A Review of the Literature

Abstract

The decarbonization of the shipping industry has risen to a new level of significance on the agendas of policy makers and strategic decision makers. This paper focuses on the likely cost implications for the shipping industry of recently implemented, and future planned policies that seek to reduce the carbon footprint of the sector. The scale of the problem is presented through a summary review of the International Maritime Organization’s fourth greenhouse gas study of 2020. The regulatory context, which is emerging as a response to overcoming this challenge, is analyzed at both the global and EU level. The potential cost implications for the future, in terms of this new regulatory context, are then analyzed on the basis of a review of academic and industry sources. Our paper concludes that alternative, zero-carbon fuels are the best way forward, but that operational and technological innovations will not be sufficient to bring about the complete decarbonization of the industry within the foreseeable future. Thus, market-based measures are required. Finally, the options available, and the likely implications of each of these options, is addressed, suggesting that there will be both winners and losers in the race to decarbonize the shipping industry.