The
de-carbonisation of global energy supplies to address climate change
will have radical implications for the global shipping industry, said a
new report.
If the Paris Agreement goals are met, the fossil fuel cargo base that
shipping serves would undergo an aggressive and prolonged
transformation, analyst MSI said.
The consequences for shipping markets of a major shift in energy
consumption away from hydrocarbons and towards renewables and biofuels
is the subject of a report prepared by MSI on behalf of the European
Climate Foundation.
“Whilst some sectors of the shipping industry, such as containerships,
would be virtually unscathed, those for which hydrocarbons comprise a
significant proportion of - or all - the cargo mix would undergo decades
of falling demand,” said MSI Director, Stuart Nicoll. “The results,
detailed in the report, would be multi-decade declines in fleet
capacity, earnings and asset prices across the affected sectors.
Shipowners would be forced to slash new ordering and scrap uneconomic
vessels.”
MSI’s shipping market modelling systems enable analysis of how changes
in energy demand will affect inter-regional commodity trade flows, and
the associated shift in required shipping capacity, industry earnings
and asset prices, across all segments of the shipping industry.
The analysis projects two demand frameworks – ‘Reduction’ and
‘Reference’ – designed to provide broad narrative and structure to
long-term global energy demand.
Global energy consumption in the ‘Reduction’ scenario is largely based
on projections made for pathways consistent with limiting warming to 1.5
deg C above pre-industrial levels, as described in the IPCC SR1.5
report.
The ‘Reference’ scenario is designed to provide a comparison to
‘Reduction’. Although it describes a more limited change in the global
energy consumption profile, ‘Reference’ still incorporates substantial
restraints on future energy consumption.
The more extreme’ Reduction’ scenario is the focus of the report, under
which fossil fuel demand sees radical decline over the next three
decades. By 2050 world coal consumption falls by 80%, oil consumption
halves, and gas demand drops by about a quarter.
“The energy transition from fossil fuels to renewables means that
investors in shipping and ports are exposed to substantial financial
risks, which have not been adequately assessed before,” co-author Tim
Smith, MSI’s Director, Oil and Tanker Markets, added. “Those in the
industry who believe that that global commitments to cut carbon
emissions will be achieved need to prepare for radical transition that
this implies. Vessel selection will be critical, and divestment from
sectors with the greatest exposure to fossil fuels may prove the only
way to profitably navigate the changing landscape.”
This report will be further analysed in the July/August issue of ‘Tanker Operator Magazine’.
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