Shipping industry faces $200 per container gap in emission transition

A 34-page study just released on the brink of COP28 examines the cost of zero-emission container ships, illuminating the annualised costs and the discrepancy in price per container between Chinese and transpacific coastal shipping.

The report by the UK-based UMAS highlights the significant initial cost differential between traditional fossil fuels and scalable zero-emission fuels (SZEF), taking into account variations within the SZEF options.

Under an optimistic fuel price scenario, the cost difference is estimated at $150 per TEU for green ammonia and $210 per TEU for green methanol on the transpacific route in 2030. These amounts increase to $350 per TEU for green ammonia and $450 per TEU for green methanol in a scenario with high fuel prices.

However, the report indicates that the cost gap is expected to close by 2050 with strong demand signals, willingness to pay the difference, and policy support. Cargo owners and other early adopters are essential in creating a market for shipping with no emissions.

UMAS consultant Camilo Perico underlined the importance of openly discussing the difficulties and having stakeholders pitch in to close the budget deficit.

According to the Total Cost of Operation approach, which considers both operational and vessel capex, operating a single SZEF vessel on the transpacific route would cost an extra $20–30 million annually by 2030.

The fuel costs range from $18 to $27 million in this. The TCO for vessels using methanol and green ammonia is anticipated to be two to four times higher in 2030.

Leaders in the shipping sector, including the CEOs of significant corporations, recently made a joint statement at COP28, asking the International Maritime Organization (IMO) to establish regulatory frameworks that will hasten the switch to green fuels and imposing a deadline for newbuilds powered solely by fossil fuels.