The Future of Shipping

Managing emissions and constant market developments

Shipping is vital to the global economy, carrying 85% of world trade by sea and moving goods, food, energy and people efficiently. Although it is the most cost-effective way to transport large quantities over long distances, the sector is responsible for 2.2% of global emissions. 

To meet the Paris Agreement targets, emissions must be reduced by 45% by 2030 and net zero must be reached by 2050. These goals are challenging because of the long lifespan of ships, which typically last 20-30 years, making the industry slow to adapt to trends such as decarbonisation and electrification.

Rising Costs and Shifting Demands

As the industry becomes more decarbonised, fuel costs and prices for new, more environmentally friendly ships are rising. This shift may be accompanied by a decline in demand for transporting certain goods, especially fossil fuels and chemicals. This could lead to more dynamic cargo rates, making it harder for ship owners to invest in new fleets in times of low earnings. Long-term cargo contracts could provide some financial stability and attract investors making long-term plans. 

But to truly achieve zero emissions by 2050, the industry needs new ships powered by renewable fuels. This shift is likely to change the landscape of ship ownership, with a shift towards entities that can offer both ships and renewable fuel options, leading to possible consolidation in the industry by 2030.

Enhancing Transparency for Environmental Performance

Few cargo clients choose shipping carriers based on environmental performance because there is little transparency. To change this, the shipping industry needs measures that reward energy-efficient operations. This means shifting income models to focus on customer service and environmental performance. New IMO and EU rules will increase demand for energy-efficient ships and encourage this shift.

Four Levers to kick-start Decarbonisation

shipping



To improve energy efficiency, the industry needs clear benchmarks:


  1. Setting a fuel benchmark for each voyage, based on typical performance, would help measure a ship's environmental impact. 
  2. More transparency and differentiation will allow customers to choose carriers based on efficiency.
  3. Fuel budgets in commercial contracts will motivate operators to optimise their operations and invest in energy-saving upgrades.
  4. Innovating the revenue model to include fuel budgets will create an additional revenue stream, rewarding carriers for saving fuel and reducing emissions. These steps will reduce emissions and support sustainability.

How can BDO help?

Our BDO experts can help companies in the Transport & Logistics industry with all kinds of advice and solutions such as ESG support, digital transformations, customs expertise, financial risk management…

By helping you comply with the massive wave of environmental regulations, giving insights and analyses into your data and supporting you in your energy transition, your operational efficiency will improve and your company will become future-proof. 

In addition, our audit and assurance services help you monitor compliance and sustainability reporting, while innovative revenue models, such as integrating fuel budgets into commercial contracts, align your financial incentives with environmental objectives.

Curious to learn more about our services tailored to the Transport & Logistics industry? Have a look at our service page.

So what will this decarbonised future of the maritime sector look like? How will these changes impact services to clients? Find out all about it in the full article by Danish Ship Finance.  

Read the article