Climate change: unregulated shipping industry contracts, uncertainty over fuel transition among biggest barriers to decarbonisation, experts say

Shipping industry in ‘uncharted waters’ in its search for low or zero-carbon marine fuels, report says

One of the ‘biggest single carbon inefficiencies’ emanates from contractual obligations between many layers of owners, charterers, cargo interests and bill-of-lading holders, executive at Hong Kong consultancy says

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A cargo ship leaves Zhoushan port in Ningbo, in China’s eastern Zhejiang province, in this photo taken on June 6. Ocean-going vessels contributing around 3 per cent of global greenhouse gas emissions annually, according to the United Nations Conference on Trade and Development. Photo: AFP

Published: 6:30am, 4 Jul 2023Updated: 9:49am, 4 Jul 2023

The largely unregulated nature of shipping contracts and uncertain regulations for fuel transition are among the biggest barriers keeping the shipping sector from accelerating its decarbonisation, experts said.

The long chain of contracts between shipowners, charterers and sub-charters often creates complex disputes about responsibility, especially when new carbon-emission regulations are passed during the course of long-term agreements, said Natalie Chan, managing director of PIE Strategy, a Hong Kong-based sustainability consultancy.

“Perhaps one of the biggest single carbon inefficiencies in the maritime industry emanates from contractual obligations between the many layers of owners, charterers, cargo interests and bill-of-lading holders,” said a report published jointly by international law firm Stephenson Harwood and PIE on Monday.

More than 80 per cent of global trade by volume is transported across the seas, with ocean-going vessels contributing around 3 per cent of global greenhouse gas emissions annually, according to the United Nations Conference on Trade and Development.

Interviews conducted by PIE with 26 key business decision-makers – more than half of them in the maritime industry – found that the industry faces big uncertainties about fuel transition, which complicates investment decisions about the construction of new vessels as well as the retrofitting of existing ships.

“The shipping industry is navigating uncharted waters to seek the ideal low or zero-carbon marine fuels,” the report said. “This choice is crucial, with implications for everything from investment decisions to long-term business planning.”