Nov 30, 2020
Millions of people depend on shipping for transport, access to food and supplies, jobs and more. But when it comes to climate change, the maritime industry poses a significant problem.
Shipping is responsible for 3% of total global CO2 emissions. These emissions are growing fast, driven by demand for heavy fuel oils (HFOs) which are high in sulphur and nitrous oxide. The air pollution from HFOs is estimated to cause around 60,000 premature deaths every year.
Moving towards zero emission shipping
Transformational change is needed and the key question facing us is: how can we unlock the scale of capital needed to support decarbonization and move to zero emission fuels and technologies in the next ten years?
The answer is multi-faceted. In the early stages, financing will be vital and that is where CIF hopes to offer its expertise to effect change in the industry. CIF has developed a model for using targeted public resources to help drive significant action on climate change over the years. “This model has led to major changes in the clean energy sector, and I am convinced that it can do the same for the maritime industry,” said Mafalda Duarte, Head of the CIF.
The model works by providing large amounts of concessional finance through six multilateral development banks. This capital is risk-bearing, a long-term investment and below market rates - all qualities that have convinced others to invest hundreds of millions of dollars in climate-friendly alternatives that bring long-term benefits to our climate.
A recent report by Bloomberg New Energy Finance demonstrates the model’s effectiveness. It found that the deployment of concessional finance has significantly accelerated clean energy markets in developing countries. This financing helps industries move more quickly towards what BloombergNEF called two “tipping points”: when a clean energy facility becomes cheaper to build than a new gas or coal plant, and when it becomes cheaper to run.
New regulations are needed for shipping to change
Investment alone will not be enough to bring the changes needed to global shipping. Technical assistance is also vital. CIF works directly with developing country governments to support them to implement policies and regulations that encourage rather than restrict commercial investments in large, costly and often high-risk clean energy projects.
These big ambitions are easy to talk about, but harder to achieve. Maritime transport is an extremely energy-intensive industry, so decarbonising it will be challenging. But the CIF aims to use its Industry Program be part of the solution by developing a new financing program to utilise its unique business model. This Program will provide access to finance, enhance regulatory and policy frameworks, give incentives to deploy innovative clean technologies, and develop firms’ capacity and skills.
A recent webinar discussed the change required
CIF is committed to being part of the solution. To this end, Duarte took part in the Global Maritime Forum Working Group on Financing the Green Transition last month. Alongside her at the virtual meeting were leaders of some of the biggest companies in the global maritime industry.
Speaking at the event, Duarte encouraged the industry to be ambitious in its decarbonization aims. “The maritime industry needs to change urgently,” she said. “Even if we reduce greenhouse gas emissions in the sector by half by 2050, we will fail to reach our 1.5°C climate change target. We need to see companies be more ambitious and innovative if we are to achieve our climate goals.”
She outlined specific initiatives, including improving the energy efficiency of existing ship engines, and shifting from HFOs to zero-emission alternatives such as hydrogen fuel cells and electric motors, or hydrogen and ammonia used in combustion engines.
You can read more about CIF's work to unlock private capital in support of climate-resilient projects here.
