Financing decarbonisation

Two trillion (US) dollars, according to Michael Parker, chairman of global logistics, shipping and offshore at Citigroup.

“85% of this will be on landside distribution,” he said during the ‘Financing Decarbonisation of Shipping’ session at the IAPH World Ports Conference 2021 . Ports will therefore see major investment during the energy transition.

Government subsidies will reduce the competitiveness gap, market measures will determine the distribution of funding, and investment will be paid for by a small increase in consumer prices, he said.

If 85% of investment will be landside, then 15%, approximately US$250bn will be used for decarbonising shipping. Parker also noted research had shown 2.4 trillion dollars would be needed to replace the global fleet.

He stressed: ““We will overcome cost barriers. Consumer pressure will make it happen. The money is here, it’s the mechanisms via private support that will make it happen.”

Eranda Kotelawala, chief executive officer of the Solomon Islands Ports Authority, said that while large ports will pass on rising costs to their customers, small and medium sized ports (SMEs) with lower volumes may need different strategies, as they will need to be careful not to pass on too many costs to the customer.

Fuel bunkering players

On the subject of whether there are opportunities for new players in fuel bunkering, Kotelawala believes: “Some current companies will adapt to supply new fuels, but more specialised companies will emerge.” The latter will depend on how fast existing companies adapt.

Parker said UN Climate Change Conference of the Parties (COP 26) will demonstrate industry developments and how vital partnerships will be.

We need to see a number of alternative fuels used. Ports will need to accommodate experimentation by shipping companies, he stated. However, he warned that while energy companies are expected to invest heavily, “we have to remove the speculative element or market lenders will not invest”.

Kotelawala stressed again that size does make a difference: “Bigger ports can more easily facilitate fuel experiments.” All ports need to consider new investments or retrofitting where feasible, taking into consideration where capital investments are coming from, he added.

Both Parker and Kotelawala agreed that ports and shipping need to decarbonise at the same time, with collaboration in mind rather than looking at which sector should act first. That said, if ports are going to invest, there needs to be the security of certainty of use.