Global shipping industry most exposed” to low carbon energy shift

Global shipping industry most exposed” to low carbon energy shift
18/07/2019

Rapid decarbonisation of global energy supplies will have radical implications for the global shipping industry, detailed in a new report from MSI. Vessel selection will be critical, requiring divestment from sectors with the greatest exposure to fossil fuels.

The consequences for shipping markets of a major shift in energy consumption away from hydrocarbons and towards renewables and biofuels is the subject of a report prepared by MSI on behalf of the European Climate Foundation that projects two demand frameworks – ‘Reduction’ and ‘Reference’ – designed to provide broad narrative and structure to long-term global energy demand by fuel. MSI’s shipping market modelling systems were used to analyse how global fossil fuel demand reductions could alter inter-regional commodity trade flows and the associated shift in required shipping capacity, industry earnings and asset prices, across all segments of the shipping industry.

The MSI report does not provide commentary or assessment of the likelihood of the projected scenarios occurring, rather the scenarios are intended as frameworks to explore the implications for the shipping industry and associated capital markets of a major shift in energy demand. The two scenarios are informed by projections made or commissioned by the Intergovernmental Panel on Climate Change (IPCC) and the timeframe of the report is out to 2050, though the temperature targets associated with the IPCC scenarios have timeframe objectives that extend beyond this period. The Reference scenario is designed to provide a comparator to Reduction and describes a much more limited change in the global energy consumption profile. Under this scenario, global energy demand continues to grow robustly through the 2020s before stabilising in the 2030s.

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