Barriers to energy efficient and low carbon shipping

TLDR

Energy costs account for 60–70 % of a ship’s operating expenses, and with fuel prices at record highs, improving energy efficiency has become a top priority for shipping companies, yet substantial unrealised abatement potential remains largely untapped due to market barriers. This study examines non‑market and market failures in shipping by surveying companies to evaluate their prevalence. The survey findings are compared with results from the global shipping system model (GloTraM). The analysis indicates that both non‑market and market failures exist in shipping, mirroring issues seen in other industries.

Abstract

Energy costs represent around 60–70% of operating costs of a ship and with the fuel price soaring to record levels, energy efficiency has become the top priority for many shipping companies. Numerous cost-effective energy efficient options (technologies for new and existing ships and operations) have been identified for improving the energy efficiency of ships. Analysis from industry leading experts and recognised bodies has so far shown substantial unrealised abatement potential using options that often appear to be cost-negative at current fuel prices. Apart from the shortcomings of the analysis, failure to realise this potential could be attributable to various market barriers and failures. This paper discusses non-market failures and market failures in context of shipping and draws on findings of a survey of shipping companies to assess their pervasiveness. The results are compared with analysis undertaken with the global shipping system model (GloTraM). Initial results from these methods suggest the existence of some non-market failures and market failures that have also been discussed in other sectors and industries.