Sailing toward carbon zero?

Sailing
The toward
path global shipping is on
carbon zero?
By Mads Peter Zacho

Taking stock of
maritime
transportation’s
climate impact

October 2021
Version 1.0
Sailing toward carbon zero?

A three-part series1 explores maritime

transportation’s decarbonization journey
and complements the Mærsk Mc-Kinney
Møller Center for Zero Carbon Shipping’s
forthcoming Industry Transition
Strategy report
The first installment tracks the
industry’s climate impact based on
current trends.

1
The Center would like to thank McKinsey & Company, as knowledge partner to the Center, for its analytical and
editorial contributions to this series of articles.

2
 Taking stock of maritime transportation’s climate impact

Introduction grows, shipping volumes are expected to

climb by around 1.3 percent on average
every year between now and the middle of
On the surface, the global shipping
the century. Other roadblocks on the path
industry’s environmental impact gives
to zero-carbon shipping include carriers’
little cause for alarm. After all, despite
preference for cheaper fossil fuels and that
accounting for around 80 percent of global
improvements in ship efficiency alone are
transportation measured by volume, the
insufficient to offset emissions caused by
sector is responsible for only 10 percent
demand growth.
of transport emissions—and 3 percent of
total greenhouse gas emissions. Compared
The global shipping industry needs to
to other forms of freight transport, shipping
do more to contribute to international
is the most efficient in terms of amount of
efforts to curb the worst effects of climate
emissions.
change, which will require limiting the rise
in global temperatures to be in line with the
However, dig a little deeper and a more
Paris Climate Accords. To chart feasible
unsettling picture emerges. Even when
pathways toward carbon zero for the
taking planned decarbonization efforts into
shipping industry, the Mærsk Mc-Kinney
consideration, the continuous growth of
Møller Center for Zero Carbon Shipping was
world trade may drive a corresponding rise
established to build consensus amongst
in emissions from shipping between now
leaders across the maritime ecosystem on
and 2050. The industry consumed about
the most viable pathways to zero.
300 million tons of fossil fuel in 2018 and,
as the world’s appetite for traded products

A new model to navigate the path to zero

The shipping industry does That is why the Mærsk Mc- based on industry inputs
not lack good ideas for Kinney Møller Center for and cost forecasts from
how to decarbonize. The Zero Carbon Shipping the Center’s partners, as
challenge is creating clarity developed the NavigaTE2 well as the impact of
among a large array of model in order to help ma- different customer,
ideas and solutions—in ritime stakeholders under- financial-sector, and
terms of both decarboni- stand the most plausible regulatory interventions.
zation impact and pathways for the industry’s The perspectives shared in
economic implications— decarbonization. The mo- this series of articles and
for a global and diverse del analyzes the total cost the forthcoming Industry
industry. of ownership for different Transition Strategy report
ship-efficiency technolo- are based on insights from
gies and alternative fuels, the NavigaTE model.

3
Sailing toward carbon zero? ohcaZ reteP
To complement the Mærsk Mc-Kinney planned decarbonization efforts may
Møller Center for Zero Carbon not be sufficient to offset the growth in
Shipping’s first Industry Transition underlying demand. If industry players
Strategy report, which will be released in don’t act decisively to cut their emissions
October, the Center is rolling out a series now by rethinking how business is done
of three articles that will make the case and innovate lower carbon solutions,
for why industry players should be doing then they may soon find the decline
more, lay out some of the complexities in needed to reach carbon zero by 2050
the industry’s path to carbon zero, and too steep to undertake. Furthermore, with
tease out some of the practical other stakeholders such as regulators,
strategies that decision makers can investors, and customers scrutinizing
consider. the sustainability of how products are
made and transported, clamors for more
In this first installment, we take stock sustainable shipping will only grow louder.
of the global shipping industry’s
decarbonization efforts, presenting our Thus, coming together to make decisive
best view of what will happen by 2050 if shifts toward a more sustainable path is not
the industry keeps on its current path. only the socially responsible thing to do, but
We identify the industry’s main drivers of also an opportunity for this generation of
CO2 emissions, arguing that maritime leaders to build a legacy of helping

“Coming together to make decisive

shifts toward a more sustainable path
is not only the socially responsible
thing to do, but also an opportunity for
this generation of maritime leaders to
leave behind a legacy of helping
solve one of the world’s most
intractable problems.”

2
NavigaTE refers to “Navigating decarbonization through
Techno-Economic modelling”.

4
 Taking stock ofmaritime transportation’s climate impact

solve one of the world’s most intractable of all goods transportation. Shipping
problems while supporting the ever- remains by far the most energy-efficient
increasing flow of international trade. form of freight transport, producing 20 to
25 grams of CO2 per ton-kilometer,

The shipping compared to up to 600 grams for aviation

and between 50 and 150 grams for road-
industry’s carbon based transportation.

footprint If we measure CO2 emissions “from well

to wake”—that is, emissions from crude-
It wouldn’t be an understatement to say oil extraction, refining into fuel oil, and
that the global shipping industry is what consumption in the vessel—the sector
makes international trade possible. The accounts for about 3 percent of total global
sector is responsible for nearly 80 percent emissions (Exhibit 1). While tank-to-wake is

Exhibit 1

The maritime share of 3% of global emissions risks growing as other

sectors decarbonize if nothing is done

Global emissions, 2018 Transport sector specific emissions, 2018 typical gCO2 eq./ton-km ranges
xx typical gCO
Global emissions, 2018 Transport sector specific emissions, 2018 for freight when fueled eq./ton-km ranges
by2 fossil
GtCO2eq/year (tank to wake) xx
GtCO2eq/year (tank to wake) fuels for freight when fueled by fossi
GtCO2eq/year (tank to wake) GtCO2eq/year (tank to wake) fuels
xx % share of global emissions
33.5
xx % share of global emissions
Others
33.5
2.2 Sector with commercialized
Private households 0.9 decarbonization solutions
Others 2.2 Sector with commercialized
Private 0.9
households 2.0
Services decarbonization solutions
Services 2.0

~70—
Industry 6.2
~400— ~5—45 ~30—60
180 900
~70—
Industry 6.2 . ~400— ~5—45 ~30—60
180 900

.
8.3 ~18% ~25%
~3% ~3% ~1%
Transport (25%)

8.3 ~18% ~25%

~3% ~3% ~1%
Transport (25%) 0.2
1.1
1.0

0.2
1.1
1.0
6.0 8.3

Road Aviation Maritime Other1 Total

Electricity and heat 14.0
6.0 8.3
Source: IEA (2020, 2019), IMO 4th GHG Study (2020), IPCC. (2018), all data in tank-to-wake (TTW) emissions
1 Includes rail and non-specified transport Road Aviation Maritime Other1 Total
Electricity and heat 14.0

Source: IEA (2020, 2019), IMO 4th GHG Study (2020), IPCC. (2018), all data in tank-to-wake (TTW) emissions
1 Includes rail and non-specified transport

5
Sailing toward carbon zero?

the commonly used term in the industry, a Strides have been made in shipping and
well-to-wake figure gives a fuller measure of the first vessels operating on zero-carbon
the industry’s carbon footprint. fuels have been deployed. Technology
and operating practices have led to
Three segments—bulk carriers, tankers, improvements in energy efficiency. After
and container ships—are responsible decades of growing international trade,
for around 65 percent of the shipping the 2008 global financial crisis triggered a
industry CO2 output (Exhibit 2). While these reduction in trade growth, which resulted in
three categories make up around 90 a temporary shrinking of carbon emissions
percent of shipping volumes and for about a year. After the recession, the
contribute the most in terms of absolute industry managed to achieve substantial
emission volumes, it’s worth noting that business growth while keeping emissions
these large ships tend to be more energy to a minimum through a variety of means.
efficient and less carbon intensive than For example slow steaming—the practice
smaller vessels. Still, these segments of deliberately slowing down to reduce fuel
remain a critical target when planning consumption—helped reduce emission
decarbonization pathways. intensity per ton-mile by 13 percent
between 2008 and 2012 and to an extent
where the industry almost managed to
decouple business growth and emissions
for the decade between 2010 and 2020.

“Bulk carriers, tankers, and container

ships—are responsible for around 65 percent
of the industry CO2 output. [However,] these
large ships tend to be more energy efficient
and less carbon intensive than smaller vessels.”

6
 Taking stock ofmaritime transportation’s climate impact

hree
hree
Threesegments
Three
segments
segments
Three
Exhibit 2
are
segments
are are
segments responsible
are
responsible
responsible
are for
responsible
for
responsible most
for
mostmost em
for
em
form
e
Three segments are responsible for most emissions and their volumes are
olumes
olumes
volumes
expectedare
volumes
are
volumesexpected
are
expected
to continue are
expected
are
growing to
expectedcontinue
to2050
to
expected
towards continue to
continue growing
tocontinue
growing
growing
continue to
gr
to
g
Industry
Industryvolume
Industry
volume distribution,
volume Industry
distribution, 2020
distribution,
2020
Industry and
volume est.
2020
volume est.
andgrowth
anddistribution,
growth 2020
est. growth
distribution, and
2020 est.
and growth
est. growth Emissions
Emissionsand
andintensity,
Emissions Emis
intensity,20
and inten20
Em
Billion
Billionton-miles
ton-miles
Billion ton-miles Billion ton-miles 2020-50
2020-50CAGR
CAGR%%CAGR % 2020-50
2020-50 GtCO CAGR
/year %%
(well-to-wake) GtCO
Billion ton-miles 2020-50
GtCO2eq
2eq CAGR
GtCO
/year (well-to-wake)
2eq /year (well-to-wak
GtC2

Total
Total Total Total
Total 58,932
1.3
58,932 58,932
1.3 1.3
58,932
1.3
Total
Total
1.3 Total Total
58,932 To
1.0 1.0
Bulk
Bulkcarrier
carrier
Bulk carrier Bulk carrier 25,050 1.0 1.0
Bulk carrier Bulk
Bulk1.0 Buc
25,050 carrier
Bulk carrier
Bulk carrier 25,050 25,050 25,050

0.1
0.1 0.1 0.1
Tanker
TankerTanker Tanker
Tanker 14,090
14,090 14,090 14,090 0.1
Tanker
TankerTanker Tank
14,090 Ta
Container
Container
Container Container
Container
2.4
2.4 2.4 2.4
Container
Container
2.4 Container Cont
13,046
13,046 13,046 13,046
13,046 Co
2.3 2.3
Gas
Gascarrier
carrier
Gas carrier Gas carrier 2.3 2.3
Gas
Gascarrier Gas
carrier
Gas carrier Gac
2.3
Gas carrier 2,987
2,987 2,987 2,987
2,987
2.2
2.2 2.2 2.2
Other
Othercargo
cargo
Other cargo Other cargo
Other cargo 2,146
2,146 2,146 2,146 Other
2.2
Othercargo
cargo
Other cargo Othe
2,146 Ot
2.0
2.0 2.0 2.0
2.0
RoRo/Car
RoRo/Carcarrier
carrier carrier RoRo/Car
RoRo/Car carrier
RoRo/Car
607
607
carrier 607 607
607 RoRo/Car
RoRo/Carcarrier
carrier carrier RoRo
RoRo/Car Ro

Three
eonsiblesegments areand
foremissions responsible
mostemissions
emissions for most e
andtheir
their
2.0 2.0

onsible for most and

2.0 2.0 2.0

for most their

Ferry Ferry 135
135 135 135
Ferry Ferry Ferry 135 Ferry
Ferry Ferry Ferry
Fe
4.0
4.0 4.0 4.0
4.0
Cruise
CruiseCruise Cruise Cruise Cruis
volumes are expected to2050
continue
2050 growing
CruiseCruise
130 130
Cruise 130 130

continue
continue growing
growing towards
towards Cru
130

ue growing
Others towards
OthersOthers 2050 Others
Others 740
740 740 740
740
2.3
2.3 2.3 2.3
Others
Others
2.3 Others Othe
Ot

Industry volume distribution,

Emissions
Emissions andand 20202020
and
intensity,
intensity, est. growth
2020 Emissions and inten
Source: Emissions
Source:IMO
IMO 4th
4thGHG
Source: GHG 4thand
IMOstudy,
study,
GHG intensity,
McKinsey.
Source:
McKinsey.
study, NavigaTE.
IMO
McKinsey. 2020
4th
NavigaTE. GHG study, McKinsey. NavigaTE.
NavigaTE.
Billion Source:
ton-miles IMO 4th GHG study, McKinsey. NavigaTE. 2020-50 CAGR %
2020-50
11Others
2020-50
Others CAGR CAGR
include
1include%
Others % tugs
offshore,
offshore,
include tugsand
1and
offshore, non-specified
Others
tugs include
non-specified
GtCOand ships
offshore,
non-specified
/yearships tugs and non-specified ships
ships
(well-to-wake) GtCO /year (well-to-wak
1 Others
GtCO 2eq include
/year
2eq offshore,
(well-to-wake) tugs and non-specified ships gCOgCO 2 eq/ton-km2eq
2 eq/ton-km
GtCO2eq/year (well-to-wake) gCO2 eq/ton-km
Total
1.3 1.3 1.3
2 Total
Total 58,932 ~12 ~12 Total
Total ~12
1.261.26
1.26
1.0
Bulk carrier
1.0 1.0 25,050 Bulk carrier
Bulk carrier BulkBulk carrier
carrier ~5
~5 ~5
0.240.24
0.24 0.1
0.1 0.1
Tanker Tanker 14,090 ~11 ~11 Tanker
Tanker Tanker ~11
0.280.28
0.28
Container 2.4
~12 ~12 Container
2.4 2.4
Container
Container 13,046
Container 0.290.29 ~12
0.29
2.3
Gas carrier
2.3 2.3
~15 ~15 Gas carrier
Gas carrier GasGas carrier
carrier 2,987 ~15
0.080.08
0.08
2.2 2.2 2.2
Other cargo Other cargo 2,146 ~22 ~22 Other cargo
Other cargo Other cargo 0.090.09 ~22
0.09
2.0 2.0 2.0
RoRo/Car carrier RoRo/Car carrier
607 ~52 ~52
RoRo/Car carrier
RoRo/Car carrier RoRo/Car carrier 0.060.06 ~52
0.06
2.0 2.0 2.0
Ferry 135 ~223~223
Ferry
Ferry 0.060.06 ~223 Ferry
Ferry
4.0
0.06
4.0
4.0
Cruise Cruise 130 ~155~155Cruise
Cruise Cruise 0.040.04
~155
0.04 2.3
Others
2.3
~89 ~89 Others
2.3
Others
Others 740
Others 0.120.12 ~89
0.12

Source: IMO 4th GHG study, McKinsey. NavigaTE.

1 Others include offshore, tugs and non-specified ships
7
Sailing toward carbon zero?

Obstacles in emissions to steadily climb by around 18

percent until 2050—a significant slowdown
the pursuit of over recent years but still far away from
carbon zero (Exhibit 3).
decarbonization
Sporadic shocks to international trade,
While progress has been made in the past such as the global financial recession of
decade, the path we’re on may lead to 2008 and the COVID-19 pandemic, are
more, not fewer, CO2 emissions by 2050. likely to be temporary and overall trade
Projecting forward the current policy flows will continue to grow between
landscape, likely rates of improvement now and 2050. Furthermore, there may
in ship efficiency, and declining costs of be more environmentally conscious
alternative fuel technologies in recent shippers aspiring to decarbonize, who may
years, we can expect the industry’s CO2 switch their preferred mode of delivery

Exhibit 3

We are heading for an increase in emissions with current levels despite

current industry-wide efforts

Current decarbonization efforts are outplayed by growing trade and large fuel price differences
WTW Maritime emission pathways
GtCO2eq/year

2.2

2.0

1.8

1.6

1.4
18%
1.2

1.0

0.8

0.6

0.4

0.2

0.0

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Historical Path we are on

1.5°C target
No decarbonisation below 2°C target
Sources: IMO, IPCC, IEA, Clarksons and NavigaTE

8
 Taking stock ofmaritime transportation’s climate impact

to seaborne from air freight. Continued

trade growth will lead shipping volumes—
especially for container freighters—to
trend upwards by 1.3 percent annually, with
emissions growing most significantly in the
most dynamic trading regions in East Asia.

It is now clear that the current rate of

adoption of cleaner fuel sources and more
energy-efficient ship technologies may
not be sufficient to offset the underlying
demand growth. The global shipping
industry needs to overcome a number of
hurdles if it is to realize its ambitions of
reaching carbon neutral by 2050.

High cost of zero-carbon

alternatives

The needed large-scale transition towards

net-zero will only be possible when the cost
gap between fossil and zero-carbon fuel
Globalized est. production costs, 2025
e-Methane
closes. Right now, fuel represents between
USD/GJ 62
20 and 35 percent of the total annual
e-Methanol 61
cost of ownership for most vessels. Even
e-Hydrogen 49
though the production costs of cleaner
e-Ammoniazero-carbon alternatives are projected to 48

decrease, they are currently higher than

Blue hydrogen 30

the prices of the commonly used25 fossil

Blue ammonia
fuels.
Biomethanol 25

Biomethane 23
The existing infrastructure supporting
these fuels is also very well established
Globalizedand transitioning
estimated prices, 2025 to clean alternatives will
Globalized estimated prices, 2025
USD/GJ
incur additional costs for most companies
LSFO —and their customers 11 may not yet be
willing to pay that cost. In the absence of
LNG effective and 8
widespread regulatory
requirements, we may well see a slow
Source: NavigaTE
uptick of cleaner fuel sources between
Note: Most zero-carbon fuels are not used as maritime fuels in today’s ships. Without official market prices we compare price forecasts of fossil fuels with
production costs of future zero-carbon fuels. Production costs thus acts as a lower boundary to future prices of those fuels.
now and 2050.

9
Sailing toward carbon zero?

Misaligned incentives for

ship owners to invest in
green technology

The adoption of other energy-efficiency

levers has happened, but not as much
as it could have, largely owing to the
misalignment of incentives between
owners and charterers. Whereas
charterers often pay the fuel bill, the owner
pays for the capital expenditure of the ship,
which includes expensive fuel-saving
devices. Ship owners often forgo installing
the most efficient (and more expensive)
technologies because they are not
financially rewarded since they don’t bear
the burden of fuel costs, and because
charter rates do not reflect the value of
energy efficiency.

There are some signs that this may

change, as ships with eco-designs can
sometimes command higher charter rates,
but, when the market is down, charterers
may not be willing to pay the premium. A
more enduring alignment of interests is
necessary to persuade owners to start
ordering more fuel- and emission-efficient
ships, and optimize how they operate the
ones they have from a emissions-efficient
perspective.

10
 Tracking maritime transportation’s climate impact

The cost of related demands of the companies they

invest in. Shipping companies that do

doing nothing not get ahead and proactively reduce

their emissions stand to lose out. Public
perception of the industry as a whole
Decarbonization has become an
may also diminish.
increasingly pressing issue for many
other industries which are on their
Runaway climate change will likely result
own journeys toward carbon neutrality.
in extreme weather events, including
Depending on how successful other
severe conditions at sea that could result
sectors of the economy are at reducing
in more ship casualties. Rising sea levels
their environmental impact, shipping could
also put port and terminal infrastructure
account for between 5 and 8 percent of
at risk. Operators may find themselves
global CO2 emissions by 2050, compared
having to spend more to adapt if we
to 3 percent in 2019.
don’t limit the rise in global temperatures
to less than two degrees Celsius, which
In addition to being the environmentally
the Intergovernmental Panel on Climate
irresponsible thing to do, not acting
Change says will help us avoid the worst
decisively to move to a more sustainable
effects of climate change.
path may result in shipping companies
seeing their financing dry up as investors
Thus, a different path is required for the
and banks deploy their capital to sectors
industry to thrive well into the 21st
with a smaller carbon footprint. As
century and enable the global connectivity
customers around the world become more
that has been the hallmark of growing the
sensitive to the environmental impact of
world economy for over a century.
their consumption patterns, they may
demand that their governments legislate
But what will that take? In our next article, we
to pass more stringent sustainability
identify the critical levers that make sense
requirements. Meanwhile, in the private
for the environment and the bottom line of
sector there has been a growing trend
industry players.
among investors to make sustainability-

“A different path is required for the industry

to thrive well into the 21st century and
enable the global connectivity that has
been the hallmark of growing the world
economy for over a century.”
11
Sailing toward carbon zero?

About
.

The Mærsk Mc-Kinney Møller Center for Zero Carbon

Shipping is real climate action. It is a not-for-profit, independent
research and development center creating an industry-wide
transition strategy by providing overview of the technical
solution space and the critical change levers.

With partners from leading organizations across the world, we

will accelerate the development and implementation of new
energy systems and technologies.

The Center was established in 2020 with a donation from the

A.P. Moller Foundation.

12