Sustainability and Decarbonisation in the Shipping Industry

Sustainability in the Shipping Industry – Road to Decarbonisation

By Nicole Lim

The shipping industry accounts for almost 3% [1] of the world’s emissions, and arguably accounts for the largest proportion of many organisations’ Scope 3 emissions. Yet, it is the most efficient form of transport of goods, compared to air, road or rail. More than ever, COVID-19 has shown the importance of shipping in preserving supply chains and transporting essential goods across the globe. With such a significant role to play, the shipping and maritime industry is key in ensuring the world meets climate goals set out in the Paris Agreement.


This year’s World Maritime Day was themed Sustainable Shipping for a Sustainable Planet, aimed at creating awareness of the UN SDGs and to create the opportunity for the industry to reflect upon the work done and the steps that can be taken towards a sustainable future. This comes as the industry takes big strides to move towards a decarbonised future.

In 2018, the International Maritime Organization (IMO) developed an initial strategy on the reduction of greenhouse gas (GHG) emissions from ships, which lays out key targets and signals for the industry to follow. Referred to as IMO2050, this strategy is ambitious, with the following goals:

  • Reduce CO2 emissions intensity by at least 40% by 2030, pursuing a 70% reduction in 2050 [2]
  • Absolute reduction by at least 50% by 2050, pursuing efforts to phase them out by the end of the century, consistent with the Paris Agreement

IMO strategy for reductions in GHG emissions from shipping

Figure 1. GHG emission gap between IMO GHG strategy and BAU emissions (DNV-GL 2019) [3].



IMO actions to reduce GHG emissions from shipping

Figure 2. Illustration of overall GHG reduction pathway to achieve IMO2050, taking into account a wide list of short-, mid- and long-term measures.

Source: IMO Action to Reduce GHG Emissions from International Shipping


To bridge the emissions gap (Figure 2) and the IMO2050 goals, the maritime industry would have to develop solutions that do not yet exist today – from new fuels to better ship design and to better ways of operating.


Challenges faced today

While IMO2050 is a strong signal to the industry and definitely sets the right path forward, there is still a long way to go from where the shipping industry stands today.

Shipping is a capital-intensive industry. Ships, in particular, require a large amount of capital upfront and coupled with the long lifespan of ships. This creates lock-ins for shipping companies and can pose as a significant challenge to change.

Alternative fuels and new technologies are seen as vital and almost central to cutting emissions from ships. Many of the low-emission solutions needed are still untested, and there is a need for financing and initial investments to co-fund or pay for the development and implementation of such solutions. However, there is presently a lack of incentives and push to channel such financing to the industry.

Finally, the industry consists of a complex network of actors, with a largely fragmented ownership of the world’s shipping fleet. The world’s top 10 ship owners make up less than 20% of global capacity, with the remaining 80% of the fleet owned by smaller ship owners with a few ships each. Then there are other actors in the value chain, such as engine manufacturers, ship builders, ship managers and so on – often with a similar structure of fragmentation [4]. This hence makes it very difficult to get consensus and achieve industry-wide standards as well as transparency.

Transparency, particularly for GHG emissions, is especially important for decision-making for financing solutions and green investments.


Opportunities and Singapore’s Role

However, with every risk and challenge, comes an opportunity. Singapore is well placed to seize the opportunities and lead to way towards decarbonisation of the shipping industry.

Singapore is one of the world’s busiest ports and is the leading maritime capital of the world [5].


As a leading maritime capital and one of the world’s busiest ports, Singapore has a role to play to set standards and regulations for the industry, such as in pushing for greater alignment and transparency in emissions disclosures.


As a financial hub, Singapore is well placed to create green financing mechanisms for the shipping industry. This year, many Singapore-based companies have been making headlines for successful implementation of various sustainable finance agreements [6], [7], [8], [9].


As a sustainability leader (on many fronts), Singapore’s strategic geographical location is its biggest natural resource, and it is only appropriate that the sustainability agenda is reflected in its maritime sector as well.


Singapore is on the right track – Next year, the Maritime Port Authority (MPA) of Singapore will launch the Maritime Singapore Decarbonisation Blueprint 2050, which will set out strategies to achieve a sustainable maritime Singapore. MPA has also launched its Maritime GreenFuture Fund, worth $40 million, to create ecosystems for the test-bedding of low-carbon technologies [10].

This sends a strong signal to the industry that Singapore is prepared and ready to seize the various opportunities that come with moving towards decarbonisation.


Paia has strong expertise in climate change and carbon management strategy. We assist clients with carbon profiling, accounting, reduction and reporting. Paia has worked with key players in the Singapore maritime sector, including government bodies, and is well-placed to assist shipping companies with their climate change and carbon strategy and reporting. Do reach out to us if you would like to find out more.


[1] IEA Energy Technology Perspectives 2017

[2] Intensity calculated as CO2 emissions per transport work

[3] Maritime Forecast to 2050, Energy Transition Outlook 2019

[4] Decarbonising Shipping: All Hands on Deck

[5] The Leading Maritime Capitals of the World 2019

[6] CapitaLand obtains S$500 million sustainability-linked bilateral loan – the largest in Singapore’s real estate sector, 28 May 2020

[7] CIMB and Starhub Ink RM270M Sustainability-Linked Loan Agreement, 19 September 2020

[8] Deutsche Bank and Olam International close Asia’s first FX Forward using ESG performance targets, 26 June 2020

[9] NUS raises S$300 million in its inaugural green bond issuance, 27 May 2020

[10] Speech by Senior Minister of State for Transport and Health Lam Pin Min at The Ministry of Transport’s Committee of Supply Debate 2020 Sustainable & Competitive Industries and Sustainable Environment with a focus on Aviation, Maritime and Active Mobility, 5 March 2020

Chinas carbon neutral target 2060

China’s 2060 Carbon Neutral Target – Challenges and Opportunities

By Adrian Pang

China announced recently that the country pledges to speed up emissions reductions to reach carbon neutrality by 2060. The announcement by the Chinese president was a pleasant surprise for many experts, who along with environmentalists, welcomed the news and opined that this significant step by the world’s largest polluting nation will significantly slow climate change. Some even called the announcement “the most significant climate policy move for years” (China’s carbon neutral pledge could curb global warming by 0.3 degrees Celsius: Researchers, 2020). Researchers from Climate Action Tracker said the move could curb global warming by 0.2 to 0.3 degrees Celsius this century if China achieves the target (China going carbon neutral before 2060 would lower warming projections by around 0.2 to 0.3 degrees C, 2020). Under this goal, China also pledged that its emissions would peak before 2030 before undergoing drastic reduction until 2060.

China carbon neutral targetChart for illustrative purposes only. Source: Paia Consulting

This is a significant milestone as the country is the biggest carbon emitter in the world. Prior to the announcement, China was reserved in its long-term commitment to carbon neutrality. The country’s previous goal was to reach emissions peak by 2030 at the latest. As the largest emitter in the world, China accounts for 28% of the world’s emissions (Myers, 2020). This figure dwarfs the proportion of total emissions – 11% of the over 60 countries that pledged to achieve carbon neutrality by 2050 in 2017 (Sengupta & Popovich, 2020). With China’s commitment, the world might witness a nearly 40% carbon emissions reduction between 2050-2060. However, as with many of the aforementioned 60 countries, China also did not specify how it plans to achieve the targets. At present, these question marks will continue casting shadows on China’s ambition until the country set out a solid action plan with near- and long-term targets. Even so, it is obvious a critical area of focus would be its energy scene. Here, we look at China’s energy landscape to examine challenges and opportunities while awaiting the plans from the government.

Challenges: Energy Revolution Still in the Pipeline

The sector with perhaps the biggest role to play is the energy sector. China still relies on fossil fuels for about 85% – with coal at 60%, of power production (Shepherd, 2020). This amounts to about half of the country’s carbon dioxide emissions from fossil fuels. While the rest of the world is gradually shifting away from fossil fuels, China’s emissions rose in 2018 and 2019. The setback was induced by  the country’s efforts to boost a sluggish economy. In 2020, Beijing has approved coal-fired power plants at the fastest pace since 2015 (Hale, 2020). There were more construction permits granted for these power plants in the first six months of 2020 than 2018 and 2019 combined. This is evidently to regenerate the economy devastated by the pandemic but at the detriment of progress made on cutting coal consumption. As a result, carbon emissions from China’s main economic activities – energy production, cement making, and industrial uses were 4% higher year-on-year in 2020. This is despite an overall 25% pandemic-induced reduction of emissions at the start of the year. Therefore, reversing recent and current energy and emissions trends is pivotal to kickstart the 40-year plan to carbon neutrality.

The country’s upcoming five-year plan is expected to spell out necessary economic, industrial, and environmental agenda. Experts speculate the plan would maintain a cap on coal power capacity as well as accelerate the production of 20% of electricity supply from renewable sources by 2030 (Shepherd, 2020). Experts from Bernstein Research have estimated that China needs to reduce fossil fuels consumption from the 85% of total energy mix to 25% to reach carbon neutrality (Zhou & Yep, 2020). Unfortunately, there currently are no substantial incentives for grid operators to buy renewables, casting the spotlight on needs to reform power pricing mechanisms.

Elsewhere, China’s Emission Trading Scheme (ETS) struggles to make an impression. Its ETS, which would eclipse the EU in size and accounts for a third of China’s national emissions, has been delayed several times (Temple-West, 2020). China’s ETS encountered difficulties in establishing a comprehensive data collection system that would allow policymakers to set target levels and allocate carbon credits accordingly (ibid). It was also scaled back to limit carbon credits trading to the power generation sector rather than the eight industrial sectors [1] in the original outline (ibid). The numerous setbacks to establish the scheme have been hampered by the pandemic-induced economic downturn as well as political uncertainties. There are also persistent doubts on the effectiveness of the trading scheme. Overall, there needs to be equitable contribution by the stringency of the coal power cap, enforcement of regulations, power sector reforms, political and social will, etc for a country of China’s scale.

Then, there is the conundrum of disrupting socioeconomic and socioenvironmental status quo to pave way for rapid transitions. This is a legitimate issue, as China currently has the biggest population in the world at 1.4 billion people. The 40-year commitment equates to rapid transformation within one generation of people. Thus, there are potential upheavals for people’s lives and incomes in a still-industrialising country. This is because social fabrics and fundamentals like energy consumption, food production, physical mobility and works will be radically affected.

Opportunities: Press on with Progress

On the country’s renewable energy development, China’s capacity now accounts for 30% of the world’s total. It is currently a leader in clean energy technologies where it is leading in wind turbines and solar panels production and installation. Therefore, one of China’s main opportunities is to press forward with current progress such as speeding up the transition to renewable energies for its industrial and commercial sectors. China has also shown that it has the capacity on other fronts. Aside from renewable energy infrastructures, China is also a global leader in batteries and electric vehicles productions.

While the ETS has faced repeated setbacks, a nationwide scheme is nonetheless taking shape. Eight regional authorities, including those from the most populous Beijing and Guangdong regions are piloting their own ETS albeit at much lower scales. These pilot schemes cover more sectors than the national scheme. They operate alongside the national scheme with a view to be incorporated into the national programme eventually (Temple-West, 2020). In the process, there should be no new coal-fired power plants

More importantly, China’s focus on expediting its carbon neutral commitment will have significant “spillover” effects on the global energy landscape and emission reductions. A good example is the decreasing solar panels prices all around the world due to China’s high demand for solar energy (Pollitt, 2020). This would result in higher adoption of renewable technologies worldwide – and higher emissions reduction in other parts of the world even if other countries do not implement new climate policies (ibid). China is also the world’s biggest energy financier and biggest market aside from being the biggest emitter. It is consistently the top investor in clean energy globally for nine out of the last ten years according to the Frankfurt School of Finance and Management (Campbell, 2019). It has invested heavily in many developing parts of the world such as South America, Africa and Asia. While political intentions might be cornerstones of many of such investments, China’s contribution remain significant from the environmental perspective, driving the global transition to renewable energy.

Finally, a significant opportunity for China is its own governance and regulations. The country should implement more significant economic measures targeting at energy and emissions intensive sectors still reliant on fossil fuels and coals. The country can also have stronger enforcement of laws against environmental offenders. That might see a significant shift away from current fossil fuel driven economic discourse and paradigm. Socioeconomically, creative destructions of technology, skills, and jobs such as those in coal extraction spurred by the energy revolution are inevitable (Pollitt, 2020). Thus, transformations require fine balancing acts by the government to ensure a smooth transition to clean renewable energy sources, such as creating new industries and jobs as well as subsidising infrastructural developments. This is to ensure the least disruption will be caused to the socioeconomic stability of its society.

In essence, China’s 2060 pledge is driven by encouraging progress in the renewable energy sector. Together with other major actions and policies shift such as strengthening the ETS and tailoring carbon neutrality into the next Five-Year-plan, it is possible for China to reach zero carbon by 2060. All eyes are indeed on China’s 14th Five-Year-plan. Their next course of action will be pivotal for the climate change trajectory in the next decades.

What do you think are the challenges and opportunities as we await China’s action plans to achieve carbon neutrality? Share your thoughts with us in the comment section.

[1] Power generation, steel and iron, non-ferrous metal, building materials, chemical industry, petrochemical industry, paper making, civil aviation



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