industry is at the forefront of cutting its carbon footprint and building
resilience to climate change impacts. It is in this regard that IMO has set
guidelines for shipping industry to reduce greenhouse gas (GHG) emissions. This
contains short-term mandatory provisions on the technical energy efficiency of
ships’ propulsion systems and their operational carbon intensity. To achieve
this feat will require new investments in fleet renewal, innovative ship design
and clean fuel technology.
resulting costs of the shipping’s decarbonization will be borne by all
stakeholders, from carriers to consumers, a recent report
(https://unctad.org/system/files/official-document/dtltlb2021d2_en.pdf) by the
United Nations Conference on Trade and Development (UNCTAD) sought to assess
the impact of IMO’s short-term GHG reduction measures on states.
Main area of focus, changes on maritime logistics costs, trade flows
and GDP impact to 184 economies
assessment was anchored on the expected negative impacts to states through
implementation of IMO’s short-term carbon reduction measures. The main area of
focus was on changes on maritime logistics costs (transport costs and time
costs), trade flows (imports and exports) and GDP impact to 184 economies.
On average, developing coastal countries will be affected more
developing coastal countries will be affected more by the proposed IMO
short-term measures, compared to coastal countries in developed regions.
Results show an average small increase in maritime logistics costs which
translates into a slight decline in global trade flows and GDP. These changes
will lead to potential shift in logistics and trade patterns, including
potentially trading more with less-distant markets and some regionalization,”
the report noted.
countries’ trade and GDP depend on
factors such as trade openness, modal share of trade flows, the price and value
of time traded products and commodities, the types of ships and distances
travelled. Thus, changes in maritime logistics costs will lead to changes in
countries’ trade flows (imports and exports) and ultimately GDP. This is not to
mean that developed economies will be spared by these impacts, but some trade
aspects in developing economies will render them more vulnerable. They include
distance to global markets, low economies of scale, the extent to which the
countries are dependent on commodity exports and the type, size and age of the
ships that serve their markets.
countries within supply chains that are considered unusual or outliers might
experience a steep increase in maritime logistics costs - more than 50 percent
in the case of some trades. This will likely regionalize trade flows or lead to
loss of trade, UNCTAD concluded.
SIDS and LDCs require support to mitigate costs of adjusting to low
Island Developing States) and LDCs (Least Developed Countries) in particular
will require technical and financial support to mitigate the costs of adjusting
to low carbon shipping,” said Shamika N.Sirimanne, director of UNCTAD’s
technology and logistics division. “These vulnerable countries already face
higher transport and logistics costs, with most of their trade depending almost
exclusively on maritime transport to access regional and global markets.”
Small-sized vessels and larger ships
The report found
that small-sized vessels plying short-sea shipping routes would be negatively
affected compared to larger ships traveling longer distances. Costs may also
rise when deep-sea liners are required to go slower to meet the short-term
operational requirements, leading to skipped port calls and greater use of
In essence, the
IMO measures will not only lead into potential changes in ship costs, but also
changes in ship travel, fleet distribution, routing patterns, and market and
regional connectivity levels, UNCTAD concluded.