Decarbonizing Shipping: All Hands on Deck

Decarbonization

Decarbonization requires transformational change across the sector, leadership, and the involvement of multiple stakeholders. Although change is happening, and the focus on decarbonization has increased across governments, companies and society at large, there is growing consensus that more should be done across sectors to reach net-zero by 2050. The shipping sector has a unique role to play as the backbone of global trade, it is not only a sector that shoulddecarbonize, but is also an enabler of global decarbonization through the transportation of low-carbon fuels.

A push toward action

The first report on decarbonizing shipping, All Hands on Deck, published in 2020, revealed the barriers to, and readiness factors for, decarbonization. It highlighted 12 solutions toward decarbonization by 2030 and offered a longer-term view on other changes that may be required. This updated report, All Hands on Deck 2.0, helps serve as a refresher or “temperature check” across the sector, to assess the prevailing views, sentiments, and concerns in the industry. It helps provide a high-level overview of progress since the publication of the first report, and adopts a nearer-term view, to emphasize a selection of specific, more immediate actions that should enhance the solutions originally identified, what should happen right now, and who should do it.

To develop this update, Deloitte Netherlands and Deloitte UK re-engaged more than 25 leaders across segments of the shipping sector to share their perspectives on the decarbonization challenge. This update also draws on research and analysis that gives depth to the perspectives shared.

Shipping’s progress in decarbonization

Despite the complexity of decarbonization in shipping, some pockets of progress have been seen in the past two to three years since the launch of the first report. Market and customer demand for alternative fuels has grown in some shipping segments, with most signs of voluntary demand coming from the customer-facing (B2C) container segment, where the potential to exact a “green premium” from cargo owners is greatest. Regulatory incentives have become more concrete, for example through two IMO-led measures for design and efficiency: the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Index (CII), both of which became effective on 1 January 2023. Technology alignment has improved, as the growing maturity of alternative fuel technologies, and clarity on their development timescales, are starting to drive greater clarity on the likely set of dominant fuel pathways for different deep-sea segments. Finally, there is positive movement on asset replacement as demand for vessels that are capable of using lower-carbon alternative fuels such as liquefied natural gas (LNG) and methanol has increased significantly in the past two years.

These results are encouraging, but not yet at sufficient scale. The magnitude of action and investment should step up with speed if the shipping sector is to make meaningful progress toward the ambition articulated by many countries and companies across the globe to achieve net-zero by 2050. All Hands on Deck 2.0 highlights six critical recommendations that complement the 12 solutions originally proposed. These solutions are:

1. Scale up pockets of demand for low carbon-solutions through joint-purchasing coalitions, grouping of long-term contracts, and book-and-claim models¹ to aggregate signals across segments.
2. Take a segment-specific approach to decarbonization, to enable prioritization and tailoring of solutions to serve segment-specific needs, rather than considering deep-sea shipping as one homogeneous segment.
3. Leverage local/regional regulation for momentum and near-term impact, while working toward a level playing field through global regulation.
4. Drive clarity on fuel pathways, building on the deeper understanding of fuel technologies and segment needs achieved over the past two years, and shift toward increasing demonstration projects to support decision-making for fuel suppliers and shipowners.
5. Adopt an integrated view on asset improvement, by deploying an integrated set of levers including efficiency measures, increased investment in dual-fuel-capable vessels, and faster conversion and increased modularity via retrofits, as well as helping to ensure sufficient new build and repair-yard capacity to undertake these changes.
6. Activate green corridors to create concrete proof points in specific geographies that can be scaled for inter-regional impact.

¹Book-and-claim is a chain of custody model that allows the administrative flows and claims about aproduct to be separated from the physical flows of the material, enhancing the transparency ofspecific claims regarding materials or products and thereby supporting the reliability of theseclaims.

To learn more download the All Hands on Deck 2.0 report.