Shipping industry and ports likely to suffer billions of dollars in damage and disruption from climate change

March 14, 2022 — A new report finds that the global shipping and port industry is likely to suffer billions of dollars in infrastructure damage and business disruption from the impacts of climate change. Written by RTI International, a non-profit research institute, for Environmental Defense Fund (EDF), “Act Now or Pay Later: The Costs of Climate Inaction for Ports and Shipping” explores data on climate-related disasters and projects the cost of future damage to the industry. Without ambitious action to reduce emissions, the impacts of climate change could cost the shipping industry up to $25 billion each year by the end of the century.

International shipping has grown tremendously over the past 25 years, more than doubling the annual volume of trade. Because of this growth combined with shipping’s reliance on highly polluting fuels, the industry has become a major emitter of greenhouse gases, currently accounting for around 20% of global emissions from transportation. Meanwhile, from rising sea levels to increased storm activity to inland flooding, climate change threatens maritime infrastructure and operations.

“Just as the COVID-19 pandemic has put our ports and the global supply chain into crisis mode, the climate emergency will have major consequences for international shipping. In the face of a deteriorating climate, however, the industry maritime transport has a wake-up call and an opportunity to act,” said Marie Hubatova, senior manager of EDF’s Global Transport team. “By stepping up their efforts to reduce emissions and invest in carbon-free fuels, shipping leaders could help avoid these costly consequences and build a more sustainable future for the industry.”

Based on past impacts and projected climate change scenarios, the report predicts that additional annual damage to port infrastructure could reach nearly US$18 billion by 2100. Storm-related port disruptions could add 7.5 billions of additional US dollars each year, reflecting economic losses. incurred by ports, shippers and carriers due to port closures and costs to shipper customers. Together, these additional future costs due to climate change are roughly equivalent to the total annual net revenues of the container port sector in 2019.

World trade is expected to grow in the future, as is the volume of goods transported by sea. However, negative ripple effects on maritime and port networks can have significant global economic consequences and the report finds that the impacts of climate change can reduce the volume of maritime trade. Assuming a stable growth rate, world trade is expected to grow to 120 billion tonnes in 2100 – but in the worst climate scenario, this growth could be stunted by almost 10%.

This report summarizes existing evidence and estimates of the impacts and costs of climate-related hazards, finding that data on this topic is sparse or completely absent for many areas. The lack of data means that the shipping industry does not have a clear picture of future circumstances and that future costs could be much higher than those estimated here.

“While our report uses the best available information to paint a picture of the true economic cost of climate change on international shipping, the reality is that these figures likely underestimate the full scale of the consequences,” said George Van Houtven. from RTI. “Given the unpredictable volatility of climate change and the immense complexity of the shipping sector, we simply need more data to get the full picture. However, the available evidence clearly indicates that the costs will be high.”

  • The industry can take several steps now to advance the transition to green shipping and reduce future costs related to climate change, including:
  • Commit to full decarbonization by 2050, in line with the Paris Agreement.
  • Support a market-based mechanism to reduce ship emissions at the International Maritime Organization.
  • Invest in zero-emission fuels and technology.
  • Support a just transition for the shipping industry to ensure that the burden of damages and adaptation costs do not fall disproportionately on developing countries.

Many shipping leaders have already endorsed a call to action through the Getting to Zero coalition, which aims to develop and deploy commercially viable zero-emissions deep-sea vessels by 2030.

“Many stakeholders in the maritime sector are already committed to climate action and the need for full decarbonisation of the shipping industry by 2050,” said project manager Ingrid Sidenvall Jegou of the World Maritime Forum. “This report only strengthens the business case for decarbonizing shipping to start now, highlighting that a just and equitable energy transition is an opportunity for the private sector and developing countries.”