Shipping Companies Face Pressure to Slash Emissions

Amazon, IKEA, and Unilever Want to Make Shipping Greener

Amazon (AMZN), IKEA, and Unilever (UL) are putting pressure on shipping companies to use greener energy, despite a lack of alternatives to fossil fuels in the shipping industry. These major companies are aiming to move their goods on ships that have zero carbon emissions by 2040. The commitment, which is more stringent than what the industry previously agreed upon, comes ahead of the UN’s Climate Change Conference, also called COP26, which kicks off Sunday in Glasgow, Scotland.

A number of industries including trucking companies and airlines are developing green alternatives to fossil fuels. However, shipping companies have yet to agree on a more environmentally friendly fuel source. There are not enough methanol and ammonia, cleaner alternative fuel sources, to power the world’s 60,000 cargo ships.

Shipping Industry Lacks a Consensus

As it stands, the International Maritime Organization, a UN regulatory body, does not expect shippers to significantly cut their emissions until 2050. Within the shipping industry, companies are split on when the transition should begin. The smaller companies fear larger rivals will have an advantage because they have more money to pour into curbing emissions. The industry is also struggling to come to an agreement about what type of alternative energy should be used to power the ships of the future.

As a result, calls from the likes of Amazon and Unliever for zero-emission cargo ships by 2040 may be a bit premature. Without clarity about which fuels will be used and how available they will be, an industry-wide transition could be difficult to achieve.

A.P. Moeller Makes a Move

Switching to new modes of energy could cost the shipping industry as much as $3 trillion. Ships account for around 2.5% of greenhouse gas emissions across the globe, which is the equivalent of emissions from some of the large EU countries.

Though there is a lack of consensus regarding a path forward for the shipping industry, some companies are forging ahead. A.P. Moeller-Maersk (AMKBY), one of the world’s largest cargo ship operators, is already preparing for a greener future. It has placed an order for eight ships powered by methanol, which will be delivered in 2024. As it stands, the annual methanol needed for those ships is roughly ten times more than what is available in the market currently. If that does not change, or if the industry can’t identify another energy source, slashing emissions, let alone achieving zero emissions, could prove difficult.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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