New Delhi, July 17 (IANS) Rapid decarbonisation of global energy supplies will have radical implications for the shipping industry, a new report said on Wednesday.
India too has also been trying to reduce its dependency on coal imports as well as increase its domestic production of oil and gas, resulting in less dependence on fossil fuel cargo.
The report by Britain-based shipping industry research group Maritime Strategies International (MSI) recommends vessel selection will be critical, requiring divestment from sectors with the greatest exposure to fossil fuels.
If the Paris Agreement goals are met, the fossil fuel cargo base that shipping serves would undergo an aggressive and prolonged transformation.
World coal consumption would fall by 80 per cent, consumption of oil would halve, and LNG demand would peak in the near term before declining, it predicted.
Under the reduction scenario, global oil consumption effectively halves between 2020 and 2050. Declines are most severe in regions which have a substantial component of Organisation for Economic Co-operation and Development (OECD) countries — in the Americas, Eurasia and other Asia, the decline is close to 60 per cent.
Demand from India is flat across the period, whilst China and Middle East and Africa drop by close to 40 per cent.
India has also been trying to reduce its dependency on coal imports as well as increase its domestic production of oil and gas.
The Chairman of State Bank of India had said gas-based power in India has no future.
The MSI report finds India’s demand from a growing and increasingly urban population drive gas consumption increases year-on-year through to 2030 — to a quarter above 2020 levels.
Thereafter, a gradual decline in consumption volumes by 2040 is forecast, followed by a slight rise in consumption by 2050.
The report analyses how global demand reduction alters inter-regional commodity trade flows, and the associated shift in required shipping capacity, industry earnings and asset prices, across all segments of the shipping industry.
Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change (IIGCC) said: “As MSI’s research shows, the maritime sector is heavily exposed to the transformation underway across the global energy sector. Investors will expect companies to do more to pre-empt and address the implications from reduced demand for fossil fuels.”
IIGCC is the European investor group on climate change, representing over 170 members with over 19 trillion pounds in assets collectively under management.
Key findings from the report suggest that the tanker market is most exposed to the low carbon transition as its entire cargo base is made up of fossil fuels.
Even rapid growth in biofuels does not offset the shrinking demand for bulk liquid energy transport under a widescale shift to electrification and renewable energy.
Bulk carriers would see demand from coal transportation fall by around half, but overall demand for bulk carriers would only fall by 14 per cent from 2020 to 2035, as the expansion of grain and minor bulk trades outweigh shrinking coal cargoes.
“This is an important new angle on one of the areas which is vulnerable to the early stages of the energy transition, and as such, an early warning signal,” said Kingsmill Bond, New Energy Strategist, Carbon Tracker.