Zero-emission fuels may hike global maritime trade costs: UNCTAD

  • July 14, 2023
  • News

The United Nations Conference on Trade and Development (UNCTAD) experts are under the impression that the maritime sector’s move to zero-emission fuels may intensify trade costs and influence global commerce, with different implications for various regions, trade routes and committees.

Due to expensive fuels which are mandatory for making global trade sustainable, there could be a rise in the freight rates and this will deeply impact emerging economies and less developed nations. Around 80% of global trade in volume and 70% by value is shipped via sea vessels and with the shift, there will certainly be a change in the cost. Small Island developing states and underdeveloped countries will bear the brunt of the change as they are heavily dependent on the imports and exports from major trade routes and they might end up paying twice the price that they are incurring now.

Furthermore, transport costs excessively affect goods with a lower value per ton, like agricultural and industrial raw materials. Countries heavily reliant on these exports are more vulnerable to fuel cost changes, putting developing countries at a loss.

The current discussions at the IMO aim to create measures to counter these concerns. Suggested mechanisms include redistributing funds to states most impacted by measures like carbon pricing. Even though it is expected that the marine fuel price increase would be crucial for preventive shipping emissions, a global response is necessary to manage the revenue collected benefits the nations located far from their markets.

Despite higher trade costs, maritime decarbonisation presents a small window for certain countries to involve more in international trade via the production and supply of scalable zero-emission fuels. Progress at IMO’s MEPC80 will be important in ensuring a global methodology for maritime decarbonisation that will help all countries without leaving anyone behind.