Charting a course to net zero: The crucial role of shipbuilding in greening the maritime sector

Maritime transport facilitates approximately 90% of global trade in goods, and its strategic shift towards net-zero has vast implications for the global economy, job markets, and technological progress. Recent regulatory measures, such as the bolstered ambition of the International Maritime Organisation’s 2023 Strategy on Reduction of GHG Emissions from Ships, signal an intensified commitment to guide the sector onto a sustainable path, with targets set for net-zero greenhouse gas emissions by around 2050. Moreover, 2024 is poised to bring even more momentum. The EU is on track to include maritime transport into its Emissions Trading System (ETS) and launch the FuelEU Maritime Regulation, advocating for a 2% annual uptick in ships’ energy efficiency.

However, the path ahead is not without its hurdles. A mere 6% of the global fleet is equipped to operate on alternative fuels and the nascent stage of the maritime decarbonisation ecosystem means that alternative zero-carbon fuels are still in scarce supply.

Amid these developments, the role of shipbuilders and marine technology suppliers is a critical one. They are entrusted with the formidable task of developing energy-efficient designs and seamlessly integrating alternative fuels. To put the challenge into perspective, an estimated more than 50,000 ocean-going vessels will require retrofitting or complete replacement in the next two decades to align with the 2050 carbon-neutrality goal.

The dynamics of the shipbuilding industry are intricate and ever-evolving. Recent data indicates a 6% decrease in ship deliveries in 2022, yet a subsequent 12% year-on-year growth in the beginning of 2023. Such fluctuations underline the industry’s responsive nature to market demands, necessitating strategic planning and foresight. Shipbuilders’ expansive network, engaging with a multitude of suppliers and subcontractors, amplifies the significance of each decision made.

In the shipbuilding sector, subsidies present a multifaceted challenge. While they hold the potential to induce market distortions, contributing to overcapacity, diminished profitability, and financial strain within the industry, they simultaneously remain indispensable for advancing decarbonisation efforts, including in ship construction. However, there is a noticeable trend: while subsidies are on the rise, their design is not consistently aligned with decarbonisation objectives. This “green-targeting gap” has a cascading effect: the industry risks being entrenched in outdated carbon-intensive methods and potentially locking in non-sustainable practices. Further, emphasis of subsidies often leans toward downstream infrastructure, side-lining the pressing need for advancing the uptake of technologies needed for ships to become more efficient and capable of using alternative fuels.

Maritime decarbonisation consistently finds itself at the forefront of international discussions, including those within the OECD framework. The pressing need for actionable strategies addressing technological advancements, fuel options, and better collaboration across transport, energy, and industry sectors emerges as a priority.

Reflecting this commitment, the OECD recently renamed its Council Working Party on Shipbuilding to the “Shipbuilding Committee”. The OECD Shipbuilding Committee will help advance decarbonisation by analysing emissions reduction options throughout a ship’s lifecycle, and assessing how industrial policies for shipbuilding could be turned away from subsidising excess capacity of shipyards and towards non-distorting support for the net-zero transition.

In today’s dynamic landscape, shipbuilding stands as the intersection between decarbonisation, global trade, and cutting-edge technology. The journey is rife with challenges, demanding a targeted, unified strategy, bolstered by effective collaboration between governments and industry. The time is now to steer the maritime sector towards a sustainable horizon.

OECD work in support of Industrial Decarbonisation