Costs, Carbon, and Cargo, Powering Shipping into the Future

31 May 2022, Posted in All Posts, Blog Posts

The international shipping industry facilitates the movement of millions of products between continents in a matter of weeks. Massive container ships today are so large that they require their own unit (measured in twenty-foot equivalent units or TEUs), and with their significant freight capacity, they form the backbone of the modern global supply chain. Yet to move these loaded down titans thousands of miles across the globe requires highly energy-dense fuel. The choice of fuel can impose massive costs – well beyond fuel prices.

Shipping moves 95 percent of manufactured goods and over $4 trillion dollars worth of value across the oceans every year. Relying on fossil fuels for their energy density and versatility, the emissions generated by the shipping industry to move these products have become a source of concern to some. If the global shipping industry were a country, it would be the world’s sixth-largest emitter of carbon dioxide.

Container ships run primarily on bunker fuel, a heavy fuel oil containing sulfur that is made from the remnants of the refining process. In 2020, the global shipping industry consumed almost 4 million barrels of bunker fuel per day, which can have a negative impact on communities surrounding ports, as roughly 70 percent of maritime emissions occur within 250 miles of land. Then, starting in January 2020, the International Maritime Organization (IMO) required ships to use fuel that contains no more than 0.5 percent sulfur. While this sulfur cap was projected to slash the roughly 14 million cases of asthma to which ship emissions are believed to contribute by limiting pollutants, the carbon dioxide emissions of bunker fuel still give rise to concern for many. With climate policy taking a central stage globally, industry and governments are seeking ways to decarbonize and mitigate the impacts of the shipping industry.

Mitigating the climate impact of container ships could be addressed by simply slowing down the speed limits of ships on the high seas. A short-term strategy to address emissions is slow steaming, where a ship runs at a speed below its maximum engine capacity. It saves fuel and can reduce a single ship’s emissions by 27 percent with as little as a 10 percent decrease in a ship’s speed. This is currently the most effective means of combating shipping emissions, as alternatives to bunker fuels are still at least 300 percent times more expensive than traditional bunker fuel. Cutting emissions further from the shipping industry is challenging due to the long distances that container ships must travel and the massive steel containers that hold cargo. Bill Gates elaborates in his book, How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need, that the “best conventional container ships can carry 200 times more cargo than either of the two electric ships now in operation, and they can run routes that are 400 times longer.” The main barrier to electrification for large vehicles like ships and jumbo jets is space and weight: more power is needed to drive heavier vehicles longer distances, which requires more power, with more batteries.

Several potential replacements for bunker fuel have been developed in recent years. Ammonia, hydrogen, and liquid natural gas (LNG) all hold promise as a potential liquid fuel replacement for bunker fuel, but it is nuclear energy that may hold the most potential. Multiple U.S. Navy aircraft carriers are powered by small nuclear reactors, and the shipping industry has increasingly invested in manufacturing a safer and more efficient nuclear reactor for container ships, while also investing in ventures to produce batteries that can hold energy generated by nuclear reactors. Several companies have partnered with the U.S. government’s Advanced Reactor Demonstration Program (ARDP) to develop cutting-edge reactors that utilize liquid sodium to depressurize reactors and absorb more heat and store energy, in addition to cutting the costs of building a reactor due to less need for pressurized construction materials.

The international shipping industry accounts for 6 percent of global oil usage for its over 50,000 merchant ships operation around the world. This adds up to a total of 5 billion barrels a year. Because multiple industries, governments, and markets depend heavily on global shipping, the diverse stakeholders behind this decarbonization effort have the potential to serve as a model for other transportation sectors to follow.

Importantly, departing from the status quo of bunker fuel could result in many different impacts, including higher costs, lower storage capacity, slower shipping times, or even security risks. The benefit of this change may be lower carbon dioxide emissions, which may be worth the change, but must be calculated knowing the full costs and benefits. As private industry and government regulators continue to wade into the waters, costs and efficiency will be stacked up against climate concerns, and it is essential to remember that the global trade of raw materials, commodities, finished goods, and essential products relied upon by society is what stands to be impacted.


Click here to read our latest brief: Powering the Shipping Industry of the Future


Written by Roy Mathews, Public Policy Associate


The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.