Shipping Industry and Ports Susceptible to Billions of Dollars in Damage, Disruption from Climate Change

14 March, 2022 — A new report reveals that the global shipping and port industry is susceptible to billions of dollars in infrastructure damage and trade disruption from climate change impacts. Authored by RTI International, a nonprofit research institute, for Environmental Defense Fund (EDF), “Act Now or Pay Later: The Costs of Climate Inaction for Ports and Shipping” explores data on climate-related disasters and projects the cost of future damages to the industry. Without ambitious action to reduce emissions, climate change impacts could cost the shipping industry up to $25 billion every year by the end of the century. 

International shipping has grown enormously in the last 25 years, more than doubling in annual trade volume. Due to this growth in combination with shipping’s reliance on heavily polluting fuels, the industry has become a large emitter of greenhouse gases, currently accounting for roughly 20% of global emissions from transportation. Meanwhile, from sea level rise to increased storm activity to inland flooding, climate change threatens shipping infrastructure and operations.  

“Just as the COVID-19 pandemic threw our ports and the global supply chain into crisis mode, the climate emergency will have major consequences for international shipping. In the face of climate breakdown, however, the shipping industry has an early warning bell and an opportunity to act,” said Marie Hubatova, senior manager for EDF's Global Transport team. “By stepping up to reduce emissions and invest in zero-carbon fuels, shipping leaders could help avoid these costly consequences and build a more sustainable future for the industry.” 

Based on past impacts and anticipated climate change scenarios, the report projects that the additional annual damages to port infrastructure could reach nearly US$ 18 billion by 2100. Storm-related port disruptions could add another US$ 7.5 billion each year, reflecting the economic losses incurred by ports, shippers, and carriers due to port closures and the costs to shipping customers. Together, these added future costs due to climate change are roughly equivalent to the total annual net earnings for the container port sector in 2019. 

Global trade is expected to grow in the future and so is the volume of goods transported by sea. However, negative ripple effects through shipping and port networks can have significant global economic consequences and the report estimates that climate change impacts can reduce maritime trade volume. Assuming a steady growth rate, global trade is expected to grow to reach 120 billion tons in 2100 – but under the worst-case climate scenario, that growth could be stunted by up to nearly 10%.  

This report summarizes existing evidence and estimates of the impacts and costs of climate-related hazards, finding that data on this topic is sparse or completely lacking for many areas. The lack of data means that the shipping industry does not have a clear picture of future circumstances and future costs could be far higher than estimated here. 

“While our report uses the best information available to paint a picture of the true economic cost of climate change on international shipping, the reality is that these figures are likely underestimating the total scale of the consequences,” said George Van Houtven from RTI. “Considering the unpredictable volatility of climate change and the immense complexity of the shipping sector, we simply need more data to show the full picture. However, the available evidence strongly indicates that the costs will be great.” 

• The industry can take several steps now to advance the transition to green shipping and reduce future climate change costs, including: 
• Committing to full decarbonization by 2050, in line with the Paris Agreement.  
• Supporting a market-based mechanism to reduce shipping emissions at the International Maritime Organization. 
• Investing in zero-emission fuels and technology. 
• Supporting an equitable transition for the shipping industry to ensure the brunt of damages and adaptation costs do not disproportionately fall on developing nations. 

Many shipping leaders have already endorsed a Call to Action through the Getting to Zero Coalition, which aims for the development and deployment of commercially viable deep sea zero-emission vessels by 2030.  

“Many in the maritime sector are already committed to climate action and the need for a full decarbonization of the shipping industry by 2050,” said Project Director Ingrid Sidenvall Jegou from the Global Maritime Forum. “This report only reinforces the business case for shipping decarbonization to begin now, emphasizing that a just and equitable energy transition is an opportunity for the private sector and developing countries alike.” 

Read the full report here.