As discussions on a mid-term market-based measure continue at this week’s intersessional meeting of the IMO Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 17), a document has been submitted by IAPH to the IMO presenting the findings of a study it commissioned from Maritime & Transport Business Solutions (MTBS) to make on port climate adaptation and decarbonisation investment needs of developing nations.
The study explored the current state of port adaptation and decarbonisation infrastructure in developing nations, with case studies from Brazil, India, Indonesia, Kenya and the Solomon Islands, and identified the investments needed to ensure a fair and equitable transition.
1. Port infrastructure financing is already challenging today, with most bankable projects requiring a combination of a positive socio-economic impact for the region as well as a bankable business case.
2. Green energy from solar and wind will provide several developing nations with a new opportunity to produce, use/and or export green energy to high energy demanding nations. Green Hydrogen generated from renewable energy is earmarked as a base energy source to replace fossil fuel dependency.
3. The sector must reach consensus regarding the regulatory framework and GHG mitigation measures of the future as soon as possible to avoid risk aversion to investing in technology which, eventually may not become widely adopted.
4. Any share of funds generated from a market-based measure will require decisions based on :
• Level of dissemination (country, port, project)
• A sound methodology for gauging viable investments, with a minimum of climate change vulnerability
• A region’s dependency on maritime transport
• Cargo value and type (economic benefit of increased investments)
• Increase of transport costs due to the charging scheme
• Food security
• Adaptation relative to required mitigation investments
• Cost-effectiveness (such as adapting to rebuild)
• The overall related socio-economic impact and development
The examples in the study demonstrate investments in port adaptation (resilient infrastructure) and decarbonisation infrastructure varying widely depending on port size, location, existing infrastructure, activities, and prior adaptation and mitigation plans. That said, based on estimations, it is predicted that the aggregate total investment needs for ports in developing nations lies between USD 55 and 83 billion*.
Ports in developing countries tend to prioritise adaptation (resilience) investments over mitigation (decarbonisation) investments. The higher the vulnerability and the smaller the port, the more prominent this development. The small island ports in Indonesia and on the Solomon Islands are the most outspoken on this. This is problematic, as adaptive measures like building storm barriers have no underlying economic business case except the potential protection from future economic loss due to disruption of the activities. The study also found that costs of climate adaptation are a magnitude higher than those associated with mitigation.
Managing Director Patrick Verhoeven commented: “As was mentioned in our submission of this report from MTBS, tackling climate change in the maritime industry means adopting both adaptation and mitigation measures in ports. Adaptation is focused on keeping the ports trading and making sure they are protected against the onslaught of extreme weather disruptions. Mitigation entails investing in infrastructure improvements to reach net-zero GHG emissions as soon as possible. Only through a combination of both actions can ports build resilience and secure their future.” With the current proposals for the basket of candidate mid and long-term measures on the table at this week’s intersessional meeting of the IMO Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 17), IAPH remains neutral as to the choice of instrument. However, it is supportive of a carbon- pricing mechanism that will provide a strong incentive to invest in the necessary port infrastructure to enable both the commercial viability of low- and zero-carbon fuels and to support a just and equitable transition. Patrick Verhoeven concluded: “The risk of a market-based measure increasing transport costs, which places added pressure on countries with lower efficiency infrastructure and less connectivity to the global trade network, could be offset by the potential revenues allocated to them for port-related adaptation and mitigation measures to kick start the energy transition. Never has the need been greater from shipping and ports to unify with the energy sector to motivate sovereign funds to provide the necessary stimulus to off-takers. They, in turn, will attract the private investment partners necessary to reach Final Investment Decisions for energy transition infrastructure in and around ports.” *Corrected from originally published figures due to author translation amendment |
