Incentives for zero-emissions shipping
28 June 2021
A new report from Oxford researchers shows that incentivising private investment is key to the scaling and adoption of clean fuels and technology by the shipping industry.
Pressure is growing from multiple directions for the shipping industry to decarbonise. Alternative fuels do exist to reduce or remove all emissions from fuel use, but they are not yet competitive with fossil fuels remaining prohibitively expensive. However the report shows that Contracts for Difference (CfDs) could allow the public sector to close the gap between the market price for a new technology or fuel and the price required to give the private sector a sufficient return. Effectively subsidising the private sector until production costs decline, CfDs have proven extremely successful at driving down the costs of renewable energy generation technologies, notably offshore wind power in the UK.
Matthew Ives, a co-author of the report, said "The spectacular cost declines in clean technologies such as solar and wind means that cost competitive clean fuels for shipping are on the horizon. Through the application of exciting new policy instruments such as contracts-for-difference, international shipping has the opportunity to play a major role in the green industrial revolution."
The report concludes by providing two draft CfDs developed in conjunction with law firm Pinsent Masons.