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$75bn of new investment required to fund UK shipping’s energy transition

Photo: Shutterstock View of the Port of Dover
Attracting new sources of capital will be essential to raise the estimated $75bn of investment needed for the UK’s drive to decarbonise its domestic shipping sector and achieve net-zero over the next three decades.

A new report concludes that institutional investors could play a key role in providing new sources of capital that will be essential if the UK’s domestic shipping sector is to meet mid-century decarbonisation targets. The report, UK Domestic Shipping: Mobilising Investment in Net Zero, has been produced by Marine Capital Ltd with the support of UMAS and Lloyd’s Register (LR).

The study declares that appropriate government support is likely to be required to unlock the institutional investment that could help to fund the path to net-zero. The diverse nature of the UK’s shipping sector, with a wide range of vessel types, shipowners and operators, and ports and terminals, present major challenges in the country’s maritime decarbonisation drive.

The report is said to be the most comprehensive study of the UK’s domestic shipping sector so far. Its finding and recommendations could contribute significantly to progress of the UK Government’s Clean Maritime Plan.

Through sector case studies, the report reveals that a disproportionately large share of emissions come from a relatively small subsector of vessels, providing potential for targeted measures. Ferries and ro-ro vessels, for example, account for 10% of ships but 50% of emissions from the domestic and short-sea fleets.

Offshore service vessels are another example: and given the UK’s planned expansion in the offshore wind sector, ships that service this sector are also good candidates for decarbonisation initiatives, the report said.  

Barriers that are currently hindering access to the new sources of required funding include uncertainty over the future demand for and supply of clean fuels, a lack of clarity on the development of policy and an appropriate regulatory environment, and limited access to funding. Although institutional investors, who together represent more than $80trn in assets, could be a viable source of funding, government support will be needed to help them overcome some of these current uncertainties.

LR’s Dr Carlo Raucci, Decarbonisation Consultant at the classification society’s Maritime Decarbonisation Hub, commented: “The coming three decades will need to see a significant shift towards large-scale investments into new and retrofitted vessels in domestic fleets, zero-carbon fuel production and bunkering infrastructure alongside their associated supply chains, which can span across multiple related industries across the world. These are deep, long-term commitments requiring a coordinated approach by both government and the industry to mobilise investments from external sources of capital.”

Tony Foster, CEO of Marine Capital, said: “Shipping’s decarbonisation presents many challenges. Domestic shipping is enormously diverse, so merely getting to grips with that diversity was a key element in framing the report. We have highlighted, through case studies, financial mechanisms which can facilitate the participation of institutional capital, particularly in the large-scale fleet renewal that is required. The report clearly indicates how progress can be made now and the support which government can provide to unlock this investment.’’

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