Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future.
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July 9, 2023
Costly Decarbonization Of Aviation And Shipping
The two most difficult transportation sectors to decarbonize are stepping up their efforts. Aviation and shipping are embarking on aggressive steps that will reduce their emissions by 2050, but those efforts are challenged by technology, supply chains, industry growth, long-lived assets, and costs. Both planes and ships will operate for decades, so totally changing their fuel options to reach net zero emissions by 2050 means immediate actions. But none of the technologies or fuel supply chains and quantities exist. Moreover, we do not know the optimal technology, nor do we have the infrastructure to service the new industries. The biggest problem is the cost of these new technologies and fuels. How will we handle the pending inflationary spike that will come from these decarbonization efforts? READ MORE
Costly Decarbonization Of Aviation And Shipping
Heading into the Fourth of July holiday, the number of Americans flying exceeded 2019 pre-pandemic levels. June’s passengers increased 7% month over month and was 1% above 2019’s level. Passengers going through TSA checkpoints for the first half of 2023 slightly exceeded 2019’s traffic. In Europe, daily flights in June rose 9% month over month but remained 9% below 2019 levels. June’s global flights were 4% higher month over month and 14% above 2019’s flights. People are traveling, despite higher airfares. Airline executives are upbeat given record reservations for the rest of 2023.
Offsetting air traffic’s gains, cargo, and container shipping are experiencing slower demand after the consumption-driven Covid-recovery surge wanes. China’s economic reopening lags, which is depressing shipping volumes. Forecasts call for global shipping volumes to only grow about 2.2% annually for 2023-2027, down from the historical growth rate of 3+%.
Overhanging both industries is the push to decarbonize them in keeping with the world’s Net Zero emissions goal. Although most emissions reduction efforts within transportation target cars and trucks, the shipping and air transportation industries are also pledging to cut emissions by 2050. The challenge is how to do it.
Transportation emissions account for roughly a quarter of global emissions. Of that share, road transportation emissions represent about three-quarters while aviation and shipping are each slightly over 10%. For those industries, whose assets are very long-lived and require them to transport their fuel, managing decarbonization will necessitate new fuels and new technologies.
Exhibit 1. Transportation Sector Emissions Share By Mode
Source: ICCT