During this week’s intersessional meeting of the IMO Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 17), discussions about a mid-term market-based measure are ongoing.
In this context, the International Association of Ports and Harbors (IAPH) has submitted a document to the IMO, detailing the results of a study it commissioned from Maritime & Transport Business Solutions (MTBS).
As explained, developing countries face significant investment gaps in terms of the transition to energy-efficient and climate-resilient port infrastructure. This study, commissioned by the International Association of Ports and Harbors (IAPH), is intended as a comprehensive analysis of these investment gaps, focusing on infrastructure aimed at reducing emissions and bolstering resilience against the impacts of climate change.
The global push towards a sustainable future has placed unprecedented pressure on maritime seaport infrastructure, particularly in developing countries. The ports in these countries serve as vital nodes for the international trade network, facilitating the movement of goods and services that drive economic growth;
sometimes, they are also the only lifeline for the local economy. However, they are increasingly challenged by the dual imperatives of reducing emissions (mitigating strategies) and enhancing resilience to climate change (adaptation strategies).
This study explores the current state of port infrastructure in developing countries, identifies key areas where investments are most needed, and suggests actionable recommendations aimed at bridging these investment gaps. By leveraging datadriven analysis and insights from industry experts, we aim to provide a clear roadmap for the stakeholders, including policymakers, financial institutions, and port authorities, to support the energy transition and climate resilience of maritime seaports.
Objectives
- Provide insight into the size of the climate change issue for ports in developing countries
- Provide insight into the port investment needs and sourcing of developing countries
- Provide insights into potential ways forward to support a just transition for developing ports
Framing the challenge
The issue of climate change mitigation and adaptation of ports in developing countries. As maritime transport was the cornerstone of global trade, it generated
both incredible wealth but also high externalities for coastal regions across the globe. Developing countries have significantly contributed to global maritime trade with around 55% of exports and 61% of imports. Over the past years we have seen large fluctuations in maritime transport costs. Events like geopolitical disruptions, container shortages, port congestion, the blockage of the Suez Canal and, most of all, the COVID outbreak, led to exceptionally high container freight rates. In addition, the requirements for investments in adaptation to climate change (resilience) and mitigation of climate change (sustainability) have
pushed ports towards ever higher levels of investments.
Some developing countries may require assistance to address rising maritime costs and infrastructure investments linked to climate change. Despite their increased participation in the global seaborne trade, many developing countries face challenges such as low maritime connectivity and inefficient port services; this is even more prevalent in the small island developing state (SIDS) subgroup of the developing countries. Obstacles, such as being landlocked or located at a distance from major economic centres, coupled with low trade volumes and imbalances, contribute to increased transportation expenses. In addition, these
countries are often more vulnerable than their developed counterparts to environmental shocks and disruptions caused by climate change.
As evidenced throughout this document, many developing countries experience significant trade imbalances, relying heavily on imports, while exports are often limited. The adoption of the 2023 IMO GHG Strategy aims, as a matter of urgency, to phase out GHG emissions related to shipping as soon as possible, while promoting, in the context of this strategy, a just transition, focusing on reaching net zero GHG emissions by 2050. The estimated costs of the implementation of this decarbonisation strategy are estimated to amount $1-2 trillion. It is assumed that developing countries bear a disproportionate amount of the financial burden linked to climate change mitigation efforts, as well as the consequences of climate change.
Conclusions
- The carbon pricing instruments suggested by the IMO present both promise and risk for developing countries. On the one hand, they will increase
transport costs, putting even more pressure on countries which already have lower efficiency infrastructure and are less connected to the global trade
network. On the other, the revenue of this tool can be used to help the countries invest in adaptation and mitigation measures, by providing a reserve to
support the just transition of these countries. - For shipping decarbonisation to succeed and help prevent dangerous levels of global warming, the sector must reach a consensus regarding the
regulatory framework and GHG mitigation measures of the future as soon as possible. Investment costs related to the energy transition for ports and
shipowners are significant, with no clear future standard. The shipping industry runs the risk of investing in technology that may not be (widely)
adopted, eventually. - Port infrastructure financing is already challenging today, most bankable projects require a combination of a positive socio-economic impact for the
region and a bankable business case. This business case will become even more challenging in the future, given the changes in investment risk and
payback requirements, this is even more the case for adaptation measures like building storm barriers, where there is no underlying economic business
case, except the potential protection from future economic loss due to the disruption of activities. - The five cases investigated focused on varied developing countries, from large to small port economies, countries with many and few ports, some having
a mix of small and large ports, etc. The results showed that these ports mostly deal with similar issues when it comes to investment needs for
mitigation and adaptation. The types of required infrastructure may vary but overall, the need and findings were relatively similar. What was vastly
diverging was the actual estimation of costs and feasibility of the investments, depending on the port size and the country in question. - From the interviews, it became apparent that ports 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 have the strongest opinions in this regard. - The costs of climate adaptation are a magnitude higher than those associated with mitigation. The construction of storm barriers, the relocation and
adaptation of existing ports and soil-related works are amongst the three largest groups. Mitigation efforts are also costly, but the in-port investments
are rather limited compared to the adaptation measures. For example, assuming similar prices to LNG terminals, decarbonising the maritime fuel on
port-based investments would run up to $100million per port for physical terminals or around $50million per port for barge solutions. - Most mitigation related measures in developing countries are planned ad hoc, e.g. upon request of a terminal operator (sometimes with joint
investments) or driven by regulations. This is partly due to the high level of uncertainty in terms of fuel selection in the future and in terms of future
supply and demand networks linked to renewables.
