Shipping companies’ decarbonisation transition pathways remain unclear amid alternative fuel uncertainty, Sustainable Fitch says in a new report. The shipping industry contributes 2%-3% of total global greenhouse gas emissions and faces significant technological challenges to meet its net-zero targets.

The main source of emissions in the sector is the combustion of fossil fuels. Switching to low-carbon fuels is the key to decarbonising the industry, but these alternatives are technologically immature and economically unviable.

The transition to a low-carbon economy presents significant challenges for the shipping industry. Global efforts to decarbonise supply chains put pressure on shipping companies to invest in emissions mitigation measures. Regulatory measures to cut emissions and improve reporting impose costs on the industry. Physical climate risks, such as increased droughts and extreme weather events, can disrupt shipping and port operations, leading to higher costs and lost revenue.

Shipping companies aiming to decarbonise rely heavily on land networks and port infrastructure but little progress has been made on developing these. Ports will also have to make significant investments in their capacity to operate under extreme weather conditions, cope with hazard impacts, manage a quick recovery and adapt to rising sea levels.

The industry has been slow to adopt green or transition bonds or loans to finance emissions reductions and energy efficiency improvements. Although net-zero pledges by 2050 are common, most companies lack clear short- and medium-term targets. The decarbonisation pathways for shipping companies vary greatly, depending on such factors as the age of the fleet and access to alternative fuels.