The ripple effect: How geopolitics and disruptions in key trade routes impact shipping’s decarbonization

Disruptions in two major global maritime trade waterways seem to have diminished efforts to accelerate decarbonization of the shipping industry.

Since November 2023, escalating attacks on ships in the Red Sea have been compounding disruptions in the Black Sea caused by the war in Ukraine and in the Panama Canal due to climate-induced droughts . In both the Suez and Panama canals, transits are down by more than 40% compared to their peaks.

Ships are avoiding the Suez and the Panama canals and seeking alternative routes. This combination translates into longer cargo travel distances, rising trade costs and insurance premiums. Furthermore, greenhouse gas (GHG) emissions are also growing from having to travel greater distances and at greater speed to compensate for the detours.

The maritime transport sector, which carries around 80% of the world’s merchandise trade, is under pressure to decarbonize.

For more than a decade, the shipping industry has adopted reduced speeds to lower fuel costs and address GHG emissions.

However, disruptions in key trade routes like the Red Sea and Suez Canal, coupled with factors affecting the Panama Canal and Black Sea, are leading to increased vessel speeds to maintain schedules which have resulted in higher fuel consumption and greenhouse gas emissions.

In other words, the disruptions could erode the environmental gains achieved through “ slow steaming ”, as rerouted vessels increase speeds to cover longer distances, the UN Conference on Trade and Development (UNCTAD) said in its recent report.

This is particularly evident among container ships, where a 1% increase in speed typically leads to a 2.2% rise in fuel consumption. For example, accelerating from 14 to 16 knots increases fuel use per mile by 31%.

As a result, the longer distances caused by rerouting from the Suez Canal to the Cape of Good Hope imply a 70% increase in greenhouse gas emissions for a round trip from Singapore to Northern Europe, according to UNCTAD.

As the conflict in the Red Sea shows no signs of ending, a direct consequence are increased CO2 emissions, at least for the foreseeable future. Current geopolitical tensions could significantly slow down the shipping industry’s decarbonization efforts. Speaking of a long-term impact, the geopolitical tensions might significantly disrupt or make unattainable the International Maritime Organization’s interim targets along the way to 2050, including a 20% GHG cut by 2030 and at least 80% by 2040.