Ordering: shipowners cautioned on stranded asset risks linked to energy transition

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2024-06-07 04:00:03

Study says a drop in demand for fossil fuels as the world moves to renewable energy sources could cut asset values and profits by billions

Owners of fossil fuel-carrying ships will be at risk of extensive financial losses as efforts to curb the worst impacts of climate change see society and energy markets shift towards non-fossil fuel alternatives.

A new report from the University College London (UCL) Energy Institute and the Kühne Climate Centre found the risk of stranded assets – or, in the context of shipping, an expensive vessel that cannot recoup its purchase and financing costs through profitable operations – in shipping sectors that deal in fossil fuel cargoes will rise in line with fossil fuel demand slumps linked to global decarbonisation efforts.

If no more newbuildings are ordered to carry oil, gas or coal, the report found that profits for companies shipping fossil fuel cargoes would see cuts of some US$214Bn on a decarbonisation trajectory aligned to the Paris Agreement goal of limiting global average temperature rises to 1.5°C. In this same scenario, shipowners could see their assets devalued by a total of around US$100Bn by 2030, cutting off between a quarter and a third of the value of the existing fleet.