Why the Climate Crisis may Change Global Shipping for Good

An estimated 80 percent of all goods imported and exported globally are transported by sea freight. Containers have helped to improve efficiency, while capacity has increased exponentially with the construction of massive cargo ships with the ability to carry upwards of 20,000 containers each, on every journey.

Sea freight accounts for the transportation of 11 billion tonnes of goods every year and, as of 2019, was worth over US$14 trillion per annum. From the outside it appears the industry is booming and represents the backbone of many supply chains and logistics operations around the world, with reliance on shipping only likely to increase in the coming years. And yet, not all is rosy in the shipping garden.

Piracy is on the rise, with major shipping lanes coming under threat from both land- and sea-based attacks. Traffic through the Red Sea has decreased significantly in 2023 and 2024 as a result of drone strikes and boarding attempts by Houthi rebels. This has led to increased shipping times, significant supply chain disruption and global product shortages.

To compound this, other key shipping lanes are under threat from climate change leading to decreased water levels. As concerns grow over the very future of the industry, we examine the key issues and what supply chains can do to mitigate future risks.

The Panama Canal Under Threat

Unlike the Suez Canal, which is fed by the Red Sea in the south and the Mediterranean in the north, the Panama Canal primarily relies on a freshwater lake, Lake Gatún, to keep its waterway full. Unfortunately, due to the current El Niño weather system, which has caused the lowest October rainfall in the region since records began, water levels in Lake Gatún are well below normal.

This has had a knock-on impact on the water levels in the Canal itself. When measurements were taken at the beginning of the current dry season, levels were the second lowest they had been in 110 years. This has led the Panama Canal Authority to reduce the number of ships passing through the Canal from 36 to 24 per day on average, with weight restrictions also having to be imposed.

The situation has already led to some global shipping companies redirecting ships, with the Canal experiencing a 30 percent drop in traffic since November 2023. And with over US$270 billion worth of cargo transported through the Canal each year, earning Panama approximately US$2.5 billion per year, any decisions to further restrict traffic are likely to be very costly.

While re-routing of cargo might be positive for other parts of the region, it does highlight a need to understand the shipping industry’s role in the Climate Crisis, and how they could and should be looking to reduce its impact.

An Environmental Vicious Circle

These partial closures of and disruptions on key routes, including both the Panama Canal and the Suez Canal, create something of an environmental vicious circle. Shipping accounts for approximately 1,000 metric tonnes of carbon monoxide emissions annually, around 3 percent of global totals.

When ships get held up in these bottleneck areas, or at ports as they wait to dock, their idling engines have much the same impact as a car stuck in traffic. Even keeping the ships moving by redirecting to alternative routes doesn’t help this much, it just moves the pollution to other parts of the world. Demand for sea freight and shipping is expected to continue to increase and there are estimates that, at current rates, total emissions for the industry could equate to 10 percent of all global volumes by 2050. 

As demand and emissions rise, this creates another vicious circle for the shipping industry as major environmental events cause further disruptions. Inland flooding, tropical storms, droughts, rising sea levels and extreme heat impact major shipping lanes, while seasonal flows and water levels in inland rivers, similar to the impact on the Mississippi River in 2019, can cause havoc for river-based last mile logistics.

The Era of Clean Shipping?

Most cargo ships are currently running on what is known as ‘bunker fuel’ or Heavy Fuel Oil (HFO). This is largely due to it being around 30 percent cheaper to run than other fuels for large container ships. However, not only are the carbon emissions from the fuel much higher than other fuels, two of its by-products – Nitrogen Oxide and Sulphur Dioxide – can cause huge environmental damage.

The shipping industry is aware of this and a number of major players, including Maersk, Nippon Yusen Kaisha and Hapag-Lloyd, are starting to take steps to help reduce their impact. Some are focusing on switching to “greener” fuels like green methanol, ammonia or hydrogen, though these fuels are only more environmentally friendly if produced in a renewable way. 

Other shippers are looking to technology to assist their efforts, with ships being redesigned to make them more efficient and even make use of wind as a propulsion method. Technology and AI are also being used to better predict weather patterns and plan routes accordingly, to avoid situations where even greater volumes of fuel are used.

Shipping is never likely to be a completely clean industry, but, as with many others, it needs to recognise the impact it has on the environment and take steps to reduce or mitigate this. It’s a long road but one that’s vital for the long-term health of the planet and the stability of the industry itself.