The commercial transport sector poses major challenges in the fight to reduce emissions. Together, aviation and shipping account for 10% of UK greenhouse gas emissions and, on current trends, aviation will be the largest emitting sector by 2050. Road freight now accounts for 53% of CO2 emissions within global trade-related transport, and this share is expected to rise to 56% by 2050 if current trends continue.
In the UK, the Government has set ambitious targets to reach net zero emissions by 2050 for the UK’s share of international aviation and shipping. Globally, at COP26 in November 2021, signatories to the Clydebank Declaration confirmed their support of the establishment of green shipping corridors — zero-emission maritime routes between two (or more) ports.
In July 2021, the UK Department for Transport said it could require flights departing the country to begin using a minimum sustainable aviation fuel (SAF) blend as early as 2025, rising to a 10.3% minimum blend rate by 2030, and reaching a 75% blending floor by 2050. This is even more ambitious than the levels proposed by the EU in the ‘Fit for 55’ pledge.
Meeting either of these targets will require a massive investment in SAF production, which is already underway. In December 2021, British Airways announced that it would be the first airline in the world to use SAF produced in the UK after signing a multi-year agreement with Phillips 66 Limited.
For road haulage, the UK Government has stated that sales of all new medium-sized trucks (up to 26m) are to have zero emission capability from 2035, and 26m and above by 2040.
Removing these emissions requires the development and deployment of clean technologies, and new policies and regulation. Technology will assist the larger goals, by
implementing efficient routing systems, and clean air zones are already in place in a bid to improve the air quality in urban environments.
The implementation of new technologies and the improvised retrofitting of current vessels, vehicles and aircrafts in order to adapt to new alternative fuels and additional energy efficiency requirements will create new risks that are yet to be assessed.
The role of technology
The ongoing digital transformation offers insurers a solution to allow them to meet their environmental, social and governance objectives, as well as offering their insureds the ability to transition to a more effective, efficient and often more climate friendly operation.
The use of accurate data will allow the maritime and aviation industries to more accurately predict extreme weather events, thereby minimising losses to property and cargo. Delays and route changes can be avoided, which as well as reducing the claims presented will also have a positive impact on a company’s reputation.
Investors, banks, insurers and customers will all require information on the environmental impact of shipping companies. Failure to do so could be costly in relation to potential claims, access to investment and financing — and to the company’s reputation.
Regulators, owners, operators and insurers are all responding to the call to reduce the harmful emissions caused by the maritime and aviation sectors. However, these changes will require huge investment and will create new risks.