$2 trillion investment needed to switch global shipping over to green ammonia, finds new study

A new study from Oxford University researchers has estimated that a global investment of around $2 trillion will be needed to fund the infrastructure for switching the global shipping fleet over to using predominantly green ammonia as fuel.

In their paper published on the IOPS Publishing website on 9 January, the authors Jasper Verschuur, Nicholas Salmon Jim Hall and René Bañares-Alcántara, wrote: ‘We find investment needs to transition to a green ammonia fuel supply chain by 2050 to be around $2 trillion, the vast majority of which would be needed to finance supply infrastructure. Consideration of other constraints such as fuel security may drive investment needs higher.’

They continued: ‘Of this total investment need, half of it would be needed in low and middle income countries, which provides opportunities for foreign investments and green jobs. However, at present, cost of capital is often higher in low and lower middle income countries, which could place a barrier on the flow of finance to construct renewable energy projects, such as green ammonia production. Therefore, an enabling environment, in terms of investment security, skills, and governance, needs to be established such that the future green ammonia market can contribute to a green transition of developing economies.’

As Verschuur pointed out on his LinkedIn post on the new report, the ‘whopping’ $2 trillion in investments is needed to finance the new infrastructure, and does not include the cost of engine retrofits or new engines. 

One of the key issues in switching to green ammonia will be trying to establishing connections between the locations where the fuel will be produced, and those where the shipping demand will be concentrated.

The authors noted: ‘The greatest investment need [for production], and opportunity, is in Northern and Western Australia, which is projected to become the main supplier for Asian markets.’

They added that: ‘Large production clusters are also predicted in Chile (to meet demand in South America), California (to meet demand in the western US), North-West Africa (to meet European demand), and southern Arabian Peninsula (to meet local demand and in parts of south Asia).’

Europe, meanwhile is likely to be a key area for ammonia demand, but will only produce small quantities of the fuel .

Click here to access the paper Optimal fuel supply of green ammonia to decarbonise global shipping on the IOP Publishing website.

Image: Shutterstock

Ian Taylor