Countries around the world need to make laws to force the emissions heavy shipping industry to switch to cleaner fuels, say analysts, as the United States and Norway launched a "Green Shipping Challenge" at the UN's COP 27 climate conference in Egypt.

As part of the challenge, more than 40 ports, companies and states made announcements ranging from moving to low or zero-emissions fuels to policies to promote cleaner vessels.

"We're glad to see this kind of leadership from the United States that's keeping this issue high on the agenda," said Faig Abbasov, who leads sustainable maritime policy work at Transport and Environment, a European clean transport campaign group.

"But for that challenge to become reality, the US needs to seriously consider implementing domestic legislation on international shipping to create a market for clean technologies."

Carbon emissions in the shipping industry

About 80% of the world's trade is transported by sea. Every day, huge vessels carrying colorful shipping containers crisscross the oceans delivering goods. At the same time, those ships deliver one billion tons of CO2 into the atmosphere annually.

Shipping is responsible for about 3% of annual global emissions and if it were a country, it would be among the world's top 10 polluters.

"Shipping is a major emitter of greenhouse gases globally, therefore it's vital that quick and decisive action is taken at scale to reduce emissions from this sector to help limit temperature rise to 1.5 C (2.7 Fahrenheit)," said Jonas Gahr Store, Prime Minister of Norway.

Although the industry has said wants to go net-zero by 2050, it is lagging seriously behind. Analysts gaming out a range of "plausible long-term economic and energy scenarios" say emissions could first rise by as much as 130% over 2008.

Creating the market for green fuel

Part of the problem is cost. Highly polluting heavy fuel oil used by the industry is much cheaper than cleaner alternatives like green hydrogen and methanol, said Abbasov.

"The difficult part is all those fuels are truly, truly expensive," he told DW. "Given that heavy fuel oil is so cheap, the price gap is immense. The question is, how are you going to bridge that gap?"

A switch to zero-emission fuels would increase the total cost of vessel ownership by around 40% to 60%, according to global management consulting company McKinsey.

In turn, companies have little incentive to order new ships that would use more expensive green fuel when their competitors could still be using the cheap stuff. They're also under no consumer pressure to do so. As a result, nobody is producing the fuel at commercial scale.

"Nobody really cares about those shipping company emissions, it's as simple as that," said Abbasov, adding that governments need to create national legislation to phase out fossil fuel shipping and create demand for green alternatives.

"If you can mandate it then the price doesn't really matter much because everybody will need to comply and everybody's costs will go up at the equivalent level," said Abbasov.

The European Union is negotiating final legislation that would do just that by curtailing the level of emissions allowed over time. The US congress is also looking at a clean shipping bill that seeks to drive down the sector's emissions.

Some shipping companies moving to decarbonize

In the meantime, the shipping industry is taking some steps to clean up. The International Maritime Organization (IMO), a United Nations agency that regulates shipping, said this summer that it wanted to update its climate strategy to wean the sector off fossil fuels by 2050.

The International Chamber of Shipping (ICS), which represents 80% of the world's merchant fleet, has signed up with the International Renewable Energy Agency (IRENA) to help support the sector's decarbonization.

Maersk, the world's largest shipping company, aims to go "climate-neutral by 2040 with new technology, new vessels, and new fuel," and has ordered 19 vessels with dual-fuel engines that operate on methanol.

Ships have about a 20-to-25-year operating life, so the sector needs to put in place "comprehensive zero-emission programs over the next decade," according McKinsey.

Under the "Green Shipping Challenge," Maersk also announced it would collaborate with Spain to explore large-scale green fuel production in the country.

Green fuel plants need to get up and running at scale soon, so more shipping companies can start ordering the necessary vessels when renewing their fleets, said Abbasov.

"Certain companies want to invest, but they will only invest if there is a level playing field," he added.

Edited by: Tamsin Walker