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The cost of climate change: how will the shipping industry be impacted?

Categories: Supply Chain.

The world is quickly changing — socially and economically, yes, but also physically. Global warming is now creating disruptions that can’t be ignored.

Larger, stronger, and more frequent storms, scorching heat events, unprecedented deep freezes, and wildfires are already something that we’re facing each year. If global warming continues, we’ll see more extreme weather across the globe.

Fortunately, there’s hope. Both public and private sectors are starting to deploy resources to mitigate the worst impacts of climate change, especially along the supply chain.

Shipping emissions account for around 20% of the total global transportation-related emissions and they rose nearly 5% in 2021, setting off alarm bells in the industry. But new technologies, increasing demand for greener transportation solutions, and more action from global industry (especially on the supply chain) could very well correct our course.

Climate change and the supply chain

In recent years, multiple reports have been released with an eye on global warming. The State of Climate 2021 and the IPCC signal a need for immediate, significant action to curb climate change.

The newest report, “Act Now or Pay Later” from the Environmental Defense Fund, states that climate change could cost the shipping industry financially in the coming years.

This should come as no surprise, as the supply chain relies on physical infrastructure that will face more difficult environmental conditions. But having a price tag put on inaction — to the tune of $25.5 billion in higher costs per year by 2100 — may encourage more movement for sustainability and reaching zero-emissions goals.

How does climate change impact the transportation industry? 

The most glaring impact of global warming on the supply chain happens at the port.

Sea levels rising, combined with stronger and more frequent tropical storms, will have a serious effect on ocean-facing ports, especially along the Gulf Coast. But we’re already seeing myriad impacts that extend beyond tidewater regions, from inland flooding to high-heat events to landscape destabilization due to wildfire and longstanding drought.

Here’s a sampling of the kind of turmoil climate change presents for the supply chain:

  • For long haul trucking, submerged roads and bridges mean finding alternative routes that may not be the shortest, safest, or most efficient.
  • Unexpected heavy rain in urban areas can lead to serious flooding, even when hurricanes and other storms aren’t in the forecast.
  • Extreme heat can cause roads to soften and expand, which will create ruts, potholes, and buckled rail tracks. Over time, this can result in more damage to trucks and lead to longer routes to avoid damaged roads.
  • More natural disasters mean more volatility in transoceanic travel, including more lost cargo (and even potentially lost ships).

When considering the various ways global warming can manifest, taking action now may be the better option as opposed to reacting to large-scale events which we can only assume will increase in frequency.

Act Now or Pay Later: The Main Takeaways

Cost is often stated as a barrier to taking more immediate action. However, these short-term cost savings may not benefit companies in the long run. Climate change waits for no one — and it’s going to hit shipping and transportation industries in the pocketbook.

According to RTI International’s calculations, the totality of climate impacts could cost the shipping industry $25 billion annually by 2100. It’s worth noting that global container shipping industry profits were less than $20 billion from 2018 to 2020.

We’re already seeing some of the effects of major storms on the industry. The cost of previous major storms add up:

  • Hurricane Katrina (2005) – $2.2 billion in losses at U.S. ports
  • Hurricane Florence (2018) – $46 million in losses at U.S. ports
  • Typhoon Haikui (2012) – $10 million in losses at the Port of Shanghai
  • Typhoon Lekima (2019) – $65 million in losses at China’s Port of Dalian

Researchers can only estimate what the monetary impacts of climate change will be based on data that is available – there are still lots of unknowns, especially if global emissions don’t decline. If they do drastically reduce, it could be a better outcome and be lower than predicted.

“The findings should help shipowners see the other side of the coin and realize that if they wait to invest in decarbonizing their fleet, that inaction could incur costly consequences of climate impacts,” Marie Hubatova, senior manager for EDF’s Global Transport team, told FreightWaves Maritime. “Shipping is at the heart of global trade and cooperation, and they have a unique responsibility to lead efforts to decarbonize.”

Actions at the Port of Los Angeles

In the past, we have discussed actions being taken at the Port of Los Angeles and Long Beach to be more sustainable and to hit carbon reduction targets set by the Governor. Slowly yet surely, progress is being made.

With more zero-emission and near-zero-emission units coming into transportation, alongside the implementation of the Clean Truck Fund Rate this year, leadership at the port hopes to see significant improvements in the near future. Many other ports have recently joined the Getting to Zero Coalition to hit carbon reduction targets themselves.


As sustainability practices are put in place at the Port of LA and elsewhere in the world, we’re keeping an eye on how to best serve our clients.

A 3PL like GlobeCon can help improve ESG standards or streamline operations, so you can prioritize sustainability and visibility throughout the supply chain.

Connect with a trusted partner at the Port of LA. Contact us to learn more!