3. The UN has warned that elevated shipping costs resulting from the global supply chain crunch will further fuel inflation around the world and disproportionately hit developing nations economies.

The surge in freight rates is likely to push up global consumer prices by an additional 1.5 per cent should they remain high for the next year, according to estimates by the United Nations Conference on Trade and Development in a report on Thursday.

The pandemic-induced boom in demand for goods, combined with supply chain disruptions from congested ports to the Suez Canal blockage, have caused freight rates to rocket to record highs, reaching about five times their average over the past decade.

But import-dependent developing nations are set for a deeper blow from high shipping costs. Consumer prices are expected to rise by an estimated additional 2.2 per cent for the worlds 46 least developed nations and 7.5 per cent for small island developing nations such as Fiji, Mauritius and Jamaica, the report showed.

The impact on prices in developing countries, especially small island developing countries, is five times higher, said Shamika Sirimanne, director of technology and logistics at UNCTAD. This is a real concern. With prices soaring for everything from steel to energy, central banks are judging whether inflation is likely to settle once supply chain kinks have been ironed out.

When a package thuds on to a doorstep, customers glimpse only the final few metres of its long and complex journey through the global supply chain. Most consumer goods delivered across the developed world are manufactured thousands of miles away before being shipped or flown to ports, moved to warehouses or regional fulfilment centres by road or rail, and then driven to a customers door.

As a result, every stage of the process has an impact on the environment. International trade-related freight transport is now responsible for 7 per cent of global carbon emissions, according to the International Transport Forum. And this global freight transport activity is only forecast to grow: by 2050, it will be 2.5 times its 2015 level, based on ITF projections released this year. The body also warned that freights absolute carbon emissions will be more than 20 per cent higher by 2050 compared with 2015, even under current decarbonisation policies, which it labelled as insufficient.

Among the possible solutions to decarbonise the sector are greater efficiencies to help shrink inventories and the number of deliveries, as well as switching to more sustainable fuel and energy supplies. But the industry is particularly complex to decarbonise. Whether it contains a sofa or an iPhone, a packages journey will usually involve several independent businesses, from huge shipping companies to freight forwarders, warehousing groups, and last-mile delivery couriers.

Given this fragmentation of the industry, there is no single body or organisation that will be able to lead decarbonisation, points out Cline Hourcade, managing director at Change Horizon, a logistics consultancy. I think you need to be pragmatic and see how individual companies and stakeholders are going to contribute, she says.

The biggest companies in the sector have all begun to act, by issuing a blizzard of sustainability commitments.Shipping group Maersk is aiming to reach net zero emissions by 2050, and have the first carbon-neutral vessel on the water by 2023. Meanwhile, some of the most ambitious pledges on the use of sustainable aviation fuels have come from the air freight industry. Amazon founder Jeff Bezos has pledged to use his ecommerce groups size and scale to make a difference. The company has said it will make 50 per cent of all shipments net zero in emission terms by 2030 and hit overall net zero emissions 10 years later. Amazon has already launched a venture capital fund to invest in companies pioneering new technologies to help decarbonise logistics, with an initial $2bn in funding.

This has invested in start-ups including a company building small, electric aircraft for use in package deliveries, a sustainable-fuel manufacturer, and an electric vehicle maker. The fund, and its futuristic investments, underline how logistics companies are hoping that new technologies will emerge to offer a silver bullet to help them decarbonise their energy-intensive industry.

Among the biggest challenges will be making changes to intricately planned supply chains without increasing costs for consumers, who have come to expect rapid, cheap deliveries as a part of everyday life in the western world. For now, the new technologies tend to be more expensive than older, more carbon-intensive solutions. Sustainable fuels to power cargo aircraft, for example, are up to five times as expensive as traditional jet fuel.

However, some of the most significant pressure to move on climate change is coming not from consumers but from the big corporations. They all rely on the logistics industry to get their products to market, but are also increasingly mindful of tackling their broader scope 3 emissions, which include those emitted during transportation and distribution of their goods and services.Ikea, Unilever and Michelin are among nine leading companies that last month pledged to use only ships powered by zero carbon fuels by 2040.

Companies have the opportunity to make a huge impact in the fight against climate change by also decarbonising their supply chains, says Dominic Waughray, a managing director at the World Economic Forum. The interaction between governments and companies to seize this opportunity is an important one.

Questions: (30pt)

1. Give a title to this passage. (5pt)

2. Shipping costs (container shipping and bulk shipping) surged during the pandemic, causing disruptions to the global supply chain. Can you explain the reasons behind the surge? (15pt)

3. According to the article, decarbonisation seems to be one big challenge ahead for the shipping industry. Explain how the industry is coping with this challenge, and talk about the other challenges facing this industry. (10pt)