Marine Fuel Sulphur Content
Maritime UK supports the overall provisions of MARPOL Annex VI aimed at reducing sulphur emissions from shipping for environmental and health reasons. But these are presenting severe short—term challenges for the ferry and cruise sectors.
- New regulations must be sustainable; i.e. reconcile environmental, social and economic demands.
- New regulations must take their base in science and impact assessments must be made.
- Shifting freight from sea to road is counter to avowed UK and EU government policy.
- The UK government should support a bringing forward of the 2018 feasibility study (already mandated within the revised Marpol Annex VI) and for that study to be expanded to include an assessment of the impacts of the reduction of Sulphur in fuel to 0.1% within ECA’s from 2015.
- The economic impact will be massive – increasing the cost of bunker fuel by, potentially, 87% for ships operating in Emission Control Areas (ECAs). This will mean, from 2015, up to £3.6bn additional annual cost for shipping within 200 miles of the UK.
- The energy required to refine the fuel that shipping will use in the European ECAs alone will add 12 million tons of CO2 to the atmosphere every year.
- This will include reduced shipping activity in ECAs, affecting ports and road infrastructure, and causing job losses. A recent UK study concluded that as many as 2000 jobs will be lost.
- The cruise industry will lose tourism and port revenues. The ferry industry will see closure of longer routes and price increases, which will encourage a shift of passengers, who will not want to travel long distance to the shorter ferry crossings, to less environmentally air travel. Both will lose investment and jobs.
- There is no certainty that enough fuel will be available to meet the 2015 and 2020 regulatory deadlines.
In April 2008 the International Maritime Organization’s (IMO) senior body on marine pollution matters, The Marine Environment Protection Committee (MEPC), approved amendments to Annex VI of The International Convention for the Prevention of Pollution from Ships (MARPOL).
The amendment set out more stringent limits on SOx and NOx emissions from ships exhaust and opened the possibility to designate Environmental Control Areas (ECAs) to limit emissions of SOx, NOx and particulate matter. The amendment was adopted by the IMO in September 2008 at the 58th session. The revised Annex VI will come into force on 1 July 2010 and will be made into national legislation under the tacit acceptance amendment procedure.
The existing MARPOL Annex VI came into force in May 2005 and set a global cap on Sulphur by mass in fuel oil of 4,5%. It also made provisions for specially designated Sulphur Control Areas (SECAs) where the sulphur content in fuel oil must not exceed 1, 5%. The Baltic and the North Sea (incorporating the full length of the English Channel) are SECAs as from May 2005 and the latter from November 2007. From 1 January 2010 a further limit on sulphur content at 0, 1% came into force for inland waterway vessels and for seagoing ships at berth in EU ports for more than 2 hours
The revised MARPOL Annex VI set out more stringent limits on sulphur content in fuel:
- A reduction in the global cap to 3, 5% from 1 January 2012 followed by a further reduction to 0, 5% from 1 January 2020 subject to a feasibility study.
- A reduction in SECAs to 1% from 1 July 2010 and then a further reduction to 0, 1% from 1 January 2015.
The estimated increase in marine fuel cost from reducing the sulphur content from the current global average of 2, 7% to 1% is roughly 10% and to reduce from 1% to 0, 5% is an additional 10%. However reducing sulphur content from 0.5% to 0.1% will require a move away from residual to distillate fuel and the additional cost for this is between 40-70% depending on factors such as availability. To summarise: the additional cost for marine fuel with sulphur content of 0, 1% rather than of 1% could be as much as 87%.
The provision of limiting the Sulphur content in exhaust gases via technical aids, scrubbers, rather than limit the content in the fuel itself has been made. To date the technology is still unproven and questions regarding its suitability for all vessels have not been fully clarified. It is not expected that a feasible technical solution will be available from 2015.
The main effect of the revised MARPOL annex VI is to increase the cost of fuel by 87% for those all ships operating in SECAs. This means annualized cost for shipping within 200 miles of the UK of up to £3,6b from 2015. Two alternative options for ship owners are to either fit abatement equipment (scrubbers) to clean the emissions prior to discharge or to burn alternative fuels such as LNG. However, scrubbers have yet to be proven reliable enough to provide regulatory certainty and there remain multiple problems with LNG, not least of which is that financially it is only a viable option for new build vessels.
While most global shipping, which typically is not in competition with other modes of transport, can operate on a business-as-usual basis, for the forthcoming fifteen years, the shipping segment which is most susceptible to competition, namely European short sea shipping (which includes both freight and passenger ships), will see its cost base increase dramatically overnight when we reach the year 2015. This will lead to a significant rise in ticket prices, as much as 30% on some routes.
The resultant monumental cost increases will lead to a fundamental change in the direction of the logistics flow in the UK; affecting ports as well as road infrastructure. Separate studies undertaken by the UK, EU Commission, Sweden, Finland and the European Shipowners’ Association clearly demonstrate there will be a significant shift of goods from sea to land. Gains to society by reducing sulphur emissions from ships may be negated by costs associated with the congestion, accidents, noise, infrastructural wear and carbon dioxide emissions which will result from modal backshift.
The growing cruise industry will also be affected by the increase in fuel cost and this could lead to operators limiting their activity in SECAs resulting in loss of tourism revenues, port revenues, investment and job opportunities.
The IMOs, decision to establish new regulations regarding sulphur content in marine fuels in 2008 was not preceded by a proper impact assessment study and it has become increasingly obvious that the decision has a number of unforeseen consequences. The number of studies commissioned subsequently by affected Member States bears testament to this.
Furthermore, concerns are raised over with the physical availability of the new fuel to be used from 2015 and governments should also be aware of the knock-on effect the increased demand from shipping for distillate fuel will have on regular diesel prices at petrol station pumps.
For existing vessels scrubbers provide the most likely means of meeting the regulations aside of meeting the high cost of low sulphur fuels. Shipping has been working closely with scrubber manufacturers though at present scrubbers have yet to achieve sufficient reliability at sea to encourage greater uptake. Also, a recent study by InterFerry has demonstrated that a significant number of vessels are unsuitable to have scrubbers fitted for a variety of reasons, including the size and age of the vessel and potential resultant stability problems. The EU Commission has also cast doubt on open loop scrubbers by obstructing proposals in the IMO to allow a lower ph value for scrubber discharges into the sea, essential for open loop. This has further eroded confidence in the applicability of this technology.