E
SUB-COMMITTEE ON POLLUTION PPR 7/INF.11 PREVENTION AND RESPONSE 13 December 2019 7th session ENGLISH ONLY Agenda item 14 Pre-session public release: ☐
DEVELOPMENT OF MEASURES TO REDUCE RISKS OF USE AND CARRIAGE OF HEAVY FUEL OIL AS FUEL BY SHIPS IN ARCTIC WATERS
Impact assessment on a ban on heavy fuel oil use in Greenland
Submitted by Denmark
SUMMARY
Executive summary: This document contains an updated impact assessment on establishing a ban on use of heavy fuel oil for marine propulsion in Arctic waters for Greenland
Strategic direction, if 6 applicable:
Output: 6.11
Action to be taken: Paragraph 6
Related documents: MEPC 71/14/4; MEPC 72/11/1; MEPC 73/9/1, MEPC 73/9/2; PPR 6/12/3 and PPR 6/INF.21
Introduction
1 MEPC 74 invited Member Governments and international organizations to submit impact assessments in accordance with the agreed methodology with respect to a proposed ban on heavy fuel oil (HFO) to PPR 7 for consideration and advice to the Committee.
Key findings
2 The annexed impact assessment highlights the socio-economic, climate and environmental effects for Greenland when a ban on use of heavy fuel oil for marine propulsion in Arctic waters is implemented. The Greenland government, Naalakkersuisut, initiated a socioeconomic assessment for Greenland of a ban on HFO as fuel for ships in 2016 (submitted to IMO as document PPR 6/INF.21 (Denmark)). The current document represents an updated and expanded assessment based on the adopted IMO methodology for assessments. The assessment applies the definitions related to the proposed ban in the Arctic in relation to MARPOL Annex I and the global 0.50% m/m sulphur limit under implementation. It was established in a previous assessment that an Arctic HFO ban would have socioeconomic
I:\PPR\07\PPR 7-INF.11.docx
PPR 7/INF.11 Page 2 effects in Greenland amounting to DKK 8.1 million in 2017 (approximately 1.2 million US$). The costs and the environmental benefits in the updated assessment are significantly higher than in the previous assessment, reflecting:
.1 that with improved industry input, the estimate of fuel consumption and hence emissions is more precise and larger;
.2 that the price of fuel and the price gap between residual and distillate fuels have increased; and
.3 updated unit prices for air emissions relevant for Greenland are now available from Danish Centre for Energy and Environment (DCE 2019).
3 The updated unit costs have a significant impact on the assessment, as the SOX unit price is reduced by half, which reduces the economic benefit of reduced SOX emissions, but in particular as the change in the unit price for particulate matter (PM) is very large. The DCE (2019a) finds that an updated unit cost for PM is DKK 934 per kg while in the previous assessment it was close to zero. These are the key sources for the increase in the benefits related to "Effects from Environmental and Climate".
4 The main analysis only considered the costs and benefits for Greenland. In the updated assessment total socio-economic cost amounts to DKK 36.3 million in 2020. This includes a cost of DKK 21.3 million for the business community, a cost of DKK 4.9 million to the citizens of Greenland due to higher prices and a cost of DKK 10.1 million to Naalakkersuisut due to lower tax and duty revenue and a negative effect on labour supply. The benefits amount to DKK 62.4 million which include a climate benefit of DKK 0.33 million due to lower CO2 emissions and an environmental benefit of DKK 62.1 million.
5 The assessment is carried out through evaluation of examples of oil spill impacts, thus applying a deterministic approach in the following key scenarios for Greenland:
.1 North Water Polynya/Baffin Bay as a unique ecosystem of open water;
.2 Disko Bay/Ilulissat is a UNESCO World Heritage site and Greenland's main tourism area with frequent cruise ship activities;
.3 Store Hellefiskebanke is a commercially exploited biological resources with relatively high traffic intensity for Greenland; and
.4 Ittoqqortoormiit/Scoresby Sound is an isolated town with a high proportion of subsistence economy.
Action requested of the Sub-Committee
6 The Sub-Committee is invited to note the information provided in this document.
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I:\PPR\07\PPR 7-INF.11.docx PPR 7/INF.11 ANNEX Annex, page 1
Assessment of the impact on Greenland of an HFO ban on the use and carriage as fuel for ships in Arctic waters Report version 01
Colophon Prepared by: Frank Stuer-Lauridsen and Kristina Kern-Nielsen (LITEHAUZ) and Martin Bøge (Incentive)
Dato: 12 Dec 2019 Version: 01
Kontakt LITEHAUZ, Diplomvej 381, DK-2800 Kgs. Lyngby T:(+45) 88 70 86 75, E: [email protected] litehauz.com Table of Contents
1 SUMMARY 6
2 SCOPE, POLICY OBJECTIVE AND POLICY OPTIONS 13 2.1 Policy Options 15 2.2 Reading directions 15
3 INTRODUCTION TO ANALYSIS OF IMPACTS 17
4 DETERMINATION OF THE STUDY AREA 19 4.1 Geographical demarcation 19 4.2 Economy and Industry in Greenland 19 4.3 Greenland’s nature and environment 20 4.4 Ship traffic in Greenland 23
5 ASSESSING COSTS TO GREENLAND INDIGENOUS PEOPLES AND LOCAL COMMUNITIES AND INDUSTRIES 28 5.1 Greenland owned ships that currently operate on HFO 28 5.2 Foreign-owned ships serving Greenland that currently operate on HFO 28 5.3 Extra costs for ship operators using alternatives to HFO 30 5.4 Reduction in atmospheric emissions from ships 31 5.5 Socio-economic impact assessment of an HFO ban on society 33 5.6 2020 compliant low sulphur fuel based on Heavy Fuel Oil 41 5.7 Debunkering HFO 41
6 ASSESSING THE BENEFITS OF AN HFO BAN TO GREENLAND INDIGENOUS PEOPLES AND LOCAL COMMUNITIES 46 6.1 Analysis of oil spills 46 6.2 The four oil spill scenarios 49
7 CONCLUSIONS 61
8 REFERENCER 63
9 APPENDIX A: INPUT-OUTPUT MODEL [INCENTIVE] 67
10 APPENDIX B SENSITIVITY MAPS DISKO BAY 69
11 APPENDIX C SENSITIVITY MAPS BAFFIN BAY 74
12 APPENDIX D DISTRIBUTION OF MARINE SPECIES, WHICH ARE IMPORTANT FOR THE AREA OF STORE HELLEFISKEBANKE 77
13 APPENDIX E DISTRIBUTION OF MARINE SPECIES, WHICH ARE IMPORTANT FOR THE AREA OF SCORESBY SOUND 79
List of Abbreviations
ABBREVIATION EXPLANATION
ABS American Bureau of Standards
AECO Association of Arctic Expedition Cruise Operators
AIS Automatic identification system
AMAP Arctic Monitoring Assessment Programme
ASTD Arctic Ship Traffic Data
BC Black carbon
DBD skimmer Disc/Brush/Drum skimmer
DCE Danish Centre for Environment and Energy
Dist Distillate fuel
DMA Danish Maritime Authority
DMA, DMB, DMZ Fuel types according to ISO 8217 2017 Fuel Standard for marine distillate fuels
DMI The Danish Meteorological Institute
DNV GL Det Norske Veritas Germanischer Lloyd
ECA Emission control areas
EEZ Exclusive Economic Zone
EF Emission factor
EPA Environmental Protection Agency (USA)
FONAR Fuel Oil Non-Availability report
GDP Gross domestic product
GRT Gross register tonnage
GT Gross tonnage
HFO Heavy fuel oil
ICCT International Council on Clean Transportation
IFO Intermediate Fuel Oil
IMO International Maritime Organization
IUCN The International Union for Conservation of Nature
LNG Liquefied natural gas
MARPOL The International Convention for the Prevention of Pollution from Ships
MDO Marine Diesel Oil
MEPC Marine Environment Protection Committee
MFO Marine fuel oil
MGO Marine Gasoil
nm nautical miles
NWP North Water Polynya
ORI index Potential oil residency / Oxygen Reserve Index
PAME Protection of the Arctic Marine Environment Working Group
PM Particular matter PPR Sub-Committee on Pollution Prevention and Response
PSSA Particularly Sensitive Sea Area
Res Residual fuel
Ro-Disc Rotating disc
SLCF Short-lived climate forcers
TJ Terajoule 1 TJ = 1.0*1012 Joule
WWF World Wildlife Fund
1 Summary
Introduction
The Greenland government, Naalakkersuisut, carried out a socioeconomic assessment for Greenland of a ban on HFO as fuel for ships submitted to IMO as PPR 6.INF21. The current document represents an updated and expanded assessment based on the adopted IMO methodology for assessments. The assessment applies the definitions related to the proposed ban in the Arctic in relation to MARPOL Annex I and the global cap on sulphur under implementation. The banned fuels are referred to as “residual” as opposed to “distillate”.
Background
Kalaallit Nunaat, or Greenland, is a self-governing country within the Kingdom of Denmark, located primarily in the northern polar region, the Arctic. Greenland is the world’s largest island at 2,175,600 km2, of which only 341,700 km2 is ice-free. The predominantly rocky coastline stretches over 44,087 km, where approximately 56,000 inhabitants live. Sixty percent of Greenland’s population lives in the five largest cities: Nuuk, Sisimiut, Ilulissat, Aasiaat and Qaqortoq. Greenland has 383 km of road, 13 airports and 43 helipads, 17 ports in towns, and port facilities in 58 settlements, and nearly all import/export relies on shipping. One shipping company, Royal Arctic Line, delivers all goods during the ice-free season to a scheduled list of 26 towns and settlements.
The winters are cold, with average winter temperatures ranging from -7 °C in the south to about -34 °C in the north. Temperatures in the summer months show local variation as well, with average temperatures between 7 and 4 °C in the south and north, respectively. Sea ice cover may often extend beyond 70°N latitude during winter (Westergaard- Nielsen et al. 2018, Statistics Greenland 2019 and DMI 2016).
Due to the low population density and very large and relatively untouched natural areas, Greenland’s unique ecosystems have internationally significant populations of animals such as narwhals, belugas, humpback whales, bowhead whales, polar bears and a range of sea birds. Greenland’s waters are home to marine mammals and marine fish species such as cod, salmon, redfish and halibut, serving as subsistence food and/or export commodities (Boertmann et al. 2017, Christensen et al. 2012, Speer et al. 2017).
Global warming has reduced the sea area that has permanent ice coverage and has prolonged the ice-free periods in the summer months, affecting the ecosystem and biodiversity as well as traditional hunting and fishing. This may also give new opportunities for ship traffic, fishing, tourism and exploitation of mineral resources in Greenland (Christensen et al. 2015, Rigét et al. 2019, AMAP 2017).
The main GDP contributor is fishing (85% of exports), and Naalakkersuisut has initiated a transition towards a more sustainable economy, including tourism and exploitation of minerals, oil and gas resources to reduce reliance on fisheries and the subsidy from Denmark of approximately 50% of the national budget. A considerable part of the livelihood, especially in settlements, is covered through subsistence hunting and fishing (Sejersen 2003). Forty-four vessels have their registered home port in Greenland while flying the Danish flag. Larger vessels (>20 GRT) are concentrated in central west Greenland, whereas the smaller vessels are in the northern region (DNV GL 2019). The Greenland 200 nm EEZ is sparsely trafficked, with approximately 283 unique vessels annually (by AIS tracking) and more intense traffic around Nuuk and in the Disko Bay area, including Store Hellefiskebanke. The main ship types are fishing vessels, container and general cargo vessels, small tankers, and cruise ships.
Fuel use and air emissions from shipping in Greenland
While most MARPOL Annexes are in effect in Greenland, including Annex I under which the ban on HFO is proposed, Denmark has made reservations on behalf of Greenland in her accession to MARPOL Annex VI, excusing Greenland from the global low sulphur regime. In Greenland, residual fuel is used in a few large fishing vessels and by the local transport services provider Royal Arctic Line (especially for the larger vessels with transatlantic voyages). The foreign flagged ships associated with oil exploration and mining operations operate on distillate fuel by accord with the authorities of Greenland, and the cruise ships companies have mainly been members of Association of Arctic Expedition Cruise Operators that have formally agreed to refrain from using residual fuel in the Arctic.
Table 1 Fuel consumption by shipping in Greenland
Corresponding consumption HFO, m3 HFO, tonne in MDO/MGO, tonne Greenland homeport 17,000 16,660 15,786 Foreign flagged vessels 11,304 11,078 10,497 Greenland EEZ 28,304 27,738 26,283
Source: Polaroil 2019, Polar Seafood 2019, RAL 2019
The baseline scenario year for the current analysis is 2020 when the global sulphur cap is in effect. Due to the MARPOL Annex VI reservation for Greenland, the use of residual fuel, i.e. HFO, IFO or low sulphur hybrid fuel is and will continue to be acceptable in Greenland in this “no change” scenario. The ban scenario is given as 2021-2022, i.e. “soon, but after implementation of the IMO 2020 low sulphur regime”.
Table 2: Consumption of fuel and air emissions from shipping in Greenland (rounded numbers)
2020 scenario HFO ban scenario Reduction of (Residual allowed) (Distillate allowed) atmospheric emissions
Total annual fuel consumption 27,738 26,283 in Greenland’s EEZ [tonne]
CO2 emissions [tonne] 86,376 84,264 2,112
SOx emissions [tonne] 662 69 593
Particular matter (PM) [tonne] 79 16 63
Black carbon (BC) [tonne] 29 22 7
A ban on residual fuel will reduce atmospheric emissions from shipping in the Greenland territorial sea and in Greenland’s EEZ. The conversion factors used are from Statistics Greenland, the Third IMO Greenhouse Gas
Study and for black carbon an emission factor from ICCT (2017a). The total reduction in CO2 emissions from ships in the EEZ is estimated at 2,112 tonnes in 2020. Based on the cost difference in the fuels an economic model was used to map whom the end-payers of the extra costs will be. The climate and environmental gains of banning residual fuel were calculated. Climate
gains include the reduction in CO2 emissions, while the environmental gains include the reduction in atmospheric emissions.
The figure below shows that the total socioeconomic cost amounts to DKK 36.3 million in 2020. This includes a cost of DKK 21.3 million for the business community, a cost of DKK 4.9 million to the citizens of Greenland due to higher prices, and a cost of DKK 10.1 million to Naalakkersuisut due to lower tax and duty revenue and a negative effect on labour supply. The benefits amount to DKK 62.4 million, which includes a climate benefit of
DKK 0.33 million due to lower CO2 emissions and an environmental benefit of DKK 62.1 million.
Together, the effects listed in the figure represent the socioeconomic effects for Greenland of a possible ban, which is included in the analysis. Note that the calculation of the socioeconomic effects is based solely on the costs and gains in 2020.
The main analysis only considered the cost and benefits for Greenland. The standard in socioeconomic assessments uses a national perspective and geographic delimitation, which leads to the exclusion of foreign- flagged vessels. In this case, it excludes Danish-flagged vessels not registered in a port in Greenland, and this affects five vessels from Royal Arctic Line registered in Denmark but overwhelmingly serving Greenland. These are specifically addressed in a sensitivity analysis: The scenario analysis treats the fuel consumption from foreign-flagged ships as if it were from Greenland vessels (and approximately 90% is). The socioeconomic net- benefit will be DKK 23.5 million compared with DKK 26.1 million in the main scenario. The lower socioeconomic net-benefits primarily reflects the higher costs for the Greenland companies. The business economic effect increases to DKK -23.6 million from DKK -21.3 million as a result of both absorbing costs and transferring them to consumers.
Socio-economic impact assessment of an HFO ban in 2020, DKK million
62.4
26.1
-4.9 -10.1 -21.3
Business economic Effects for Effects for Effects for Socio economic effects citizens Naalakkersuisut enviroment and net-benefit climate
It was established in a previous assessment that an Arctic HFO ban would have socioeconomic effects in Greenland amounting to DKK 8.1 million in 2017 (approximately 1.2 million USD). The costs and the environmental benefits in the updated assessment are significantly higher than in the previous assessment, reflecting 1) that with improved industry input, the estimate of fuel consumption and hence emissions is more precise and larger, and 2) that the price of fuel and the price gap between residual and distillate fuels have increased, with both 1 and 2 increasing the cost side of the equation.
Finally, it is also the case that 3) updated unit prices for air emissions relevant for Greenland are now available from Danish Centre for Energy and Environment (DCE 2019). The updated unit costs have a significant impact
on the assessment, as the SOX unit price is reduced by half, which reduces the economic benefit of reduced SOX emissions, but in particular as the change in the unit price for PM is very large. The DCE (2019a) finds that an updated unit cost for PM is DKK 934 per kg while in the previous assessment it was close to zero. These are the key sources for the increase in the benefits related to *Effects from Environmental and Climate”.
Oil spill costs and impacts
In 2017 an agreement was decided between the governments of Denmark and Greenland on oil and chemical spills contingency. This “Principaftale” delegates Denmark the responsibility for the spill response and contingency measures outside 3 nm in the EEZ, while Greenland is responsible for the territorial waters inside of 3 nm. In case of a widespread spill Denmark is required to combat the spill and carry the costs, should Greenland request this.
The shore-based response related to spills within the 3 nm boundary relies on local manpower and equipment placed in 12 ports in Greenland, typically comprising a 100 m boom, a 200 m boom and a skimmer. The contingency at sea also relies on mechanical containment and recovery, and will be sourced from Denmark, through collaboration with other national authorities and with chartered civil equipment and logistical services, as no contingency staff or equipment aimed at combatting an offshore spill is placed in Greenland. The Danish naval and air defence force deployed in Greenland will take part in combatting an oil spill.
The unit cost of carrying out a response is unfortunately not available for the contingency response in Greenland, and clean-up costs reported from ICCT for the shore-based and the sea-based activities is used as an approximation. The “distillate cost” is used as directional for the efforts to clean up at sea and the “residual costs” reported are associated with the total of shore-based and sea-based efforts. Thus, the sea- based efforts are 3,055 USD/tonne and a shore-based clean-up as a separated cost of a residual spill would be 22,441-3,055 = 19,386 USD/tonne. The storage and treatment of recovered oil and water for which sufficient capacity is not available in Greenland has not been estimated here.
The sea traffic pattern in the Greenland EEZ is not expected to change as a consequence of a ban, and the same statistical rates are expected with respect to accidents leading to oil spills. No significant difference in spill sizes is foreseen, as distillates overall are expected to replace the same amount of residual fuel, although a slightly higher heating value in distillates may theoretically reduce the total carried volume of fuel by up to approximately 3%.
Four spill scenarios
The present assessment relies on existing information and does not include any new modelling or data generation. It is carried out through evaluation of examples of oil spill impacts, thus applying a deterministic approach in the following key scenarios for Greenland: 1) North Water Polynya/Baffin Bay is a unique ecosystem of open water; 2) Disko Bay/Ilulissat is a UNESCO World Heritage Site and Greenland’s main tourism area, with frequent cruise ship activities; 3) Store Hellefiskebanke is a commercially exploited biological resource with relatively high traffic intensity for Greenland; and 4) Ittoqqortoormiit/Scoresby Sound is an isolated town with a high proportion of subsistence economy.
The actual circumstances of a spill are obviously of paramount importance for the impacts expected. In this study a season, where ship traffic is possible, is chosen for each scenario and the predominant weather conditions and seasonal biological status are used as indications of the expected spill trajectory and effect of biological resources. In general, the cost of response and clean-up is addressed, but it is not possible to develop this in a greater detail (please see section 5.7.2 on Contingency and clean up costs).
In the impacts assessment oil spills are either taken from the existing modelling which range from 280 m3 to 1,000 m3 or based on the average HFO spill size north of latitude 55°N between 1993 and 2011 of 415 tonnes (461 m3) as estimated from Fritt-Rasmussen et al. (2018). In comparison, the fuel oil spills modelled for contingency purposes in Greenland range from 38 to 398 tonnes. The assessment does not address the possible mitigating effect of oil spill response from Greenlandic or from Danish authorities, or the combatting strategy, but does estimate a crude cost for sea surface and for coastal clean-up.
Subsistence hunting and fishing is widespread in Greenland, and many inhabitants have a licence that allows them full-time or part-time hunting and fishing. Inhabitants’ income and/or food source varies over the year and in the individual districts, depending on the specific conditions of the area. The approach is taken to estimate a reduction in landing and should be taken as examples of the impact that may be observed in the aftermath of an oil spill. The landings of fish and shrimp are taken as affecting mainly industrial actors operating seagoing vessels although it is recognised that smaller vessels play a part. The landings of mammals are taken as resulting from purely subsistence activities.
This approach will be influenced by seasonalities of the target species, any temporary banning of certain landings caused by the spill, local availability of alternative hunting/fishing grounds, etc. Overarching effects may also come into play as a consequence of an image loss in the eyes of the international public reducing demand and/or the value of landings even if they are maintained in volume, or of a culturally founded reluctance in the Inuit population to continue hunting and fishing in waters and on ice considered soiled or unclean leading to a reduction in landings.
In the assessments, an impact is given for only the first year, but impacts of shored oil spills have lasted several years in other Arctic locations (Deere-Jones 2016). The possible impact on recruitment of pelagic fish and shrimp stock is expected to be transient given the spill volumes assessed. Ecological impacts are primarily driven by presence of marine mammals and surface resting seabirds. Prolonged impacts are expected if oil is trapped in the ice cover and reappears as ice breaks up or if oil beaches on a soft shore with pebbles or shingles where the oil will be worked into the crevices or sand between the rocks only to reappear after heavy weather or ice scouring. Impacts in shallow protected coastal areas, coves and lagoons may also be magnified. Please note that cost estimates in Table 3 are estimates and should be interpreted with this in mind.
Table 3: Assessment of costs oil spill (million DKK) Location Spill Impact Impact Impact Impact Recovery Clean up fishing tourism subsistence ecological at sea* shore North Water Polynya- Res 0 0 20-50% Large 1.6 30 Baffin Bay Dist 0 0 - Small 1.8 0
Disko Bay-Ilulissat Res 25-51 81 20-50% Medium 1.0 32
Dist 25-51 0 5-10% Small 1.1 0
Store Hellefiskebanke Res 16-31 0 5-10% Large 3.6 65
Dist 16-31 0 - Small 4.0 0
Ittoqqortoormiit- Res 0 0 20-50% Large 1.0 32 Scoresby Sound Dist 0 0 - Small 1.1 0
* Mainly a cost to Denmark. “-“ denotes an expected transient effect
The North Water Polynya/Baffin Bay is a unique open water ecosystem in an area where ice cover is prevalent, and the residual fuel spill scenario is set in June-July, when ship traffic to Qaanaaq is possible. The trajectory and surface area of a spill are taken from a blowout spill modelled in Baffin Bay (Shoal’s Edge 2016). Here, 37% of the volume spilled, or 190 tonnes, reached the coast. An average contaminated surface area of 10 km2 (>10 g/m2) and 223 km2 (>0.01 g/m2) will be expected, and >20 km soiled coastline or ice edge. There is no commercial fishing, but subsistence hunting and fishing is dominant and will be impacted heavily. Depending on the actual conditions regarding ice cover, alcids, polar bears, ring seals, narwhals, thick-billed murres and little auks may be affected, leading to a 20-50% reduction in landings in the first year of the spill. Although not significant in monetary terms, the loss of income and livelihood in a location where alternative occupation is not possible will be devastating for many households in the settlements of the area. A spill of distillate fuel is not expected to affect the coast/ice edge, and the spill will be entrained in the water column, yielding no long-term effects.
Disko Bay and the glacier fjord of Ilulissat is a core area in Greenland for large-scale tourism, and the bay is also an important area for fishing and hunting baleen whales, minke whales, fin whales, seals (many species) and seabirds. A fuel oil spill from a cruise ship of 280 m3 modelled in Shoal’s Edge (2016) during the summer showed significant surface and coastal impacts. Here, the impact is estimated to be the collapse of cruise- based tourism and the collapse of Ilulissat’s tourism industry for one year. The landings or their value is expected to be reduced by up to 10% in year 1, and critical subsistence hunting and fishing may see a 20-50% reduction. A distillate spill would result in only a reduction in landings due to an expected restriction imposed or a loss of catch value due to market response.
The land-based tourism in Ilulissat is estimated to generate revenue for the Greenlandic community, representing 30% of total Greenlandic tourist activity. If an oil spill occurs and land-based tourism collapses for one year, revenue from tourism would be reduced by roughly DKK 67.5 million. Likewise, a collapse of cruise- based tourism for one year would mean unrealised revenue of DKK 12.8 million.
Store Hellefiskebanke is an important fishing ground for Greenland halibut, and in the adjacent deeper areas, deep sea shrimp are also targeted. A large spill size of 1,000 m3 has been selected, assuming a collision of vessels offshore. While a residual fuel spill would be expected to reduce the landings primarily due to expected fishing restrictions or voluntary absence to save gear and catch from being soiled by surface oil, the impact is assessed to be primarily on subsistence hunting and fishing and a significant reduction in a local population of king eiders resting on the sea surface. Beaching of the oil is most likely in October/November, with the models predicting mainly north/south trajectories for the rest of the year. This may lead to elevated concentrations of oil in the shallow kelp forest of the less exposed part of the coast, impacting capelin and lumbsuckers. A large fuel spill would not be expected to have an effect on the water column if it were residual oil, and neither would a distillate spill of the same size. Effects would be expected to be transient since a 6,000-tonne subsurface blowout scenario would produce concentrations of only >10 ppb oil during the first week in the top 15 m of water. A distillate spill would also impact the king eiders if the timing and spatial conditions were unfavourable.
The spill scenario selected for Ittoqqortoormiit at the mouth of Scoresby Sound is the cruise ship also used in the Disko Bay assessment of 280 m3 spilled during the summer. In comparison, the spill used in the Danish contingency model is 104 tonnes of residual fuel. In the relatively limited area of the sound, a large part (67%) of a residual oil spill would be expected to reach and smother the shore (or ice edge). An oil spill would heavily impact the relatively small tourist industry associated with the Northeast Greenland National Park and the Scoresby Sound fjord system. A large proportion of the approximately 450 inhabitants who rely on hunting and fishing for subsistence would be expected to experience a 50% reduction in landings during the first year of a spill of residual oil. A spill would impact bird colonies and foraging seabirds: arctic terns, little auks, kittiwakes, ivory gulls, eiders and guillemots. In season, narwhals, humpbacks, seals and polar bears also may be affected. A similar spill with distillates would be expected to have an effect only during the initial spill phase, until surfaced oil is entrained in the water column. Due to the limited spill size compared with the 1,000 m3 at Store Hellefiskebanke, where no water column effects were expected, no long-term effects are expected on pelagic or planktonic organisms.
The impact on the communities and households, where fishing and hunting for subsistence is vital for the well- being of humans (and equally crucial to their sled dogs), is difficult to elucidate as the monetary consequences in the subsistence economy are dwarfed by other impacts and costs, but in particular in the scenarios from North Water Polynya/Baffin Bay and Ittoqqortoormiit/Scoresby Sound, this type of impact would be strong, since few alternative ways of upholding life are readily available in settlements.
The mandatory global cap on marine fuel sulphur content, to be implemented in 2020, may dramatically alter the availability of quality fuel, and in certain locations “off the beaten track” (e.g. remote locations in the Arctic), the fuel of choice may be unavailable or exorbitantly priced. Any distortion of traffic due to a lack of availability of compliant fuel under an HFO ban in Arctic is not assessed here.
It was established in 2016 that an Arctic HFO ban would have a socioeconomic impact in Greenland amounting to DKK 8.1 million in 2017 (approximately 1.2 million USD). These include all the effects on citizens, the business community, the environment, the climate and the government of Greenland, but the assessment did not attempt to include the economic effects associated with an oil spill. Compared with the previous assessment, the unit cost of SOX is reduced by half, which will reduce the economic benefit of lower SOX emissions. For PM, a major change has been made. The DCE (2019a) finds that most of the negative effect from PM emissions is regional, which means that emissions can have a negative impact thousands of kilometres from their source. In the previous assessment, PM was treated as having only a local effect, meaning only the near surroundings of the emission location were affected. In consequence, the change in the unit price for PM is large as it was close to zero in the previous assessment, and the updated unit cost for PM is DKK 934 per kg.
The impact of a ban on residual oil in the Arctic will lead to additional costs to Greenland businesses, its population and the government’s revenue stream. In socioeconomic terms, these are counteracted by environmental and climate benefits. Also, the impacts and costs associated with a possible residual spill are considerably higher than those expected from a spill of distillate oil. The negative economic impact on businesses and population will be experienced sooner than the benefits, and the impacts of oil spills are risk based. 2 Scope, Policy Objective and Policy Options
The Greenland Ministry of Nature and Environment decided in late 2015 to analyse the socio-economic implications for Greenland of the proposal raised in Arctic Council and IMO regarding a “Ban on the use and carriage of Heavy Fuel Oil as fuel by ships in the Arctic”. The scope was to perform a socio-economic impact assessment of the specific policy objective and the report by the consultancies Incentive and LITEHAUZ is available as a submission to the IMO (PPR6/INF.21).
The PPR6 Sub-Committee report (PPR6/20) acknowledged the work of the Greenland government (Naalakkersuisut) as submitted in PPR6/INF.21 by Denmark but recommended to the 74th meeting of its parent committee MEPC that Impact Assessments on the Ban of Heavy Fuel Oil followed the new methodology now outlined in PPR6/20/Add.1 (Annex16). PPR6 noted that “not all of the items and particular details mentioned in the methodology would be applicable to every Member State and organization that might conduct an impact assessment, the Sub-Committee invited submissions to PPR 7, especially those by Arctic States, containing impact assessments guided by, but not limited, to the above-mentioned methodology“. The new methodology was adopted by MEPC (MEPC74/18).
The Ministry of Environment and Food of Denmark in 2019 asked LITEHAUZ and Incentive to carry out an update on the analysis of the socio-economic implications of a ban on the use of HFO for marine propulsion in the Greenland region of the Arctic in response to the decision of MEPC74 to adopt the new methodology proposed by PPR6. It is noted that socio-economic assessments in Greenland and Denmark are guided by a methodology given by the Ministry of Finance in Denmark, the most recent version being from 2017 (Ministry of Finance 2017), which is incorporated in both the previous and current assessment of the proposed ban.
The current assessment brings the already identified impacts up to date regarding the foreseeable consequences of a change from the residual fuel oils to be banned to compliant distillate oils. This includes the increased costs to a number of activities relying on Heavy Fuel Oil in a baseline scenario, and it additionally identifies realistic examples regarding effects of oil spill in four scenarios due to the difference in properties of Heavy Fuel Oil and compliant fuel oils1. The additional requirements of the new Methodology are addressed as outlined with the described level of impacts maintained primarily at the national and societal level as prescribed by the socio-economic assessment guidance in Denmark. The previous assessment did not address the quantitative consequences of impacts on subsistence culture and lifestyle of indigenous peoples and local communities nor was health effects assessed associated with e.g. reduction in airborne pollutants or with healthcare costs incurred from switching food sources, and these issues remain outside the scope of the updated assessment.
It is relevant to emphasize that the socio-economic assessment focus on the costs to the community of Greenland, its businesses, people and environment, and costs incurred by other foreign parties and stakeholders as a consequence of a ban are not included. The compliance options included in the current assessment are purely based on a switch to distillate fuels and does not include other possible fuel choices, e.g. nuclear or LNG, and it does not address the possible prolonged return on investments in scrubbers (planned or installed) if such vessels must be operated using more expensive compliant fuel under a ban.
1 Heavy Fuel Oil is used here according to the definition of the ban as a collective term for oils non-compliant under the proposed ban, but it is also a commonly used term for the specifc quality of oil used in vessels. The banned fuels would include not only traditional HFO but also the qualities known as IFO and the more recent IMO 2020 compliant low sulphur hybrid fuel oils of <0.5% Sulphur. Since all of these potentially banned oils are based on residual oil and the compliant oils are distilled fractions, this document will also use the terms “residual” and “distillate” to denote the banned and compliant oils, respectively. Facts The existing ban in Antarctica and the heavy fuel oil proposed to be banned in the Arctic
MARPOL Annex I in regulation 43 has specific requirements for the use and transport of oil in Antarctica prohibiting three categories of heavy fuels south of latitude 60° S: 1. Crude oils that at 15°C have a higher specific gravity than 900 kg/m3 2. Oils, other than crude oils, which at 15°C have a higher specific gravity than 900 kg/m3 or a kinematic viscosity higher than 180 mm2/s at 50°C 3. Bitumen, tar and their emulsions.
The Polar Code’s voluntary scheme in Chapter II-B is proposed to be elevated to a ban in the Arctic “…of HFO for the use and carriage as fuel in ships…”, thus not including the oils carried as cargo in a ban.
Ordinary HFO in shipping falls under point 2 above, but mixtures (Intermediate Fuel Oil, IFO), which have a viscosity less than 180 mm2/s, will also be affected by a ban because of a conflict with the specific gravity criterion (greater than 900 kg/m3).
In the publication Greenland Energy Consumption 2017 from Statistics Greenland the category ‘Fuel oil’ includes the heavy oils IFO 30, IFO 180 and HFO 380, all of which fall under point 2 above. Marine Gasoline/diesel and other distillates, including Diesel Fuel Arctic, will not be subject to a ban.
The ban proposed by IMO includes the Heavy Fuel Oil definition and area demarcation as defined in the report from MEPC74 (MEPC74/18), i.e.:
The Heavy Fuel Oil definition is based on the MARPOL Annex I, Regulation 43, para 1.2, reworded as provided in PPR6/20 and adopted by MEPC (MEPC 74/18):
"Heavy fuel oil means fuel oils having a density at 15ºC higher than 900 kg/m3 or a kinematic viscosity at 50ºC higher than 180 mm2/s."
The area covered by the ban is defined as the application area of IMO’s Polar Code in the Arctic and in Greenland waters this is understood as its territorial waters, i.e. baseline to 3 nm, and the exclusive economic zone, i.e. from 3 nm and to 200 nm.
The baseline and implementation time for the assessment under the new methodology is not devised by IMO and a specific date is not specified by Danish or Greenland authorities. As the baseline the year 2020 is used when the mandatory global cap on marine fuel sulphur content is to be implemented, and data will be sourced from 2018-2019 or as available. The development of the ban was only given in the report of PPR 6 as “on an appropriate timescale”. Throughout the current assessment the implementation date should be taken as “soon after 2020” in order for the fundamental conditions ecologically and economically of the assessment not to have changed dramatically. However, in the submission to MEPC72 this date was suggested as “no later than the end of 2021” (MEPC 72/11/1). The baseline is therefore taken here as 2020 and the change scenario is “soon, but after implementation of the IMO 2020 low sulphur regime”, e.g. 2021-2022. 2.1 Policy Options
The scope as provided by first Naalakkersuisut and in this updated version does not point to specific policy options to be assessed and consequently the comparison is simply between the baseline without a ban and the situation where the proposed ban is in place, i.e.:
Implementation of a ban on the heavy fuel oil use and carriage as fuel by ships in Arctic waters.
It should be kept in mind that the mandatory global cap on marine fuel sulphur content may dramatically alter the availability of fuel qualities. In locations “off the beaten track”, e.g. remote locations in the Arctic, the fuel of choice may not be available or exorbitantly priced. In a transgression period while the global fuel markets adjust to the new low sulphur regime it is possible to grant dispensations or exemptions in order for transport costs to small remote settlements not to skyrocket or transport to be discontinued during a few precious summer months. The new methodology does address the issue of other factors that could either ameliorate adverse impacts of a ban or accommodate specific situations. These may be construed as policy options albeit temporary and may include but is not limited to:
1. delay implementation for ships engaged exclusively in trade between ports or terminals of a State;
2. delay implementation for ships routinely making voyages between specified ports or locations; and
3. adjust HFO phase-out schedules to accommodate other factors, e.g. local availability of fuel compliant with the global sulphur cap and availability of ships that use fuels other than HFO.
Some of the expected impacts to the Greenland society may indeed be brought about by costs added to the balance sheet in companies providing transport services to Greenland even if the vessels are foreign flagged – this is analysed in a special case.
In 2020, the global sulphur requirements for ships will be stricter. At the MEPC meeting in London in October 2016, the IMO decided to maintain that ships’ fuel in 2020 must contain a maximum of 0.5% sulphur. For the existing fleet of ships shipowners must in 2020 by and large choose between a fuel inherently low sulphur (e.g. Marine Diesel Oil or Liquified Natural Gas), the recently marketed low sulphur hybrid residual oil products, or combining HFO with an exhaust gas cleaning system (scrubber). However, if the Arctic countries adopts a ban on the use of HFO as defined in MEPC 74/18 it is not currently to be permitted to use HFO regardless of an investment in a scrubber for exhaust gas cleaning.
There is a current debate in IMO regarding “the matter of the carriage ban on non-compliant fuel oil being not applicable when an equivalent means approved under regulation 4.1 of MARPOL Annex VI is used on board a ship”, e.g. the use of a scrubber operating on HFO as mentioned above. The issue being that if a ban on the use of HFO for propulsion in the Arctic is introduced the proportion of the world fleet that have chosen to operate on HFO with scrubbers installed (“equivalent means”) cannot trade in the Arctic as they will have HFO in the main fuel tanks. The consequences of lack of availability of compliant fuel under an HFO ban in Arctic as identified by a Fuel Oil Non-Availability report (FONAR) described for the IMO 2020 low sulphur regime also remains to be clarified.
2.2 Reading directions
For the benefit of the reader we have slightly amended the headlines of the methodology. Hence, the three first sections on Scope, Policy objective, Policy options, are combined into the current chapter (chapter 2). The fourth section of the methodology, “Analysis of Impact”, is rather comprehensive and detailed, and here the individual subsections have been elevated to chapters to avoid excessive numbering of headings. Therefore, the following four chapters form a combined “Analysis of Impact” section. The assessment chapters are introduced in chapter 3 and the report also briefly addresses cultural and health impacts in the “Introduction to Analysis of Impacts” in chapter 3. Chapter 4 describes the baseline in Greenland and chapter 5 renders an assessment of the updated costs and benefits of a ban to businesses, people and environment based in the foreseeable effects of a fuel switch. The addition to the current assessment compared to the previous is found in chapter 6, where the impacts of four oil spill scenarios are provided. The appendices contain a description of the socio-economic assessment methodology and a section on the sensitivity maps of Greenland regarding oil spill.
3 Introduction to analysis of impacts
Climate and environment
The current study has analysed the implications of a possible ban by calculating the current consumption of HFO and estimated the consumption of alternative fuels, which would have to replace it. Based on the cost difference in the fuels an economic model to map is used to assign extra costs to end payers. The climate gains and environmental gains were calculated of a ban on HFO. In the analysis, the consumption of HFO for propulsion in Greenland was calculated on the basis of statements of imports of HFO for use in ships and information on volume of HFO onboard vessels navigating Greenland destinations.
The data used in this report were obtained through public sources available as statistics and reports, as well as through direct contact and interviews with the players involved. Most data and information are from 2017- 2018.
Effects on biological resources and subsistence hunting and fishing
In addition to impacts climate issues the effects on the biological resources is also assessed. This is obviously not just limited to those exploited be it in traditional hunting or industrialized scale, but also include the effects on ecosystem and biodiversity. While information on the monetary values of commercial resources is available and used, it is not in this report attempted to develop costing of effects on ecosystem and biodiversity. The relative importance of the impacted species is exemplified by other than monetary yardsticks through e.g. the share of the global or local population of the species, its importance for subsistence hunting/fishing or similar measures.
Throughout this assessment the cornerstone impact information is taken from the sensitivity atlas and other assessments available for parts of the western Greenland coast (e.g. Boertmann & Mosbech (2017), Boertmann et al. (2013), Christensen et al. (2015), Christensen et al. (2012), Clausen et al. (2012), Clausen et al. (2016)). Since no oil and gas exploration has triggered the development of similar detailed information it is not yet available for the Scoresby Sound on the eastern coast. The sensitivity information primarily concerns environmental sensitivity, but areas important for human use are included and is addressed here although no monetarization is possible.
The baseline scenario year for the analysis is 2020 when the IMO low sulphur requirements have entered into force internationally. The HFO ban is considered as a part of the MARPOL Annex I on carriage of oil and the area and relevant definitions involved are those of the Polar Code. Particular issues related to the assessment
There are some caveats to these analyses due to the specific situation in Greenland:
HFO in baseline scenario: Greenland is exempt from the Danish adoption of the requirements of MARPOL Annex VI. Vessels registered in Greenland may therefore continue to operate within the Greenland EEZ on HFO after the entry-into-force of the IMO 0.5% sulphur requirements in 2020. Costs associated with an HFO ban are therefore still relevant for these vessels and associated infrastructure while only relevant for other vessels/activities if the acceptable solution to the 0.5% sulphur requirement violates the ban on HFO for propulsion, e.g. HFO scrubbers or low sulphur hybrid residual oil.
Oil spill contingency: The governments of Denmark and Greenland have agreed (in the ”Principaftale”) that Denmark is responsible for the oil spill response and contingency measures in the area of the EEZ outside the territorial waters (3 nm) while Greenland holds responsibility of the territorial waters and shores. Along these lines the costs for the response and for a subsequent clean-up is therefore split between Greenland and Denmark. This is particularly important if an oil spill reaches the shoreline, which is generally more likely for a spill of residual oil than for distillates.
Debunkering: Limited experience and specific information regarding unit cost of HFO debunkering is available. Through careful voyage planning vessels will in general aim to reduce the HFO volume to a safe minimum and switch to distillates en route or debunker in the last port of call and continue on compliant fuel. When debunkering is performed the bunker company will offload the HFO bunker and the value of the HFO will be part of the balance regarding the cost of the debunkering service. The service offering regarding a possible debunkering at sea when entering the Arctic or the inverse situation of bunkering of IMO 2020 compliant fuel upon exiting the Arctic is not ready from bunker companies.
Cultural issues and human health
The indigenous peoples of Greenland are Inuit and make up a majority of the Greenlandic population. The Inuit culture is hinged on a strong bond with the seasonal change and availability of natural/biological resources and many settlements are Renewable Resource Communities (RRCs) defined as “a population of individuals who live within a bounded area and whose primary cultural, social and economic existences are based on the harvest and use of renewable natural resources” (Deere-Jones 2016). When the accessibility to clean water, ice and coast is reduced or removed, e.g. by an oil spill, and fishing and hunting is unsuccessful and suddenly provide limited food for the household, this not only a health issue but also has implications on the hunter’s cultural pride, the structure of families/households and the societal hierarchy. Few data are found and Deere-Jones (2016) reports an “absence of data on the “non-economic” human effects of spills (health impacts, community impacts, and societal problems such as social disruption and psychological stress)”.
Such changes will most likely directly affect the health and nutritional status of the local population, effects which, however, are not included in the scope of the current assessment. It should be recognised also that while the local population may have an unexpected income from taking part in the clean-up activities, negative health effects have been reported from both those cleaning-up and the residents of an area exposed to an oil spill (Deere-Jones 2016). Benefits to the human health is also expected through the reduction of emission of airborne particulate matter (PM) when distillate fuels are used rather than residuals. This is not directly addressed on the local community in Greenland, but is on a regional scale reflected in the unit price of PM. 4 Determination of the study area
4.1 Geographical demarcation
In this study the Arctic area is understood as defined by IMO’s Polar Code and Greenland waters is understood as territorial waters and the exclusive economic zone, i.e. out to 200 nautical miles from land, see Figure 1. Greenland is located between the Arctic Ocean and the North Atlantic Ocean and is the world’s largest island at 2,175,600 km2 of which only 341,700 km2 are ice-free areas. The predominantly rocky coastline stretches over 44,087 km and is for most of the part barren with fjords. Off the coast are countless rocky islands that extend from central to southern Greenland. Inland ice cover most of the Greenland landmass feeding glaciers and the rivers around the coastline with meltwater.
Figure 1 Illustration of Arctic waters defined under the Polar Code
Source: PAME (2019).
4.2 Economy and Industry in Greenland
Greenland is part of Europe in terms of geopolitics but is geographically located on the North American continent. The population is around 56,000 and the population density is the lowest in the world. 90% of Greenland’s population lives in 16 towns, and the remaining population lives in settlements. In the past, there were more than 60 settlements, some of which are no longer habitable today. Progressive urbanization has been observed over the past 50 years, especially in Nuuk. The Greenland Inuit comprise the vast majority of the population (approx. 90 % Inuit). The majority of Greenlandic Inuit refer to themselves as Kalaallit. Ethnographically, Greenlandic Inuit consist of three major groups: the Kalaallit of West Greenland, who speak Kalaallisut; the Tunumiit of Tunu (East Greenland), who speak Tunumiit oraasiat (East Greenlandic) and the Inughuit / Avanersuarmiut of the north (IWGIA 2019). The remaining 10% are mainly Europeans, predominantly Danes.
Greenland’s business sector is dominated by large publicly owned companies, such as Royal Greenland A/S (fishing industry), KNI A/S (retail and oil sales) and Royal Arctic Line A/S (shipping). Only a few large industries dominate the economic activities in Greenland. One of them is the fisheries sector, which accounts for one third of the revenue. Wholesale and retail is another big industry. The revenue from this industry poses just about one third of Greenland’s total company turnover.
The labour market is characterised by a large public sector, which accounts for around 40% of all jobs. Looking at the women only, more than 60% work in the public sector. The men mostly work in public administration and service, fishing, hunting and agriculture (Statistics Greenland 2019).
4.3 Greenland’s nature and environment
Greenland is located in the northern polar region and most of the country consists of pristine tundra with 81 percent ice coverage. The winters are cold with average winter temperatures ranging from -seven °C in the south to approximately -34 °C in the north. Temperatures below -70 °C can be measured at the coldest point, the Inland Ice. Temperatures in the summer months show local variation as well with average temperatures between seven and four °C in the south and north, respectively. In summer, the day temperatures can exceed 20 °C (Westergaard-Nielsen et al. 2018, Statistics Greenland 2019, DMI 2016).
Figure 2 displays the surface currents around Greenland which is an important component of the circulatory and water mass balance of the North Atlantic and the Arctic regions. A detailed description of the area's oceanography can be found in Clausen et al. (2012), Frederiksen et al. (2008), and Boertmann et al. (2013).
Surface currents in the northern North Atlantic. Blue arrows = cold water current. Red arrows = warm Figure 2 water current.
Source: Clausen et al. 2012 p 14-9
Sea ice cover grows throughout the winter month and may often extend beyond 70°N latitude. After the peak in March the melting increases as the sun gets stronger. The extent of the ice cover is typically around one third of its winter maximum in September. A detailed description of the influence of the Ice cover on the ecosystem can be found among others in Frederiksen et al. (2008), Clausen et al. (2012) and Cullather et al. (2016).
Greenland’s ecosystems are unique and have internationally significant populations of animals such as narwhals and polar bears. The maps in Figure 3 shows critical areas for marine mammals and seabirds and displays the most important areas according to the criteria by the International Maritime Organization (IMO) to identify the Particularly Sensitive Sea Areas (PSSAs). Detailed information on the identification of PSSAs can be found in IMOs resolution A.982(24) (IMO 2006), in Christensen et al. (2012) and in the report on administrative measures regarding PSSA in Greenland (Litehauz 2012).
A) Important areas for marine mammals. B) Important areas for seabirds. C) Proposed designation of Figure 3 sensitive areas. Within the overall areas, the particularly important 'core areas' are marked in red. The areas are prioritized in four categories based on the extent to which they meet the IMO PSSA criteria (cf. the colour of the area numbers)
Source: Christensen et al. 2012
The four unique habitats, namely North Water Polynya/Baffin Bay, Disko Bay/Ilulissat, Store Hellefiskebanke and Scoresby Sound are potential sites of outstanding universal value in the Arctic Ocean (Boertmann et al. 2017, Christensen et al. 2012, Speer et al. 2017). Each of these ecoregions are unique and are of critical importance for seabirds and marine mammals. A brief description of the four regions can be found in the following section with references to further reading.
NORTH WATER POLYNYA / BAFFIN BAY The northern Baffin Bay region is considered as one of the most productive marine environments in the Arctic Ocean, maybe even in the entire Northern Hemisphere. The North Water Polynya and is located between Greenland and Canada and it is the largest polynya in the world at 80,000 km2. Besides a high concentration of polar bears, it hosts the largest single-species aggregation of seabirds (little auks). Furthermore, the ecoregion is of great significance for most of the global population of narwhal, beluga and bowhead whale. A more detailed description of the region can be found in Boertmann and Mosbech (2017), Speer et al. (2017), Clausen et al. (2016).
The most important economic parameter in the main inhabited areas is subsistence hunting and fishing that occurs (WWF 2015).
DISKO BAY AND HELLEFISKEBANKE Disko Bay and Store Hellefiskebanke are located off the Greenland west coast. The latter is not only a key winter habitat for the West Greenland/Baffin Bay walrus but also for hundreds of thousands of king eiders. One third of the Store Hellefiskebanke has depths below 50 m and this is of great importance for the area's biology. The complex oceanographic and bathymetric conditions in that region lead to an increased primary production, providing a crucial habitat for foraging and breeding of many species, including fish, birds, seals and whales (Clausen et al. 2012).
For the most part, there is a high-relief rocky shoreline exposed to sea conditions and prevailing weather including ice action. From January to May sea ice is typical for the region while inside the fjords solid ice may already form from October with an ice cover peak in March. Disko Bay and Uummannaq Fjord have large and very active glaciers which leads to a high density of icebergs and growlers in the entire region. An in-depth description of the region can be found in Clausen et al. (2012), Speer et al. (2017), and Wegeberg et al. (2016).
The area around Disko Bay is Greenland's highest rated tourism destination in terms of cruise tourism and is one of Greenland's most developed tourism markets. According to Statistics Greenland (2019) the majority of the tourism operators choose to stop by Disko Bay, and in addition the most overnight stays at hotels in Greenland are recorded in the region.
ITTOQQORTOORMIIT/SCORESBY SOUND As described in detail by Christensen et al. (2012) and Speer et al. (2017) the world largest fjord system is located in the Scoresby Sound region. The authors point out that especially in spring and early summer, when the ice still blocks the coasts further north and south, it is a feeding ground for seabirds. In addition, it is an essential habitat for numerous IUCN Red-Listed species such as Spitsbergen stock of bowhead whale, narwhal, polar bear, Atlantic walrus and ivory gull. It also holds the second largest breeding population of little auks.
The town of Ittoqqortoormiit or Scoresby Sound is located at the mouth of the Scoresby Sound and the inhabitants are mainly subsistence hunters and fishermen according to Rasmussen (2017). The primary catch in fishing is cod and other species of the Gadida family.
4.4 Ship traffic in Greenland
All towns and settlements in Greenland are located on the coast. The capital Nuuk, with approx. 18,000 inhabitants is located in the south west coast, where also the majority of the population lives. All in all, 60 percent of Greenland’s population live in the five largest towns namely Nuuk, Sisimiut, Ilulissat, Aasiaat and Qaqortoq. Towns are not connected by roads, and all travel is by plane, helicopter or ship. In total Greenland has 383 km of road, 13 airports and 43 helipads, 17 ports in towns and port facilities in 58 settlements.
PASSENGER AND CRUISE SHIPS Passenger routes on the west coast are open for travel most of the year, while sea routes to the north-eastern regions are not navigated in winter due to Arctic sea ice. Even though there are no international passenger ship routes Greenland is a popular destination for cruise ships from USA, Canada and Europe. According to Statistics Greenland (2019a), 16 cruises of 500 to 1,200 passenger capacity and 14 cruises of more than 1,200 passenger capacity arrived in ports in Greenland in 2018. Thus, the number of passengers compared to 2017 increased by about 20%. Cruise season generally runs from spring to fall with a clear peak in the summer season as shown in Table 4.
Table 4 Number of cruise passengers by season
Season 2016 2017
Winter - -
Spring 562 185
Summer 17,089 17,506
Autumn 6,593 9,734
Source: Statistics Greenland 2019
GREENLAND FISHING VESSELS AND BOATS The fishing fleet consists of about 850 vessels of various sizes and of these about 300 vessels are longer than 10 meters, and there is an estimated figure of 5,000 smaller dinghies. There is uncertainty regarding the size of the fishing fleet because not all vessels which are used for fishing are registered as fishing vessels. The larger vessels are more likely to registered and engaged in fishing as a commercial activity, while smaller vessels may be partially used for personal fishing purposes, and partially used for personal transportation. AIS data for fishing vessels obtained by DNV GL in 2013 included around 150 fishing vessels mostly large vessels and are likely to cover all vessels above 20 GT. The AIS data gathered by ASTD (2019) show around 100 fishing vessels per year since 2015. Almost one third of the vessels are in the category <1,000 GT while up to two thirds are categorised 1,000 – 4,999 GT. Only a handful fishing vessels are in the range of 5,000 – 9,999 GT and no larger vessel was registered.
The ocean-going fleet includes a number of large vessels which fish outside the limit of three nautical miles. Most large vessels have the capacity to process the catch on board. The seagoing fleet is concentrated in central Greenland and the coastal fleet, which fishes within the limit of three nautical miles of the coast, comprise small vessels under 10 GRT and are found mainly in north-western Greenland (the above from DNV GL 2015). SHIP TRAFFIC PATTERN According to ASTD (2019) a total of 283 ships sailed in Greenland’s Exclusive Economic Zone (EEZ) in 2018. Over one third of these vessels are fishing vessels. Figure 4 displays in a bar chart the number of vessels divided into ship types.
Figure 4 Outline of Greenland’s EEZ and bar chart displaying the ship traffic sorted by ship type in 2018
Source: ASTD (2019)
The ship traffic pattern in Greenland’s EEZ for the year 2018 is displayed in Figure 5. Each ship type has its colour and the more intense the lines, the higher the traffic. The densest traffic can be seen along the southwest coast of Greenland. Marine traffic density map from 2018 illustrated the ship traffic in Greenland waters. The colour code on Figure 5 the right-hand side displays ship types.
Source: ASTD (2019)
The ship traffic in the Baffin Bay region can be seen in Figure 6. The traffic is less intense due to the prevailing ice conditions that hinder navigation in winter.
The regions Disko Bay/Ilulissat (Figure 6 B) and Store Hellefiskebanke (Figure 6 C) show the most concentrated pattern in ship traffic. These areas are used extensively for commercial fishing, tourism passenger traffic and natural resource exploration and exploitation, which is reflected in shipping densities. Marine traffic density map showing the ship traffic in A) North Water Polynya/Baffin Bay, B) Disko Figure 6 Bay/Ilulissat, C) Store Hellefiskebanke, D) Scoresby Sound in 2018. The colour code for ship types is the same as in Figure 5.
A) Baffin B) Disko Bay Bay/Polynya
C) Store D) Scoresby Sound Hellefistebanke
Source: ASTD (2019)
As pointed out in the literature (Christensen et al. 2015, Rigét et al. 2019, AMAP 2017) the reduction of area with permanent ice coverage and the prolonged periods of ice-free sea in the summer month will give new opportunities for ship traffic, fishing, tourism and exploitation of mineral resources in Greenland. The period of navigation will be extended in the areas where the ports are currently closed by winter ice. Especially the ship traffic in West Greenland is expected to increase partly as a result of an increased number of ships in transit, i.e. ships on their way to or from the Northwest Passage and partly as a result of increased local traffic, i.e. ships operating in West Greenland.
5 Assessing costs to Greenland indigenous peoples and local communities and industries
5.1 Greenland owned ships that currently operate on HFO
Forty-four ships were identified with an IMO number with a Greenland home port via Marine Traffic and Danish Ship Register (DMA 2019a). The majority are fishing vessels, and it was confirmed through statements from Danish Shipping Register and contact to the industry that a small number of ships currently operate on HFO:
· Polar Qaasiut, ex-name: Markus (9247091)
· Regina C (9827827)
· Svend C (9752589).
In 2017 it was reported that there were two new-builds on order to replace Markus and Regina C. Both newbuilds have been in operation since 2018 and 2019, respectively. The old Regina C (9227534) vessel was sold and is sailing under Estonian flag since 2018. Former Markus (9247091) is still sailing under Greenlandic flag and has the name Polar Qaasiut. The replacement for Markus is the new-build trawler Polar Nattoralik (IMO 9826031) which is designed to use HFO (180 cSt) with the possibility to shift over to MGO/MDO. The vessel is currently not using HFO and what happens after January 2020 depends on what the bunker oil supplier can offer. A possible HFO consumption of this ship was not considered.
The three vessels i.e. Svend C, Regina C and Polar Qaasiut are built and designed to operate on HFO but can freely switch to MGO/MDO. None of the ships have installed a scrubber or have planned to invest in one. Table 5 displays the annual HFO consumption for the trawlers.
Table 5 Greenland vessels on HFO
Ship type Total annual HFO [m3] Operate on
Trawler: 17,000 IFO 180 cSt Regina C, Svend C, Polar Qaasiut
Source: Polaroil 2019, Polar Seafood 2019, Sikuaq Trawl A/S 2019, Niisa Trawl 2019
The one-time costs, such as installation, cleaning or modifying equipment and costs of out of service days related to modifications including additional crew training incurred by owners or operators as a result of an HFO ban are not expected for the trawlers.
5.2 Foreign-owned ships serving Greenland that currently operate on HFO
Foreign flagged ships include all non-Greenland ships, i.e. also ships registered in Danish Ship Register/Danish International Ship Register with a home port in Denmark. It is first and foremost ships from Royal Arctic Line (RAL) and one chartered tanker. Transatlantic ships in RAL’s fleet operate on HFO, and the other RAL ships operate on MGO. The tanker operates on HFO. Foreign flagged ships, including cruise ships, also consume fuel while navigating in Greenland waters and call on an irregular basis to Greenland. These ships may operate on HFO purchased on the world market, and it has not been possible to calculate consumption in 2020.
However, more and more cruise liners are taking a proactive approach to improve their environmental image. The cruise ship association “Association of Arctic Expedition Cruise Operators (AECO)” stands for responsible, environmentally friendly and safe tourism in the Arctic and one of their efforts is to abandon the use of HFO in Arctic waters. According to AECO (2019) all members of AECO operating in Greenland refrain from using HFO when sailing in Greenland waters. A complete list with AECO members can be accessed at the AECO homepage (https://www.aeco.no/members/). Most of the cruise ship operators sailing to Greenland are already members of AECO as listed in Table 6. Eight cruise companies have been identified that offer trips to Greenland without being members of AECO. It was not possible to verify in the course of this investigation whether these ships are operating on residual fuel or an alternative fuel.
Table 6 Cruise ship companies that have committed themselves to operate HFO-free in the Arctic/Greenland
Adventure Canada Natural World Safaris Albatros Expeditions Noble Caledonia Algol Oceans Oceanwide Expeditions Aurora Expeditions One Ocean Expeditions EYOS Expeditions Ponant G-Adventures Poseidon Expeditions Grands Espaces Quark Expeditions Hanse Explorer Scenic Cruises Hapag-Lloyd Kreuzfahrten GmbH Seabourn Hurtigruten Silversea Lindblad Expeditions Zegrahm Expeditions Mystic Cruises
Source: Based on information from AECO (AECO 2019) and Micallef 2018
Approximately, 40 cruise ship mainly from Iceland, Canada, Norway, England, Denmark and USA are visiting Greenland waters every year (DMA 2019). To the extent that these vessels occasionally bunker in Greenland, they are included in the analysis and Polaroil’s figures. Deliveries of HFO in Greenland for such ships is calculated by Polaroil (2019) and considered as an expression of consumption which can be seen in Table 7 labelled as “Sales to foreign cruise ships”.
Table 7 Foreign flagged vessels on HFO
Type of ship Total annual HFO 380 cSt Operate on consumption [m3]
Container ships (RAL)
Irena Arctica, Naja Arctica, 10,204 HFO Nuka Arctica, Mary Arctica, Malik Arctica
Tanker IFO 180 cSt (HFO +7-10% MGO, i alt 200 Oratank 220 m3)
Sales to foreign cruise ships, 900 HFO merchant ships and trawlers
All foreign flagged vessels on 11,304 HFO
Source: Based on information from Polaroil (2019) and RAL (2019).
Bunker sold to foreign flagged ships chartered to Greenland companies will be included in the group ‘sales to foreign cruise ships, merchant ships and trawlers’, with a total annual consumption of HFO at 900 tonnes if they bunker in Greenland. These vessels will, as all ships from countries that are parties to MARPOL Annex VI be subject to the global sulphur regulation in 2020 also when navigating in the territorial sea (from baseline and 3 nautical miles out) and the EEZ (from 3 nautical miles out to 200 nautical miles).
5.3 Extra costs for ship operators using alternatives to HFO
The analysis of the implications of a ban was based on the calculation of the current consumption of HFO, and the extent of alternative fuels that would have to replace it. The extra costs were calculated based on the quantity of fuel and fuel prices.
Table 8 shows the estimated current consumption of residual fuel and the corresponding consumption of distilled fuel.
Table 8 Fuel consumption
Corresponding consumption in HFO, m3 HFO, tonne MDO/MGO, tonne Greenlandic 17,000 16,660 15,786 flagged vessels Foreign flagged 11,304 11,078 10,497 vessels Greenland EEZ 28,304 27,738 26,283
Source: Polaroil 2019, Polar Seafood 2019, RAL 2019
Prices of fuel used for the analysis are based on data from Polaroil (2019), which sets the prices of fuel in Greenland. They are higher and vary less than world market prices, due primarily to fixed transportation costs, contractual relationship, etc.
It is the price difference between HFO and alternative fuels that are driving the extra costs of an HFO ban. Fuel prices are subject to uncertainty, as there are large fluctuations in prices on the international markets. For example, the price of HFO in the world market varied between USD 386/tonne to USD 486.5/tonne during 2019.
The residual fuel price of DKK 4.57/litre and distilled fuel prices of DKK 5.35/litre were used for the analysis. The price of both the residual fuel and the distilled fuel is based on the price of HFO/MGO from 1 May 2019 (Uldum 2019, Polaroil 2019). Fuel prices are subject to considerable uncertainty. In section 5.5.1, a sensitivity analysis was carried out to show the importance of other fuel prices.
Facts Fuel prices and fuel consumption of the current assessment compared to the previous assessment In 2016 the fuel consumption for the Greenlandic vessel was estimated at 11.200 m3 and increased with 5,800 m3 to 17,000 m3 in 2019 due to improved data from industry.
The consumption of the foreign flagged vessels decreased with 596 m3 from 11,900 m3 in 2016 to 11,304 m3 in 2019.
HFO in the world market had increased from USD 170/tonne to USD 350/tonne during 2016. The prices in 2019 have been as high as 486.5 USD / tonne.
The residual fuel price used in the previous assessment was DKK 2.8/litre and DKK 3.27/litre for distilled fuel. This corresponds to an increase in residual fuel prices by DKK 1.77/litre and the price of distilled fuel by DKK 2.08/litre in 2019. More importantly, the price gap between residual fuel and distilled fuel has increased from DKK 0.57/litre in 2016 to DKK 0.78/litre in 2019, a 37% increase.
In addition to the direct extra costs of fuel, there may be other minor costs of switching fuel. There are some technical and engine-specific conditions that must be clarified and resolved before a fuel switch, but most ships are designed to use diesel and distillate fuel, and there should be no technical barriers to the use of MDO as a propellant (ABS 2010). As the vessels involved are already prepared to fuel switches such costs are not included.
5.4 Reduction in atmospheric emissions from ships
The basis of the calculation of the reduction in emissions from ships is the amount of HFO used in the territorial sea, in the EEZ and throughout the Arctic, see section 5.1 and 5.2 and the extent of alternative fuels that would have to replace it.
In the assessment of the environmental and climate emissions, it is necessary to carry out a series of
calculations and conversions to deduce the carbon dioxide (CO2), sulphur dioxide (SO2) atmospheric particulate matter (PM), and soot (black carbon, BC). As with the previous assessment, the same conversion factors were used as in Statistics Greenland, and/or used by IMO’s international expert team in their acclaimed report on greenhouse gases, Third IMO Greenhouse Gas Study (IMO 2015).
In the presented scenarios it was taken into account that the sulphur content varies in HFO, depending on whether it comes from Greenland's fuel consumption or from Foreign flagged vessels. The sulphur content in HFO from vessels registered in Greenland is assumed 1.7% (Polaroil, 2019) while the sulphur content of HFO consumed by foreign vessels is 0.5%. A shift from high-sulphur fuel to distillates results in a slight decrease in CO2 emissions because of the slightly different emission factors, while for SOX and PM emissions, there is a decline of up to 90% and 71, respectively depending on the sulphur content in the fuel.
In the previous assessment the emission of soot (black carbon, BC) is based on an emission factor (EF) of 0.18 g/kg fuel for both HFO and distillates from DNV (2013). The emission of BC in the current assessment is based on an emission factor from the ICCT study (2017a) which was also used in PAME’s investigation (DNV GL 2019) about fuel alternatives for the Arctic fleet. The BC emission rates vary from 0.09 g/kg fuel to 0.84 g/kg fuel for the DMA fuel and from 0.05 g/kg fuel to 1.04 g/kg fuel for HFO depending on lead points and sulphur content (ICCT, 2017a). A calculation on the basis of using an EF for HFO of 1.04 g/kg fuel and 0.84 g/kg fuel for the DMA will provide an approximate reduction of 23% of BC emissions.
A broad range of emission factors for BC are presented in the literature (Mamoudou et al. 2018, ICCT 2017a, Lack 2016, ICCT 2015, IMO 2012). BC EF’s depending on some non-exhaustive factors such as engine load, fuel type, ship type etc. In the IMO (2012) document it was concluded the EF’s for either HFO or MDO are higher in Port than at Sea. Lack (2016) notes in his report that the BC emissions from HFO vary due to many factors, including crude oil grade, fuel sulphur content, ash content, hydrocarbon complexity and heavy metal content. Several studies suggest an increase in BC emissions at low engine loads, but Lack (2016) believes that a switch of fuel to distillate fuels with a low sulphur content will, on average over the year, result in reduced BC emissions of 50%. PAME (2019) supports this view and concludes a realistic reduction in emission of BC between 35% and 49% when changing from the use of residual fuel to marine oil (MDO/MGO). The final number of BC emission depends on the many factors and is the best estimate under the given circumstances.
Emissions of other greenhouse gases of this type (short-lived climate forcers, SLCF), for example, methane and nitrous oxide, has not changed because of a change of fuel. The emission factors are the same for the various grades of fuel and therefore, no data is given for these emissions.
Facts Arctic According to DNV GL (2019) about 1,870 ships have been active in the IMO Arctic waters in 2017 of which around 58% have been HFO-fuelled, followed by distillate fuel with 36% and roughly 6% are nuclear powered. Only a very small number, less than 0.1%, of ships have been LNG-fuelled. Total fuel consumption inside the IMO Arctic Polar Code area increased by 45% from 2014 to 2017. In 2017, these ships consumed in the IMO Polar Code area a total of around 581,100 tonnes of bunker fuel, of which around 337,000 tonnes were residual fuel.
ENVIRONMENTAL AND CLIMATE EFFECTS IN GREENLAND A ban on HFO will reduce atmospheric emissions from shipping as explained above. The term “climate gain” is
used for the reduction in CO2 emissions, and the term “environmental gain” to include reductions in other
atmospheric emissions (SOX, PM, BC).
The total reduction in CO2 emissions from ships in territorial waters and the EEZ is estimated at 2,112 tonnes in
2020 due to an HFO ban. CO2 reduction in the entire Arctic in 2020 amounts to 25,664 tonnes.
Similarly, the reduction in emissions of SOX, PM and BC to the atmosphere is estimated and presented in tonne and percent in Table 9. Table 9 Reduction of atmospheric emissions from shipping in 2020 as a result of an HFO ban in Greenland
Reduction, tonne Reduction, %
Climate gain CO2 2,112 2
SOX 593 90
Environmental gain PM 66 71
BC 6.7-14.1 23-49
5.5 Socio-economic impact assessment of an HFO ban on society
As part of this report, a socio-economic impact assessment of an HFO ban has been carried out. The analysis includes the effects for the whole society, including citizens, the business community, the environment, the climate and the government of Greenland.
The implications of a ban have been analysed by calculating the current consumption of HFO and the amount of alternative fuels that would have to replace it. In section 5.3 and 5.5.1, the cost increase in fuel expenses is assessed. Based on the cost difference in the fuels, the economic input-output model is used to map who the end-payers of the extra costs will be. The climate and environmental gains of banning HFO are also calculated.
Climate gains include the reduction in CO2 emissions, while the environmental gains include the reduction in atmospheric emissions.
Figure 7 shows that the total socio-economic cost amounts to DKK 36.3 million in 2020. This includes a cost of DKK 21.3 million for the business community, a cost of DKK 4.9 million to the citizens of Greenland due to higher prices and a cost of DKK 10.1 million to Naalakkersuisut due to lower tax and duty revenue and a negative effect on labour supply. The benefits amount to DKK 62.4 million which includes a climate benefit of
DKK 0.33 million due to lower CO2 emissions and an environmental benefit of DKK 62.1 million. Together, the effects listed in Figure 7 affect the socio-economic effects of a possible ban for Greenland. This is included in the analysis.
Socio-economic impact assessment of an HFO ban in 2020, million DKK Figure 7 62.4
26.1
-4.9 -10.1 -21.3 Business economic Effects for Effects for Effects for Socio economic effects citizens Naalakkersuisut enviroment and net-benefit climate
Please note that the calculation of the socio-economic implications is based solely on the costs and gains in 2020. The same approach was used in the previous assessment (Incentive/LITEHAUZ 2018).
Compared to the previous assessment the environment and climate benefits are significantly higher. This is reflected by the new and better unit cost estimates. The major change to the unit costs of PM is the main reason for the increase, see section 5.5.5 Environmental and climate benefits reduced by 26% compared to the last assessment. The emission of PM is reduced by 54%. These reductions will reduce the environment and climate benefits.
In the analysis, the changes in the costs of an oil spill in case of an HFO ban is not included. The reason is that this cost assessment is much more uncertain. It is expected that the costs of an oil spill in case of an HFO ban will fall which will increase the already positive socio-economic net benefit of DKK 26.1 million even further. See section 6.1 for further information on oil spill.
The economic impact assessment is an update of the report “Socio-economic, environmental and climate effects of a possible ban on the use of HFO” (Incentive/LITEHAUZ 2018). The following sections describing the components in the socio-economic impact assessment are closely linked to the Incentive/LITEHAUZ (2018) report.
The economic model used is identical to the model used in the report “Socio-economic, environmental and climate effects of a possible ban on the use of HFO” (Incentive/LITEHAUZ 2018). A description of the model can be found in appendix 9.
In the next section a range of sensitivity analyses is presented and in the following sections details on each of the four components of the socio-economic impact assessment shown in are provided.
5.5.1 Sensitivity analyses Sensitivity analyses of the key cost estimates and parameters have been carried out. The expected socio- economic net-benefit is found to be between DKK -4.9 million and DKK 57.2 million. In comparison, the main analyses had a socio-economic net-benefit of DKK 26.1 million (see Figure 7).
In the sensitivity analyses, it is explored what happens to the socio-economic net-benefit if one parameter or assumption is changed. For example, Figure 8 shows that the socio-economic net-benefit is expected to be DKK 57.2 million if the environmental benefits are 50% higher than in the main scenario. In Figure 8 the results of the sensitivity analyses are presented. A more detailed description of each sensitivity analysis scenario can be found in Table 10.
Figure 8 Sensitivity analysis of the socio-economic returns, DKK million
Large environmental benefits (+50%) 57.2 Small increase in fuel costs (-20%) 33.4 Black carbon reduction valuation 32.5 Low degree of passing on the costs to foreing countries 26.8 Large climate benefit (+20%) 26.2 Ship operators absorb a large share of the extra cost 26.1 Ship operators absorb a small share of the extra cost 26.1 Basic assumptions 26.1 Small climate benefit (-20%) 26.1 High degree of passing on the costs to foreing countries 26.0 Large increase in fuel costs (+20%) 18.9 Small environmental benefits (-50%) -4.9
Table 10 Description of sensitivity analyses
Analyses Description
Basic assumptions The main scenario assumptions.
The increase in fuel costs is reduced by 20% compared to Small increase in fuel costs (-20%) the main scenario.
The increase in fuel costs is increased by 20% compared Large increase in fuel costs (+20%) to the main scenario.
The ship operators are expected to absorb a smaller Ship operator absorbs a small share of the extra share of the extra fuel cost compared to the main cost scenario.
Ship operator absorbs a large share of the extra The ship operators are expected to absorb a larger share cost of the extra fuel cost compared to the main scenario.
Low degree of passing on the costs to foreign A smaller share of the increased costs is expected to be countries passed on to foreign countries.
High degree of passing on the costs to foreign A larger share of the increased costs is expected to be countries passed on to foreign countries.
The environmental benefits are expected to be 50% Large environmental benefits (+50%) higher than in the main scenario.
The environmental benefits are expected to be 50% Small environmental benefits (-50%) lower than in the main scenario.
The climate benefits are expected to be 50% higher than Large climate benefits (+20%) in the main scenario.
The climate benefits are expected to be 50% lower than Small climate benefits (-20%) in the main scenario.
The black carbon reduction is included in the Black carbon reduction valuation assessment.
Please note that the socio-economic net-benefit will increase by DKK 6.4 million to a total of DKK 32.5 million if the value of black carbon reduction is included in the assessment.
The main analysis only considered the cost and benefits for Greenland. It is standard in socio-economic assessments to use a national perspective. Normally the national perspective is very well defined. However, this is not the case when it comes to foreign flagged ships. Some foreign flagged ships are registered in Denmark under Danish flag but are owned by companies in Greenland. A scenario analysis was carried out in which all the foreign flagged ships are treated as if they were from Greenland. The socio-economic net-benefit will be DKK 23.5 million compared to DKK 26.1 million in the main scenario. The lower socio-economic net- benefit primarily reflects the higher costs for the Greenlandic companies. The business-economic effect increases to DKK -23.6 million from DKK -21.3 million, see Figure 7.
5.5.2 Business-economic effects The extra costs in the event of an HFO ban for the Greenland business community is estimated to be around DKK 21.3 million. This means that if an HFO ban is decided upon, the Greenland business community will face an increase in their costs of DKK 21.3 million. The ban will not result in business-economic gains.
The effect for the Greenlandic business community is included in the overall socio-economic assessment. In the analysis, all foreign ships have been treated as belonging to the shipping industry, which is why this industry is presented independently in Figure 9 under the name foreign ship operators. It was calculated that the extra costs for foreign flagged ship operators amounts to DKK 4.9 million. This is not included in the overall socio- economic assessment. That is because only the costs and gains that fall to Greenland are taken into account.
In figure 9 the business economic effects for Greenland and abroad are shown.
Figure 9 Business-economic effects, million DKK
Greenlandic business community
Extra costs for the offshore fishing industry 5.1 Extra costs for the rest of the business community 16.2 Total extra costs for greenlandic business community 21.3
Global business community
Total extra costs for greenlandic business community 21.3 Passed on in export prices 1.7 Extra costs for foreign ship operators 3.2 Total extra costs 26.2
Figure 9 shows that of the total extra costs of DKK 21.3 million, DKK 5.1 is borne by the offshore fishing industry, while the rest of the Greenland business community bears DKK 16.2 million.
The effect on the global business community is an addition to the effects to the Greenlandic business community and extra cost to foreign ship operators of DKK 3.2 million and an expected increase in export prices of DKK 1.7 million DKK.
Figure 10 shows the extra costs broken down by industry.
Figure 10 The anticipated extra costs for the business community, million DKK
Food, beverages, tobacco products industry 9.0 Offshore fishing 5.1 Public Administration 1.7 Healthcare service 0.8 Social institutions 0.7 Energy and water supply 0.4 Teaching 0.4 Shipping 0.4 Inshore fishing 0.4 Waste coll., society, culture, other 0.4 Wholesale except cars 0.4 Construction and civil engineering works 0.3 Air transport 0.3 Hotels and restaurants 0.2 Land transport, transport via pipelines 0.1 Support activities, e.g. transp., travel ag. 0.1 Business service 0.1 Retail. rep-comp. except cars 0.1 Rental and real estate sale & purchase 0.1 Post and telecommunications 0.1 Textile, clothing, leather industry 0.1 Mining and extraction 0.0 Auto trade, service, service station 0.0 Fishing in general 0.0 Finance and insurance 0.0 Production of other goods in general 0.0 Stone, clay and glass industry 0.0 Wood, paper and printing industry 0.0 Agriculture, fishing, hunting, etc. 0.0 Chemical industry, plastics industry 0.0
Figure 10 shows that the offshore fishing industry constitutes extra costs of about DKK 5.1 million in 2020. The food, beverages and tobacco industry bears extra costs of around DKK 9.0 million. This is because it is expected that the offshore fishing industry will largely pass on parts of the extra costs to the food, beverages and tobacco industry. The extra costs will be minimal for many of the industries.
A study by Transport & Environment (Abbasov et al. 2018) has investigated the cost impact of an Arctic HFO ban on cruise industry and concluded that the price of cruise passenger tickets would increase by €5/day in 2021 with the assumption of full pass-through to passengers. According to Abbasov et al. (2018) the increase in the ticket price should be acceptable to the passengers and not lead to a decline in cruises.
5.5.3 Effects for citizens It has been estimated that an HFO ban will lead to an increase in Greenlandic prices of 0.11%. Figure 11 indicates how much more expensive goods will be for consumers. The price increase has been estimated by comparing the extra costs of a possible ban for consumers with their total cost of consumption.
Figure 11 Absolute and relative increase in Greenlandic consumer prices, million DKK
4.9 Increase in Greenland prices (0.11%)
Figure 11 shows that overall extra costs of DKK 4.9 million will be passed on to citizens through in the form of higher prices. The relative increase in the prices is shown in brackets.
The total extra costs for the consumers have been assessed by estimating the extent to which the business community will pass on the extra costs associated with an HFO ban in the prices of products that citizens buy. The citizens will not be affected by some of the pass-through since the business community will pay it, but some will ultimately lead to higher prices for citizens.
Figure 12 shows the extra costs in consumer prices divided by industry. Please note that the prices of some goods will rise more than others. Figure 12 Relative increase in Greenland consumer prices divided by industry, million DKK
Business service 2.1% Food, beverages, tobacco products industry 1.2% Textile, clothing, leather industry 0.3% Hotels and restaurants 0.2% Support activities, e.g. transp., travel ag. 0.2% Auto trade, service, service station 0.1% Retail. rep-comp. except cars 0.1% Inshore fishing 0.1% Shipping 0.1% Chemical industry, plastics industry 0.1% Production of other goods in general 0.1% Wholesale except cars 0.1% Air transport 0.1% Fishing in general 0.1% Mining and extraction 0.1% Offshore fishing 0.1% Rental and real estate sale & purchase 0.0% Wood, paper and printing industry 0.0% Post and telecommunications 0.0% Finance and insurance 0.0% Agriculture, fishing, hunting, etc. 0.0% Stone, clay and glass industry 0.0% Energy and water supply 0.0% Construction and civil engineering works 0.0% Land transport, transport via pipelines 0.0% Public Administration 0.0% Teaching 0.0% Healthcare service 0.0% Social institutions 0.0% Waste coll., society, culture, other 0.0%
When the relative price increases are weighed by the citizens’ consumption pattern, the total expected relative increase in Greenland prices is found. The relative price increases were estimated by comparing the passing on of the extra costs in each industry with the total private consumption broken down by industry.
Figure 12 shows that it is especially in the food, beverages and tobacco industry that the prices are expected to increase. This reflects that ship transport with HFO is largely included as an input in the industries. For many industries, no or only a marginal increase in prices are expected. This reflects that the industries do not use shipping as an input to any significant degree. The indicated price increases reflect changes in consumer prices that occur in addition to the normal inflation.
5.5.4 Effects for the government of Greenland The Government’s overall duty and tax revenue in 2020 has been estimated to fall by approx. DKK 9.1 million as a result of an HFO ban. The reduction in tax revenue is due to the higher costs for the business community, which will mean that the business community will pay less corporation tax. No changes are expected to the revenue from duty.
Figure 13 shows the expected fall in revenues.
Figure 13 Reduction in annual revenue for the government of Greenland, DKK mill
Reduced tax revenue 9.1 Unchanged duty revenue Total reduction in proceeds 9.1
The analysis is based on two sub-analyses:
1. Reduced tax revenues due to higher costs for the business community.
The revenues are expected to fall by DKK 9.1 million. The estimation is based on the total extra costs for the Greenlandic business community and the Greenlandic corporation tax rate of 30%, according to the Greenland Tax Agency (Aaqqissuussisimaneq).
When companies absorb extra costs, it corresponds to a fall in their profit. The fall in profit in each industry is used to calculate the reduction in their tax payments.
2. Unchanged duty revenue
The duty revenue is expected not be affected. The changes in duty revenue has been estimated by comparing current duty revenue with the expected duty revenue in the event of an HFO ban.
In section 5.1 and 5.2 the current consumption of HFO and the corresponding consumption of alternative fuels in the event of a ban on HFO are presented.
The duty revenues have been estimated by connecting the fuel quantities with the corresponding duty ratios.
Facts Tax rates for gas/diesel oil are DKK 0.10/litre, while residual fuel has DKK 113.80/tonne imposed on it. The gas/diesel oil duty is equivalent to DKK 120.48/tonne calculated with a gas/diesel oil density of 0.83 tonnes/m3 (from Statistics Greenland 2016). There was a total of 127TJ fuel oil used for sea transport and 319 TJ for fishing in Greenland in 2016 (Statistics Greenland 2017).
Source: Parliament of Greenland Act no. 21 of 18 November 2010 on the environmental tax on products to generate energy.
5.5.5 Environmental and climate benefits The estimated total climate and environmental benefit of an HFO ban is around DKK 62.4 million. A ban on HFO will reduce atmospheric emissions from shipping. As stated previously in section 5.4, the term “climate gains”
refers to the reduction in CO2 emissions, and the term “environmental gains” refers to reductions in other
atmospheric emissions (SOX, PM).
Figure 14 shows the expect climate and environmental benefits. The environmental benefits accounts for 99% of the benefits.
Figure 14 Environmental and climate benefit, DKK mill
Climate gains 0.3 Environmental gains 62.0 Total environmental- and climate gains 62.4
To take into account the reductions in atmospheric emissions in the socio-economic analysis, it is necessary to value them. Valuing the reductions requires a set of unit prices. This is the standard approach in socio- economic assessments. The unit costs express the total benefits for society if emissions are reduced by one kilogram. The benefits include the health benefits from reduced exposure to emissions and the cost savings
from the reduced need for medical treatment. For example, if the emission of CO2 is reduced by one kilogram in 2020, it will lead to a benefit to society of DKK 0.15. The emission specific unit costs used for the analysis are shown in Table 11. For more detailed information on the health effects of specific emissions, see the DEC report (2019a).
No unit cost data were available during the previous assessment and rough estimates of the environmental gains were estimated based on the Danish unit prices. Since then, the DCE (2019a) has produced estimates for local and regional unit costs of emissions. This work is used to produce a better set of unit prices for environmental gains of reduced atmospheric emissions in Greenland, which more accurately reflects the population density in Greenland. The updated unit costs are the main explanation for the significant increase in environmental benefits in the assessment compared to the previous assessment, see Incentive/LITEHAUZ (2018). The updated unit prices are based on the DCE (2019a) and presented in Table 11.
Table 11 Unit costs 2020, DKK per kg
CO2 SOX PM BC
Unit costs 0.15 0.15 934 626
The unit price for CO2 is taken from the Danish transport-economic unit prices 2019. SOX and PM is also included in this source but adjusted for differences in population density between Denmark and Greenland based on the DCE (2019a). To value changes in the emissions of black carbon, rough estimates from the United States’ EPA (2018) has been used.
Compared to the previous assessment, the unit cost of SOX is reduced by half, which will reduce the economic
benefit of reduced SOX emissions. For the PM, a major change has been made. The DCE (2019a) finds that most of the negative effect from PM emission is a regional effect, which means that the emission can have negative impact thousands of kilometres from the location of the emission. In the previous assessment, PM was treated as having only a local effect, meaning only the near surroundings of the emission place was affected. The change in the unit price for PM is very large. In the previous assessment it was close to zero, and the update unit cost for PM is DKK 934 per kg.
The unit cost for black carbon (BC) is uncertain. Therefore, the benefits of reduced BC emissions are not included in the main analysis. A sensitivity analysis is carried out, which includes the benefits of reduced BC emissions (see section 5.5.1).
The estimated reductions in SOX, PM, BC and CO2 are presented in section 5.4 under Environmental and climate effects in Greenland. 5.6 2020 compliant low sulphur fuel based on Heavy Fuel Oil
Vessels adhering to the IMO 2020 reduction on sulphur through a low sulphur fuel product based on residual fuel are expected to be disqualified under the density or viscosity criteria of the Heavy Fuel Oil ban in the Arctic (DNV GL 2019). The emerging alternative fuels based on sulphur reduced residual oil (HFO derivatives) compliant with the IMO 2020 regime are becoming available, but the bunker fuel arena in late 2019 appears still unsettled with respect to the market demand of a low sulphur residual fuel.
According to DNV GL (2019) when the sulphur limit in emission control areas (ECA) fell to 0.10% in 2015, alternatives to MGO appeared in the market designed to be compliant with the ECA requirement, while costing less than MGO. The term “hybrid fuel” refers to a blended product with specifications similar to HFO, and/or to certain refinery products that have previously not been used as marine fuels. Several hybrid fuels combine properties of both distillate and residual marine fuels and can be divided into the following categories:
o Ultra-low Sulphur HFO oils; Typically, these fuels have lower viscosity and density, and better ignition and combustion properties compared with conventional residual marine fuels
o Blends of a distillate fuel with small amount of oil (DMB type)
o Heavy distillates; fuels with low metal content but with higher viscosity than conventional DMA
As a result of IMO’s decision to implement a 0.5% global Sulphur cap in 2020, consumption of HFO is expected to shift to desulfurized or blended residual fuels, which may not fit into the traditional distillate/residual tables in the ISO 8217 marine fuel quality standard.
The potential for direct costs to the Greenland economy is limited as the base scenario includes the exemption of Greenland registered vessels for MARPOL Annex VI regulations, hence Greenland registered vessels would continue to operate on HFO in 2020 also under a no ban scenario (actually an HFO and distillate blend). Vessels that would need to address this issue would be foreign flagged vessels and Danish flagged vessels registered outside of Greenland. A Danish shipowner with vessels under foreign flag currently operating in the Arctic on HFO has estimated additional annual costs of 22 mio. DKK (approx. 3.2 mio. USD) if HFO is completely banned for propulsion and the vessels operating from Denmark and European ports cannot bunker cheaper low sulphur IMO compliant fuel for the deep-sea leg in the North Atlantic when going to the Arctic (Danish Shipping 2019). If residual fuel is allowed to remain in the tanks for the part of the return leg outside of the Arctic area this will result in an added cost of 7 mio. DKK (approx. 1 million USD).
5.7 Debunkering HFO
Vessels operating on a residual based low sulphur fuel in 2020 or vessels equipped with a scrubber and using HFO as fuel will be required to debunker their non-compliant fuel prior to entering the Arctic under the regime proposed for the ban of Heavy Fuel Oil for propulsion. This will also be the case for vessels registered in Greenland and operating on residual fuel under the Greenland’s exemption from Annex VI, if such vessels venture outside of the EEZ.
Offloading or debunkering of fuel is currently not a common feature in shipping and mainly performed from vessels having taken substandard quality fuel onboard, or in connection with major repairs, conversions, groundings, collisions, or cases of acute distress. An ordinary bunker tanker is not equipped today to pump from a vessel to its own tanks but rather in the opposite direction. Submersible pumps, associated equipment and hoses are required for a debunkering operation, which in the case of high viscosity fuel must include means of lowering viscosity and maintaining pumpability of the fuel. Bunkering is currently typically delivered in ports by way of a pipeline or bunker barge or through transfer at sea from a bunker tanker. There are no standard procedures for the current relative rare occurrence of debunkering although the shipping industry foresee an increase in such events due to substandard fuels once the IMO 2020 cap is implemented.
As the typical bunker transfer at sea is already considered a risk filled operation it is unlikely that the reverse debunkering would be any less risky. Therefore, dedicated debunkering facilities could be available in ports outside of an Arctic ban area e.g. in Iceland, to facilitate the traffic between Greenland and Denmark, but this is not the case as of today and vessels in that case would be required to veer off course.
The costs of debunkering operations are not standardised or available for Arctic conditions. It is not possible to establish whether a service will be available but bunkering companies respond that they do have the equipment necessary or a subcontractor available and will most often perform the service as a fuel take back (most likely as slop oil!) with debunkering costs covered plus a premium. Obviously, if the debunkering requires the bunker tanker to travel long distances to retrieve small amounts of fuel the business model may very well be revised.
The possibilities and implications of setting up a base in or have bunkering tankers in Iceland for the purpose of providing low sulphur hybrid fuel to vessels exiting the Greenland EEZ have not been included in the assessment.
5.7.1 Greenland companies that currently work with bunker supply In 2018 Polaroil invested into renovate and insulate warehousing capacity for HFO in two of the largest ports in Greenland. The major investment is expected to be turned around within 3 to 5 years. Polaroil used to charter two tankers, MV Oratank and MV Orasila, for bunkering in Iceland and settlement supplies. Since 2019, Polaroil charter MV Oratank only for a three-month period and provide the main HFO delivery through their land-based tank facilities in Nuuk and Sisimiut. (Schultz-Nielsen 2018, Polaroil 2019)
According to Polaroil (2019) there will be an implication for the company in the event of a ban. Approximately, 2/3 of the investment, namely the tank capacities, will be usable without significant additional investments. However, one third of the investment would be lost and could not be used in the future. The investment price was not disclosed by Polaroil.
Fuel oil is also supplied to vessels through Malik Supply, and the quantities are part of Polaroil’s calculation. As mentioned above, minor amounts of HFO are supplied directly to foreign vessels (Polaroil 2019).
Facts Polaroil has on average over the past three years delivered 13,100 m3/year HFO of grade 380 cSt at 15C, specific gravity 975 kg/m3 with 1.7% sulphur (Polaroil 2019).
A large part of the 17,000 m3 of HFO is mixed with 7-10% gas oil and sold as IFO 180. This grade will also be subject to a ban.
Polaroil supplies foreign registered vessels. Partly delivered to MV Oratank under its own charter 200 m3 HFO as 220 m3 IFO 180, and partly delivered 900 m3 HFO 380 to various vessels in the tourism, transport and fishing industry. Since 2019, Polaroil operates two land-based tank facilities located in Sisimiut and in Nuuk.
5.7.2 Contingency and clean up costs The shore-based response in Greenland related to spills within the 3 nm boundary primarily aimed at combatting minor spills in and around towns and harbours. It relies on local manpower and equipment placed in 12 ports in Greenland, typically comprising a 100 m boom, a 200 m boom and a skimmer, as seen in Table 12 below. The response capacity is designed for up to 20,000 litres in each port.
Table 12 Contingency ports and oil spill response equipment in Greenland (booms and skimmers)
The efforts at sea beyond 3 nm will as mentioned earlier fall under the responsibility of the Danish government. No contingency staff or equipment aimed at combatting an offshore spill is currently placed in Greenland, but will be sourced from Denmark, through collaboration with other national authorities and chartered civil equipment and logistical services, e.g. under the Copenhagen Agreement and the Agreement on Cooperation on Marine Oil Pollution, Preparedness and Response in the Arctic (Joint Arctic Command 2016). A spill on shores outside of the response area of the 12 ports may be expected to be a de facto shared effort by Greenland and Denmark.
Denmark maintains a naval and air defence force upholding sovereignty and carrying out inspection tasks in Greenland waters. In case of emergencies at sea this force will take part in the combatting of an oil spill, and it is stated in the contingency plan that the Ministry of Defence is authorized to “…cover the necessary costs in combatting oil and chemical pollution at sea in Danish and Greenlandic waters and on shores” (Joint Arctic Command 2016).
The Greenlandic and Danish strategy towards contingency relies on heavily on mechanical containment and recovery with offshore booms and skimmers. Recently, considerations regarding using dispersants and in situ burning under favourable circumstances have been brought forward by DCE and others but is yet to become part of the official oil spill response. Effective oil spill response in the Arctic is challenging due to the lack of infrastructure, remoteness, harsh weather conditions, darkness, and possible ice conditions (DNV GL 2019). Oil spill response at sea is considered successful at 10-15% recovery of the spilled volume (DNV GL 2015), and typically most successful when response can be quick and weather is accommodating. When conditions are unfavourable especially residual spills are difficult to handle using conventional recovery measures since the oil emulsifies in water, is extremely viscous and it may remain at sea for weeks (DNV GL 2019). Also, in ice-covered waters an oil spill may lead to oil entrapment in ice, leading to prolonged persistence, drifting sea ice may be transporting oil, and the reoccurrence of oil when the ice breaks or melts.
Detailed information on the preparedness and response plan is available from the Joint Arctic Command (2016). The unit cost of carrying out response in Greenland is unfortunately not available for the contingency response from the involved agencies in Denmark and Greenland. Little quantitative information is available in the literature on the effectiveness and cost of recovery of oil spill at shores and beaches for HFO spills compared to distillate spills, and even less related to the Arctic. Although, not based on Arctic data, the ICCT have reported the clean-up costs of residual spills and of distillate spills. In the table shown below (table 3 from ICCT 2017b) the associated costs include both the shore-based and the sea-based activities and the lion’s share is clearly the shore-based costs.
The table’s underlying data from Etkin (2000) are relatively old (+20 years) but rather comprehensive. The spill and clean-up costs are negatively correlated with the spill size for surface spills but positively correlated with the length of shoreline soiled. For the historic spills of mainly crude oil she also shows that the average unit costs of clean-up of near-shore spills are three times that of offshore spills. For the difference between residual and distillate spill shown in the table below this is echoed by DNV GL (2019) mentioning (on p43) that: “.…distillate spills are estimated to be 70% less costly than HFO spills”.
Table 13 Clean-up costs from ICCT (2017b)
As a crude approximation this study will use the distillate spill costs from ICCT (2017b) as directional for the efforts to clean up at sea and the residual fuel type costs reported as associated with the total shore based and sea based efforts, i.e. a shore-based clean up as a separated cost of a residual spill would be 22,441-3,055 = 19,386 USD and 16,831-3,055 = 13,776 USD, respectively for HFO and low Sulphur fuel, and that a distillate spill would not require any clean-up at the shore. The spill sizes that are used in the examples of incidents in Greenland corresponds well with the range of spill sizes in Etkin (2000) of 34-1700 tonnes and a soiled shoreline of 8-90 km, where unit costs are still within 20% variation.
While a distillate spill clean-up is only approx. 15% of an HFO spill clean-up, a clean-up after a low sulphur residual fuel is still 75% of the HFO spill costs according to ICCT (2017b).
Deere-Jones (2016) has reported the cost (replacements, clean-up, response, etc., but not the environmental and health effects) of the HFO spill of approx. 1,200 tonnes “bunker MFO” from the dry cargo ship MV Seelendang Ayu in Alaska. The clean-up cost etc. to the State of Alaska under the legal settlement was capped to 2.5 million USD, approx. 17 million DKK, but the “Formalized response resulted in known expenditures of over $100 million”.
The storage and treatment of recovered oil and water for which sufficient capacity is not available in Greenland has not been estimated here. Intermediate storage in ships, containers or tank farms are foreseen in the contingency plan (Joint Arctic Command 2016).
6 Assessing the benefits of an HFO ban to Greenland indigenous peoples and local communities
6.1 Analysis of oil spills
During operations and transfers on land or on a ship’s deck minor amounts of oil in the order of few litres up to a couple of hundred litres are spilled with some frequency. It is often washed to sea or into a port basin and local contingency measures are available to manage such spills, and this is also the case in Greenland. On the other side of the spectrum offshore oil exploration and production causes relatively rare but massive oil spills many orders of magnitudes larger than the operational spills just mentioned, and a number of historic spill cases of crude oil is available. A few of these are in Arctic environments but in addition to the historic cases predictive spill models and assessments have been carried out in Greenland as part of the licencing for offshore oil and gas exploration mainly over the last decade.
This section will only briefly mention the considerable amount of published scientific papers and comprehensive reports related to the Greenland offshore oil and gas exploration as the main inputs from these to the current study are the sensitivity mapping of the west coast of Greenland carried out by DCE e.g. Boertmann & Mosbech (2017), Boertmann et al. (2013), Christensen et al. (2015), Christensen et al. (2012), Clausen et al. (2012), Clausen et al. (2016) as presented in Appendix B and C.
6.1.1 Existing risk analysis of oil spill The recent work commissioned by the Danish Defence Command (DNV GL 2015) has presented comprehensive statistical analysis regarding potential for oil spills, accidents and environmental risks posed by vessels in Greenland, and forms the foundation of the current report. Brief excerpts provided here include:
Accidents with expected oil spill:
In terms of accidents with spill, the estimated annual number is estimated at 0.3, i.e. on average an accident approximately every 3 years. The estimated total average yearly spill volume from all vessels in Greenland amount to 40 tonnes. The risk constitutes an oil spill every 3rd year of about 150 tonnes of oil which is regarded as a spill which potentially can be mitigated.
Inshore compared to offshore (3 nm limit):
The number of accidents and number of spills are highest within 3 nm with 77% and 62% of the total number, respectively.
Oil spill influence areas:
Marine diesel may impact a surface area in a 15-20 km radius from a spill.
HFO or IFO is expected to impact the surface within a radius of 20-30 km. The spill size cases ranged from 200 to 1,000 tonnes, and in no cases was an effect in the water column reported beyond the immediate grid cell.
From DNV GL 2015 Figure 39 Geographical representation of spill accident return periods [years] within the 15 areas of Greenland. Bubble size represents likelihood of accident. Smaller is better.
6.1.2 Residual versus Distillate Spill The differences in the properties of residuals and distillates mean that the oil spreads differently. The distillates have a lower viscosity and even at low temperatures there is a significant evaporation, which makes landfall of offshore spills rarer than for residuals. When it does happen, it is typically short lived on the shore with a natural washing of shore and a dilution effect from waves and tide. The downside is that under certain conditions the lighter oil’s dissipation into the water column lead to higher concentrations of hydrocarbons potentially affecting pelagic organisms (Toxwærd 2018), especially in shallow areas with low currents.
Residual oils, i.e. HFO, IFO 180/380 and the IMO 2020 low sulphur hybrid oils, are viscous oils with little evaporation and water column dissipation that consequently have long residence times on the water surface. Also, in rough weather water is whipped into the residual oil, resulting in a volume increase of four to five times called a “mousse” as mentioned earlier.
The differences in effects of a residual spill compared to a distillate spill are well summarized by Fritt- Rasmussen et al. (2018):
Due to the low content of water-soluble components in HFO as well as strong dilution in the sea, an HFO spill poses a small risk to the pelagic organisms. Environmental monitoring of HFO spills near the Norwegian coast indicates that the concentrations of oil components in the water column generally are low. Significant concentrations of oil components in the water are only found immediately under the slick, close to the wreck and just after the spill has happened. Thus, spill of HFO only seems to have limited and only local, minor effects on phytoplankton, zooplankton and bacteria communities in the water column.
Due to the high likelihood that HFO remains on the sea surface, an HFO spill poses a high risk of smothering seabirds and polluting coastlines. Wind and sea current may spread HFO spills over large areas. Very often seabirds have suffered more from oil spills than other components of the ecosystem. The number of dead birds, in the event of an HFO spill, may serve as a good indicator of the total impact on the environment.
Shorelines protected against waves and containing soft sediment have a low self-cleaning potential and the degradation of oil is therefore slow, and they are thus particularly vulnerable to oil spills.
Oil beaching and smothering of macroalgae may affect the photosynthetic activity of macroalgae and consequently inhibit macroalgal growth. In addition, oil components may lead to, for example, poor zoospore attachment and delay the repair of damage to fucoid cover.
For these reasons spills of residual oil could have particularly severe impacts on Arctic wildlife, the marine environment and could threaten Arctic communities’ food security and livelihoods due the slow rate of degradation, due to very limited evaporation (typically less than <10%) and limited dispersion into the water column (DNV GL 2019).
6.1.3 Risk analysis of traffic A traffic analysis as included in DNV GL (2015) points to certain high intensity areas, and a risk characterised by three components: the frequency of an accident, the volume and type of spilled oil and the impacted (natural) resources.
The oil spills conditions of this report are not established on a statistical frequency analysis but are deterministic for the four scenarios which are also selected from those of the aforementioned report and other identifications of sensitive areas in Greenland (e.g. Christensen et al. 2012). As far as possible existing spill trajectories are used to demonstrate that the scenarios represent realistic “worst case” scenarios. As these scenarios are already published the basic underlying meteorological, oceanographic and statistics are not included here.
The types of accidents to be expected have also been the subject of a risk analysis for ship traffic in Greenland waters (Marchenko et al. 2018). Here it was shown that none of the projected incident types would be high risk (red colour in tables shown below). The risk matrix reported an “Occurs” level with “moderate” consequences by the risk associated with “grounding” and to “Very rare”/”Moderate” by onboard “fire” for all three types of vessels modelled (Tourist, Cargo/Tanker, and Fishing).
Table 14 Risk matrix for ship types in Greenland waters (Marchenko et al., 2018)
6.1.4 Spill sizes estimated for the Arctic The majority of model oil spills from the Arctic are crude oil spills from blowout scenarios typically representing a larger spill than would be expected from a fuel tank spill and are considered less relevant in relation to spills of bunker from ships. However, in Fritt-Rasmussen et al. (2018) a list of incidents involving HFO in areas north of latitude 55°N is provided, which is updated from PAME II (2016). Focusing on the “modern” spills after 1993, these are on average 415 tonne or up to 461 m3 between 1993-2011. (The average spill including data back to 1969 is 782 tonnes/869 m3.) Although not directly impacting the spill size the emergence of double hull protection around fuel tanks and the expected life span of vessels to 25-30 years justifies the omission of the older spills for the purpose of getting the example range of chosen spills relevant to contemporary operations.
The modelled spill for a cruise liner in Disko Bay in Shoal’s Edge (2016) is 280 m3 representing 10% of Crystal Serenity’s total bunker volume, which is divided into a number of tanks. This is considered to be the largest vessel sailing to Disko Bay with approx.1,700 passengers and crew. In comparison, the fuel oil spills modelled for contingency purposes in Greenland range from 38 to 398 tonnes. Product tankers, fishing vessels and the general cargo, container and reefers vessels in Greenland typically carry between 58 and 240 tonnes of fuel onboard, whereas the cruise vessels carry on average 439 tonnes (DNV GL 2015, DNV GL 2014, Incentive/LITEHAUZ 2018).
6.1.5 Residual oil, Low sulphur heavy fuel oil and distillate oils Recent estimations by Delft (2018) indicate that clean-up costs that accrue in case of an oil spill are significantly lower if MGO (or ban-compliant fuel) was spilled instead of low sulphur heavy fuel oil - LSHFO. They estimated the clean-up costs saved to amount to between 3.4 and 45 million USD (LSHFO spill) for one bunker fuel spill, and that the socio-economic and environmental damage costs in case of an oil spill may also be reduced. From a spill risk and response perspective, HFO and hybrid oils are currently and in this assessment taken to have similar properities although the data from ICCT (2017b) suggest that some reduction in clean up costs may be expected.
The experiences with low sulphur hybrid oils are still emerging both with respect to their technical properties in engine and fuel systems and in relation to other properties relevant for environmental behaviour e.g. that the hybrid fuels are known to be basically aliphatic in nature while conventional HFOs generally consist of highly complex aromatic structures (DNV GL 2019). Finally, it is yet certain whether these oils may be blended to fall below the HFO density and viscosity thresholds established under MARPOL (DNV GL 2019).
The oil properties are also important, if oil is released to sea during an accidental bunker spill in the Arctic. Challenges have been reported for hybrid fuels related to risk for solidification at low temperatures, and low oil spill response effectiveness (Sintef, 2017). Fritt-Rasmussen et al. (2018) state that it is highly important to characterise the new low sulphur fuel oils on the market, and to gain better documentation of the differences in fate and behaviour in case of a spill at sea and to document the potential/feasibility of the different response options, as also indicated by ICCT (2017b).
As opposed to distillate fuels, residual HFO emulsifies in water and breaks down very slowly, particularly in a cold marine environment. Whereas distillates typically disappear from the water surface after three days, nearly all HFO remains at the surface after 20 days (DNV, 2011b). More recent weathering’s studies by Sintef support these results (Sintef, 2017; Fritt-Rasmussen et al. 2018). In the paper “Transitioning away from heavy fuel oil in arctic shipping” (ICCT, 2019) it is concluded that distillate spills are estimated to be 70% less costly than HFO spills when the cleanup, socioeconomic, and environmental costs are considered. HFO spill may move further with currents, waves and the wind and impose a much higher risk of affecting vulnerable areas along the ice edge and shores. When mixed with ice, it is virtually impossible to clean HFO spills (EPPR 2015 and WWF, 2017). One should still bear in mind that distillate spills, though not persisting in the environment in the same way as HFO, still poses severe toxic and contamination impacts to the local habitants, and the effect of such a spill may still be devastating to communities and the wildlife (DNV GL 2019).
6.2 The four oil spill scenarios
The present assessment addresses adverse impacts to Greenland’s marine and coastal ecosystems of residual spills compared to distillate spills. No new modelling or data analysis has been carried out and the scenarios chosen are not objectively pointed to by an analysis of the most likely accident locations based on e.g. ship traffic intensity, risk analysis with respect to uncharted areas, weather conditions, icebergs and other conditions influencing the likelihood of an incident leading to an oil spill. The assessment evaluates impacts through examples of oil spill and is applying a deterministic rather that a statistical approach. Having acknowledged that it is emphasised that the scenarios chosen and the conditions selected relies on existing information and modelling, which to a wide extent is based on such prior analysis. The choice of the following key four scenarios for Greenland are based on the existing identification of environmentally, culturally and commercially sensitive areas as provided by DCE and authorities in Greenland as mentioned above. The examples will demonstrate the impact and loss of marine and coastal natural resources and the loss of culturally important subsistence activities. The scenarios are:
1) North Water Polynya/Baffin Bay as a unique ecosystem of open water;
2) Disko Bay/Ilulissat is a UNESCO World Heritage site and Greenland’s main tourism area with frequent cruise ship activities;
3) Store Hellefiskebanke is a commercially exploited biological resource (fish) with relatively high traffic intensity for Greenland; and
4) Ittoqqortoormiit/Scoresby Sound is an isolated town with a high proportion of subsistence economy.
The actual circumstances of a spill are obviously of paramount importance for the impacts expected. In this study a season, where ship traffic is possible, is chosen for each scenario and the predominant weather conditions and seasonal biological status are used as indications of the expected spill trajectory and effect of biological resources. In general, the cost of response and clean-up is addressed, but it is not possible to develop this in a greater detail (please see section 5.7.2 on Contingency and clean up costs).
An expected effect for the year of the spill (year 1) is provided and this is an important restriction, since impacts of shored oil spills have lasted several years in other Arctic locations (Deere-Jones 2016). Effects of fishing and hunting may linger for more than one year due to
physical entrapment of oil in or under ice reappearing as ice breaks up,
oil beaching on a soft shore with pebbles or shingles where the oil will be worked into the crevices or sand between the rocks only to reappear after heavy weather or ice scouring,
if sensitive recruitment areas for e.g. fish and shellfish are hit, and the commercially exploited population of adults is diminished over the coming years,
if a spill moves directly into birds resting on the sea surface,
or if the local residents refrain from subsistence fishing and hunting due to a cultural restraint.
In many cases a direct effect on a resource exploited commercially or for subsistence is not readily assessed. Instead the assessment estimates the impact as a temporary fishing or hunting restriction for the area be it caused by the actual spill, imposed by authorities or culturally/voluntarily by the inhabitants leading to a reduction in landings of a percentage of the annual landings. The possible impact on recruitment of pelagic fish and shrimp stock is addressed and generally expected to be transient given the spill volumes assessed.
The impact on the communities and households, where fishing and hunting for subsistence is vital for the wellbeing of humans (and crucial to their sled dogs) is difficult to elucidate as the monetary consequence in the subsistence economy is dwarfed by other impacts and costs, but in particular in the scenarios from North Water Polynya/Baffin Bay and Ittoqqortoormiit/Scoresby Sound this type of impact is strong since few alternative ways of upholding life are readily available in settlements.
In the impacts assessment oil spills are either taken from the existing modelling which range from 280 m3 to 1,000 m3 or based on the average HFO spill size north of latitude 55°N between 1993 and 2011 of 415 tonnes (461 m3) as estimated from Fritt-Rasmussen et al. (2018). In comparison, the fuel oil spills modelled for contingency purposes in Greenland range from 38 to 398 tonnes. The assessment does not address the possible mitigating effect of oil spill response from Greenlandic or from Danish authorities, or the combatting strategy, but does estimate a crude cost for sea surface and for coastal clean-up.
6.2.1 North Water Polynya/Baffin Bay
The North Water Polynya/Baffin Bay is a unique open water ecosystem in an area where ice cover is prevalent, and the residual fuel spill scenario is set in June-July when ship traffic to Qaanaaq is possible. The trajectory and surface area of a spill is taken from a blow-out spill modelled in Baffin Bay (Shoal’s Edge 2016). Here, 37% of the volume spilled reached the coast corresponding to 190 tonnes. An average contaminated surface area of 10 km2 (>10 g/m2) and 223 km2 (>0.01 g/m2) will be expected and >20 km soiled coastline or ice edge. Figure 15: Outline of North Water Polynya, There is no commercial fishing, but subsistence hunting and Source: DFO 2019 fishing is dominant and will be impacted heavily. According to Statistics Greenland the monetary value of hunting and the fishing in the area was around DKK 15 million in 2018. The majority of this comes from fishing and only a minor fraction from hunting. Depending on the actual conditions regarding ice cover alcids, polar bear, ring seal, narwhal, thick-billed murre, and little auk may be affected leading to 20-50% reduction in landings in the first year of the spill.
Although not significant in monetary terms the loss of income and livelihood in a location where alternative occupation is not possible will be devastating for many households in the settlements of the area. A spill of distillate fuel is not expected to affect the coast/ice edge and the spill will be entrained in the water column yielding no long-term effects.
In Clausen et al. (2016) the sensitivity of the North Water Polynya is described in detail and gives a comparison of the sensitivity scores for each season, with spring receiving the highest score, which is therefore the most sensitive time of the year for marine oil spills. In Table 15 a map showing the most sensitives area is displayed together with the sensitivity scores of each season.
Table 15 Map with areas of extreme and high sensitivity and sensitivity ranking by seasons
Average sensitivity per Season offshore area
Spring 81
Winter 56
Autumn 46
Summer 41
Source: Clausen et al. 2016
Table 16 sums up the offshore sensitivity for Human resource and species divided into seasons as shown in Clausen et al. (2016) sensitivity maps of the North Water Polynya/Baffin Bay area. The oil spill sensitivity index values are based on:
a) abundance and sensitivity of selected species (or species groups),
b) resource use (human use), mainly fishing and hunting,
c) potential oil residency (ORI index); on the shoreline based mainly on wave exposure, substrate and slope of coast; in the offshore areas based solely on the length and extension of ice cover,
d) presence of towns, settlements and archaeological sites (for shorelines).
The listed elements in Table 16 correspond with the sensitivity maps in Appendix C.
Table 16 Summarised information of areas with sensitivity ranking “Extreme” in Baffin Bay/NWP.
Season Human resource Sensitive species
Important hunting area for inhabitants of Baleen whales Qaanaaq and Savissivik, main quarry is walrus, Narwhals polar bear, ringed seal and bearded seal. Polar bear Winter Seals Walrus White whale
Important hunting area for inhabitants of Alcids Qaanaaq and Savissivik, main qua ry is walrus, Narwhales narwhal, white whale, polar bear, ringed seal Polar bear and bearded seal. Spring Seaducks Seals Surface feeders Walrus
Important hunting area for inhabitants of Alcids Qaanaaq and Savissivik, main quarry is polar Narwhal bear, narwhal, ringed seal, harp seal bearded Polar bear Summer seal and little auk, and there is small scale fishery for Greenland halibut. Surface feeders Seaducks
Important hunting area for inhabitants of Seaducks Qaanaaq and Savissivik, main quarry is walrus, Autumn Walrus narwhal, white whale, polar bear, ringed seal and bearded seal. White whale
Source: Clausen et al. 2016
6.2.2 Disko Bay/Ilulissat
The Disko Bay/Ilulissat region is sensitive to marine oil spill. The map presented in Figure 16 gives an overview of the shoreline areas of extreme (red) and high (yellow) sensitivity.
Disko Bay is a 10,000 km2 large bay on the western part of Greenland. It is located about 300 km north of the polar circle (69°15’N, 53°33’W). The Baffin Bay and the Banks to the south of Disko border the bay. There are two entrances into Disko Bay. The southern entrance is about 60 km wide and has a narrow channel that is about 500 m deep. Islands and shallow depths dominate, however, the topography at the entrance. The northern entrance, Vaigat, is a 100 km long channel with a sill depth of about 250 m (Söderkvist et al. 2006).
Disko Bay and the glacier fjord of Ilullissat is a core area in Figure 16: Areas of extreme and high Greenland for large scale tourism and the Bay is also an important sensitivity and special status areas (Ramsar fishing and hunting area aimed at baleen whales, minke whale, fin areas and UNESCO World Heritage Site), whale, seals (many species) and seabirds. A fuel oil spill from a cruise ship of 280 m3 was modelled in Shoal’s Edge (2016) during the summer with significant surface and coastal impacts. Here the impact is estimated as collapse of cruise-based tourism in year 1 (potentially continuing up to three years) and the collapse of Ilulissat’s tourism industry for one year. The landings or its value is expected to be reduced by up to 10% in year 1, and the important subsistence hunting and fishing may see a 20-50% reduction. A distillate spill will be expected to only give a reduction in landings due to a restriction imposed or a loss of catch value due to market response (5-10%).
The area has the predominant part of cruise tourism and hotel occupancy in Greenland according to Statistics Greenland and the Ilulissat Icefiord (Sermeq Kujalleq) has been UNESCO World Heritage since 2004. An oil spill here can have great negative impact on the tourism not only in the Iluissat area but in all of Greenland. Assessing the economic consequences of an oil spill here is linked with great uncertainty. The land-based tourism in Ilulissat is estimated to make a revenue for the Greenland community of 30% of total Greenlandic tourist activity. If an oil spill occurs and the land-based tourism collapses for one year it reduces the revenue from tourism with roughly 67.5 million DKK. Likewise, a collapse of the cruise-based tourism for one year will mean an unrealised revenue of 12.8 million DKK. These are rough estimates and they only reflect the economic loss in the Iluissat area and not that tourism in other parts of Greenland may be affected.
According to Statistics Greenland the monetary value of hunting and the fishing in the area was around DKK 500 million in 2018. The majority of this comes from fishing and only a minor fraction from hunting. The data available from Statistics Greenland are limited and the cost estimates should be interpreted with this in mind.
A very rough estimate of the economic loss for one year due to the impact of a spill on fishing and hunting is around DKK 25 to DKK 51 million. The economic consequences of spill are expected to be roughly the same for a residual and a distillate spill.
The sensitivity atlas by Clausen et al. (2012) for the Disko Bay region shows the sensitivity ranking for oil spill sensitivity. According to Clausen et al. (2012) spring and winter score the highest in the ranking. The Table 17 below presents the overall ranking of seasons and their sensitivity in the Disko Bay offshore region. In Table 18 elements correspond with the sensitivity maps are listed in Appendix B.
Table 17 Sensitivity ranking by seasons (Clausen et al. 2012)
Table 18 Summarized information of areas with sensitivity ranking “Extreme” in Disko Bay.
Season Human resource Sensitive species
Important area for small scale fishery and Alcids hunting for the inhabitants of Aasiaat, Deep sea shrimp Qeqertarsuaq, Kangaatsiaq, Uummannaq, Narwhal Illorsuit, Niaqornat etc. Hunting aimed at baleen whales (bowhead, minke, fin), narwhals, white Polar bear Winter whales, walrus, seals and seabirds. Scallops Seaducks Commercial fishery for deep sea shrimp Seals (important) and snow crab (important) in ice- Walrus free periods. White whale
Important area for small scale fishery and Alcids hunting for the inhabitants of Aasiaat, Deep sea shrimp Qeqertarsuaq, Kangaatsiaq Uummannaq, Narwhal, Baleen whales and White whale Illorsuit, Niaqornat etc. Hunting aimed at baleen whales (bowhead, minke, fin), narwhals, white Seabirds, non-alcid pursuit divers whales, walrus, seals and seabirds. Polar bear Spring Scallops Commercial fishery for deep sea shrimp Seaducks (important) and snow crab (important). Seals Seabirds, surface feeders Walrus
Important hunting and small scale fishing area Alcids for the inhabitants of Aasiaat, Saqqaq, Ilulissat, Baleen whales Qasigiannguit, Kangaatsiaq etc. Hunting aimed Deep sea shrimp at baleen whales, minke whale, fin whale, seals (all species) and seabirds. Greenland halibut Summer Seabirds, non-alcid pursuit divers Commercial fishery target deep sea shrimp, Scallops Greenland halibut, snow crab and previously Seaducks also scallop. Seabirds, surface feeders
Important hunting and small scale fishing area Alcids for the inhabitants of Aasiaat, Saqqaq, Ilulissat, Deep sea shrimp Qasigiannguit, Kangaatsiaq etc. Hunting aimed Greenland halibut at baleen whales, minke whale, fin whale, white whale, narwhal, walrus, seals (all species) and Narwhal, Baleen whales and White whale Autumn seabirds. Seabirds, non-alcid pursuit divers Scallops Commercial fishery target deep sea shrimp, Seaducks Greenland halibut, snow crab and previously Seals also scallop. Seabirds, surface feeders
Source: Clausen et al. 2012
6.2.3 Store Hellefiskebanke
Store Hellefiskebanke is an important fishing ground for Greenland halibut and in the adjacent deeper areas also deep-sea shrimp is targeted. The map presented in Figure 17 gives an overview of the shoreline areas of extreme (red) and high (yellow) sensitivity.
According to Statistics Greenland the monetary value of the fishing and hunting in the area was around DKK 311 million in 2018. A large spill size of 1,000 m3 has been selected assuming a collision of vessels offshore.
The generic impact level of the Marine Environmental Risk Analysis (table 12-14 in DNV GL 2014) shows that a residual spill is one impact class worse than distillate spill for the surface-exposed organisms (seabirds, mammals and marine animals and coastal habitats), whereas distillate spills may be one class worse for organisms in the water column, when quantities spilled are above 400 tonnes. The specific modelling of a 6,000 tonnes crude oil subsurface blow out scenario on the Store Hellefiskebanke in Christensen et al. (2015) produced concentrations >10 ppb oil only during the first week in the top 15 m of water, and this was comparable to the case for a 1,000 ton spill shown in Figure 18. Similarly, the 28,000 ton subsurface scenario (S1; 1,000 ton/day) in Wegeberg et al. (2016) showed peak concentrations of 0.1-1.0 ppm Figure 17: Areas of extreme and high total hydrocarbons in 0.5-30% of the water volume, corresponding sensitivity and special status areas, Source: to 0.1-1.0 ppm total hydrocarbons peak concentrations in 0.02-1.1% Christensen et al. 2012 of the bank’s water volume for a 1,000 ton spill. Although the comparison is between this assessment’s surface spill and the quoted assessment’s subsurface blowout the conclusion that water column concentrations and effects would be expected to be transient does not appear unjustified in both a residual and distillate surface spill scenario.
Oil will, however, disperse on the surface, and if the timing and spatial conditions were unfavourable, a distillate spill would also impact seabirds on the surface, in particular the king eiders, for which it may take 20 years for the population to recover albeit for the larger spills modelled in Wegeberg et al. (2016).
Spill modelling for a 24-hour 1,000 ton spill followed for four weeks. Concentrations does not exceed 0.01 Figure 18 ppm, but the water body is stationary and diluted relatively slowly
Source: Wegeberg et al. 2016
While a residual fuel spill is expected to reduce the landings primarily due to expected fishing restrictions or voluntary absence to save gear and catch from soiling by surface oil, the impact is assessed to be primarily on subsistence hunting and fishing and a significant reduction on a local population of king eider resting on the sea surface. Beaching of the oil is most likely in October/November with the models predicting mainly north/south trajectories for the rest of the year. This may lead to elevated concentrations of oil in the shallow kelp-forest of the less exposed part of the coast with a potential for impacting capelin and lumbsuckers.
A very rough estimate of the economic loss for one year due to the impact of a spill on fishing and hunting is around DKK 16 to DKK 31 million. The economic consequences of spill are expected to be roughly the same for a residual and a distillate spill.
Table 19 summarizes the human resources and species most affected by an oil spill in Store Hellefiskebanke by season. The information was compiled from the literature by Wegeberg et al. (2016) and Shoal’s Edge (2016).
Summarised information of human resources and species in Store Hellefiskebanke sensitive to an oil Table 19 spill.
Human resource Sensitive species
Important hunting area. Hunting aimed at Hot spot for benthos biodiversity walrus and seals Mussels (feeding basis for king eider and walrus) Winter Shrimp and Greenland halibut fisheries King eiders Walrus Greenland whales, other whales
Important hunting area. Hunting aimed at Hot spot for benthos biodiversity walrus and seals Mussels (feeding basis for king eider and walrus) Halibut Cod Spring Sandlance Spring bloom of plankton, including fish larvae Shrimp larvae and shrimp stock recruitment King eiders Walrus
Shrimp and Greenland halibut fisheries Hot spot for benthos biodiversity King eiders Summer Cod Sandlance Plankton
Shrimp and Greenland halibut fisheries Hot spot for benthos biodiversity King eiders Autumn Cod Sandlance Plankton
Source: Wegeberg et al. 2016, Shoal’s edge 2016
6.2.4 Ittoqqortoormiit/Scoresby Sound
The spill selected for Ittoqqortoormiit at the mouth of Scoresby Sound is the cruise ship scenario also used in Disko Bay assessment of 280 m3 spilled during the summer. In comparison, the spill used in the Danish contingency model for Scoresby Sound is 104 tonnes of residual fuel. In the relatively limited area of the Sound a large part (67%) of a residual oil spill is expected to reach and smother the shore (or ice edge in other seasons). The oil spill is expected to impact heavily on the albeit small tourist industry associated with the Northeast Greenland National Park and the Scoresby Sound fjord system. According to Statistics Greenland (2019) 1,754 cruise passengers arrived at the harbour of Ittoqqortoomiit in 2018. The revenue from cruise passengers (locally or in terms of levies) would be negatively impacted by the absence of cruise ships due to an oil spill.
Figure 19: Scoresby Sound (NØ2) marked with a The large proportion of the approx. 450 inhabitants relying hunting red circle and surrounding Areas, Source: and fishing for subsistence will be expected to experience a 20-50% Christensen et al. 2012 reduction in landings during the first year of a spill of residual oil. Statistics Greenland does not have any records of the monetary value of the fishing and hunting in the specific area (the municipality is large and includes Nuuk and other towns). Nonetheless, for the inhabitants it is their means of subsistence which can be halved. The impact is expected on bird colonies and foraging seabirds: arctic tern, little auks, kittiwakes, ivory gulls, eider, and guillemots. In the season also narwhal, humpback, seals and polar bears may be affected.
A similar spill with distillates is only expected to give effects during the initial spill phase until surfaced oil is entrained in the water column. Due to the limited spill size compared to the 1,000 m3 at Store Hellefiskebanke, where no water column effects were expected, no long-term effects are expected on pelagic or planktonic organisms.
The most sensitive species and human recourses impacted by an oil spill in the Scoresby Sound region are derived from literature by Christensen et al. (2012) and DCE (2019) and listed in Table 20. The authors pointed out to have the following knowledge gaps:
possible rest areas/ periods for king eider
importance of the area to humpback whales
migration routes and concentration for auks and guillemots
Table 20 Summarised information of sensitive species in Scoresby Sound.
Human resource Sensitive species
Hunting communities and Polar bear Winter reliance on local resources Ivory gulls Walrus Hunting communities and Polar bear reliance on local resources Narwhal Bowhead whale Eider Spring Little auks Kittiwakes Ivory gulls Spotted seal Walrus Hunting communities and Narwhal reliance on local resources Humpback whales Arctic Tern Little auks Summer Kittiwakes Ivory gulls Eider Guillemots Hunting communities and Autumn Eider reliance on local resources
Source: Christensen et al. 2012, DCE 2019
7 Conclusions
Fuel and air emissions from shipping in Greenland
While most MARPOL Annexes are in effect in Greenland, including Annex I under which the ban on HFO is proposed, Denmark has made reservations on behalf of Greenland in her accession to MARPOL Annex VI, excusing Greenland from the global low sulphur regime, and HFO may consequently be used in Greenland also after 2020. Residual fuel is used in a few large fishing vessels and by Royal Arctic Line (for larger vessels with transatlantic voyages).
Table 21: Consumption of fuel and air emissions from shipping in Greenland (rounded numbers)
2020 scenario HFO ban scenario Reduction of (Residual allowed) (Distillate allowed) atmospheric emissions
Total annual fuel consumption 27,738 26,283 in Greenland’s EEZ [tonne]
CO2 emissions [tonne] 86,376 84,264 2,112
SOx emissions [tonne] 662 69 593
Particular matter (PM) [tonne] 79 16 63
Black carbon (BC) [tonne] 29 22 7
Based on the cost difference in the fuels an economic model was used to map whom the end-payers of the extra costs will be. The climate and environmental gains of banning residual fuel was calculated. Climate gains include the reduction in CO2 emissions, while the environmental gains include the reduction in atmospheric emissions.
The figure below shows that the total socio-economic cost amounts to DKK 36.3 million in 2020. This include a cost of DKK 21.3 million for the business community, a cost of DKK 4.9 million to the citizens of Greenland due to higher prices and a cost of DKK 10.1 million to Naalakkersuisut due to lower tax and duty revenue and a negative effect on labour supply. The benefits amount to DKK 62.4 million which include a climate benefit of
DKK 0.33 million due to lower CO2 emission and an environmental benefit of DKK 62.1 million.
Five vessels from Royal Arctic Line are registered in Denmark but overwhelmingly serving Greenland and are specifically addressed in a sensitivity analysis: The socio-economic benefit will be DKK 23.5 million compared to DKK 26.1 million in the main scenario. The lower socio-economic return primarily reflects the higher costs for the Greenland companies. The business economic effect increases to DKK -23.6 million from DKK -21.3 million as a result of both absorbing and transferring costs to consumers.
Oil spill costs and impacts
The present assessment is carried out through evaluation of examples of oil spill impacts thus applying a deterministic approach in the following key scenarios for Greenland: 1) North Water Polynya/Baffin Bay as a unique ecosystem of open water; 2) Disko Bay/Ilulissat is a UNESCO World Heritage site and Greenland’s main tourism area with frequent cruise ship activities; 3) Store Hellefiskebanke is a commercially exploited biological resources with relatively high traffic intensity for Greenland; and 4) Ittoqqortoormiit/Scoresby Sound is an isolated town with a high proportion of subsistence economy.
Table 22: Assessment of costs oil spill (million DKK) Location Spill Impact Impact Impact Impact Recovery Clean up fishing tourism subsistence ecological at sea* shore North Water Polynya- Res 0 0 20-50% Large 1.6 30 Baffin Bay Dist 0 0 - Small 1.8 0
Disko Bay-Ilulissat Res 25-51 81 20-50% Medium 1.0 32
Dist 25-51 0 5-10% Small 1.1 0
Store Hellefiskebanke Res 16-31 0 5-10% Large 3.6 65
Dist 16-31 0 - Small 4.0 0
Ittoqqortoormiit- Res 0 0 20-50% Large 1.0 32 Scoresby Sound Dist 0 0 - Small 1.1 0
* Mainly a cost to Denmark. “-“ denotes an expected transient effect
The impact on the communities and households, where fishing and hunting for subsistence is vital for the wellbeing of humans (and crucial to their sled dogs) is difficult to elucidate as the monetary consequence in the subsistence economy is dwarfed by other impacts and costs, but in particular in the scenarios from North Water Polynya/Baffin Bay and Ittoqqortoormiit/Scoresby Sound this type of impact is strong since few alternative ways of upholding life are readily available in settlements. Ecological impacts are primarily driven by presence of marine mammals and surface resting seabirds.
It was established previously that an Arctic HFO ban would have socio-economic effects in Greenland amounting to DKK 8.1 million in 2017 (approx. 1.2 mill. USD). The effects include all the effects to citizens, the business community, the environment, the climate and the government of Greenland, but the assessment did not attempt to include economic effects associated will oil spill. Compared to the previous assessment, the unit cost of SOX is reduced by half, which will reduce the economic benefit of reduced SOX emissions. In the previous assessment, PM was treated as having only a local effect, meaning only the near surroundings of the emission place was affected, whereas new data suggests a regional effect, and the change in the unit price for PM is therefore large and has considerable influence on the new assessment.
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9 Appendix A: Input-output model [incentive]
Incentive has built an input-output model to map the end-payers of the extra costs that an HFO ban will cause. The model is identical to the model used in the previous assessment, see Incentive/LITEHAUZ (2016). The description of the model is very similar to the description of the model in Incentive/LITEHAUZ (2016).
The model simulates the input-output currents that flow between industries and between industries and consumers. The model is based on input-output data from Greenland’s national accounts from 2013.
The model is built based on the reaction pattern an HFO-ban will cause as the costs of fuel increases. A possible ban of HFO will mean extra costs for the offshore fishing industry as a result of the Greenland owned ships. The foreign flagged ships will generate extra costs for the shipping industry. It applies to both industries that they are a production input in other industries, which thereby will indirectly be affected by extra costs. The shipping industry and offshore fishing will be able to choose to pass on part of the extra costs in their prices, and thus other industries will have to bear part of the extra costs.
Figure 20 shows the reaction pattern.
Figure 20 Reaction pattern
Ship operators 1. The industry absorbs absorb the extra (part of) the extra costs costs HFO-ban introduced For a given 2. The industry passes on Ship operators industry, the costs (part of) the extra costs on pass on the extra of purchasing the sale of products to end costs shipping increase users (public and private)
3. The industry passes on (part of) the extra costs on the sale of semi-finished products to other industries
For option 3, in contrast to option 1 and 2, there will be secondary effects. This means that the extra costs will not definitively be allocated to end-payers. Option 3 can be considered as extra indirect costs.
Higher output prices due to the direct extra costs will mean more expensive input for purchasing industries, which in turn will lead to more expensive output. Figure 21 illustrates the cyclic mechanism. Figure 21 Indirect extra costs from the industry
Higher output prices
Industry 1 Industry 1
Industry n Industry n
Higher input prices
The competitive situation in each industry is essential for whether the transport buyers pass on the extra costs to the sales markets or absorb it themselves. A competition model was designed to estimate the degree of passing on as a result of a cost increase.
The model is calibrated so that extra costs cannot be passed directly to the mining industry, as permits from the government of Greenland for mining exploration and extraction may prohibit the use of HFO in this industry. It also includes providers of transport services.
The output from the calculation model is the final allocation of the extra costs for industries, consumers and export. Furthermore, the results of the calculation model are calibrated to illustrate the effects for citizens and the government of Greenland. 10 Appendix B Sensitivity maps Disko Bay
Four maps, one map for each of the four seasons, from the oil spill sensitivity atlas (Clausen et al. 2012) are presented below. The areas are ranked into categories from extreme to low and therefore highlighting the most sensitive areas at the particular season. Each seasonal sensitivity ranking stands alone, and the seasonal maps cannot be compared directly with each other.
Figure 22: Offshore sensitivity in winter (January to March). Ranking: Extreme (red), high (yellow), moderate (green), low (blue)
Figure 23: Offshore sensitivity in spring (April to May). Ranking: Extreme (red), high (yellow), moderate (green), low (blue)
Figure 24: Offshore sensitivity in summer (June to August). Ranking: Extreme (red), high (yellow), moderate
(green), low (blue)
Figure 25: Offshore sensitivity in autumn (September to December). Ranking: Extreme (red), high (yellow), moderate (green), low (blue)
Figure 26: Legend to the offshore maps displayed in Figure 22 to Figure 25.
11 Appendix C Sensitivity maps Baffin Bay
Figure 27 to Figure 30 present the maps from the oil spill sensitivity atlas by Clausen et al. (2016). For each of the four seasons there is a map with an individual ranking, and thus the sensitivities cannot be directly compared. The areas are ranked into categories from extreme to low and therefore highlighting the most sensitive areas at the particular season. Each seasonal sensitivity ranking stands alone, and the seasonal maps cannot be compared directly with each other.
Figure 27: Offshore sensitivity in winter (January to March). Ranking: Extreme (red), high (yellow), moderate (green)
Figure 28: Offshore sensitivity in spring (April to May). Ranking: Extreme (red), high (yellow), moderate (green
Figure 29: Offshore sensitivity in summer (June to August). Ranking: Extreme (red), high (yellow), moderate (green)
Figure 30: Offshore sensitivity in autumn (September to December). Ranking: Extreme (red), high (yellow), moderate (green)
12 Appendix D Distribution of marine species, which are important for the area of Store Hellefiskebanke
The maps and a detailed description of the area and sensitive species can be found in Christensen et al. (2012). The following figures are a selected extract from the report.
B A
C D
E Figure 31: A: Densities of capelin (blue circles) and krill (Meganychtiphanes norvegica and Thysanoessa sp., Respectively) in southwest Greenland (feeding basis for whales and seabirds), B: Wintering areas and migratory routes for whale in Baffin Bay. Densities of capelin (blue circles) and krill (Meganychtiphanes norvegica and Thysanoessa sp., Respectively) in southwest Greenland (feeding basis for whales and seabirds), C: Occurrence (flood count) of walrus in the Vestis off the Store Hellefiskebanke, D: Overgrowth area for king eider (about 500,000 birds) on Store Hellefiskebanke - red dots are satellite positions from labeled birds, the blue circles count from ship,. E: Fishing areas for deep-sea prawns in West Greenland 1995-2004 (data from GN) 13 Appendix E Distribution of marine species, which are important for the area of Scoresby Sound
The maps and a detailed description of the area and sensitive species can be found in Christensen et al. (2012). The following figures are a selected extract from the report.
Figure 32: Distribution of marine mammals important for the identification of Area of Scoresby Sound A) Drift ice areas where the spotted seal and the hooded seal feed the young in March-April 76, B-C) Walrus: general distribution (red) and C) core areas / landings, D) core areas for narwhal, E-F) Polar bears: “Hot spots” For satellite-labelled bears, respectively (winter (yellow), spring (blue) and summer red) and (F) core areas for polar bears.
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