Delineating a Chinese Emission Control Area: the Potential Impact of Ship Rerouting on Emissions

WHITE PAPER SEPTEMBER 2018 DELINEATING A CHINESE EMISSION CONTROL AREA THE POTENTIAL IMPACT OF SHIP REROUTING ON EMISSIONS Xiaoli Mao and Dan Rutherford www.theicct.org [email protected] BEIJING | BERLIN | BRUSSELS | SAN FRANCISCO | WASHINGTON ACKNOWLEDGMENTS The authors thank Bryan Comer, Naya Olmer, Biswajoy Roy, Bryan Wood-Thomas, Michael Samulski, Caroline Gravel, Freda Fung, Chuansheng Peng, Chaohui Zheng, Huan Liu, and Yan Zhang for their review and recommendations. We also acknowledge exactEarth Ltd. for providing Automatic Identification System data, and IHS Fairplay for providing ships’ characteristics data. This study was funded by Energy Foundation China with support from Bloomberg Philanthropies. International Council on Clean Transportation 1225 I Street NW, Suite 900 Washington, DC 20005 USA [email protected] | www.theicct.org | @TheICCT © 2018 International Council on Clean Transportation DELINEATING A CHINESE EMISSION CONTROL AREA TABLE OF CONTENTS Executive Summary .................................................................................................................. iii 1. Introduction ...........................................................................................................................1 1.1 Background ........................................................................................................................................1 1.2 Existing work on rerouting under ECAs .................................................................................3 1.3 Defining the problem .....................................................................................................................4 2. Methodology .........................................................................................................................6 2.1 Assessing baseline ECA emissions coverage without rerouting ..................................6 2.2 Identifying representative traffic plus rerouted legs .........................................................7 2.3 Estimating fuel consumption and fuel costs for original and alternative legs .......11 2.4 Estimating ship rerouting and emissions displacement under an ECA ...................13 3. Results and discussion ....................................................................................................... 16 3.1 Baseline ECA emissions coverage without rerouting ..................................................... 16 3.2 Ship’s rerouting decisions when facing an ECA ..................................................................17 3.3 Impact of rerouting on emission shares covered by ECAs ........................................... 18 4. Conclusions ......................................................................................................................... 20 References ................................................................................................................................22 Appendix A ..............................................................................................................................24 Appendix B ...............................................................................................................................25 Appendix C ...............................................................................................................................26 i ICCT WHITE PAPER LIST OF FIGURES Figure-ES 1. The share of sulfur oxides that ships emit within 200 nautical miles covered by an Emission Control Area. ....................................................................................iv Figure 1. Existing Emission Control Areas around the world ..........................................................1 Figure 2. Line density of oceangoing vessel traffic in 2014 and 2015 along the California coastline ..............................................................................................................................3 Figure 3. Example of rerouting around a 50 nm Chinese ECA between Shenzhen and Shanghai. ...........................................................................................................................4 Figure 4. Line density of OGV ship traffic along China’s coastline in June 2015. ..................8 Figure 5. Representative shipping legs for analysis. .........................................................................9 Figure 6. Alternative legs between Shenzhen, China, and Busan, Korea. ...............................10 Figure 7. Voyage and rerouted emissions by leg. ............................................................................. 14 Figure 8. Percentage of SOX emissions within 12 nm, 24 nm, 50 nm, and 100 nm of the Chinese coast without rerouting. ........................................................................... 16 Figure 9. Rerouting decision matrix for 10 sample ships under three fuel price scenarios. ............................................................................................................................................17 Figure 10. The share of sulfur oxides that ships emit within 200 nautical miles covered by an Emission Control Area.. .................................................................................. 19 LIST OF TABLES Table 1. Selected information for sample ships that transit each of the five legs ................. 9 Table 2. Assumptions on delay time allowance for each ship class ..........................................12 Table 3. Fuel price scenarios, in 2015 U.S. dollars .............................................................................13 Table 4. Emission retention rate by ECA width and fuel price assumption ...........................18 Table A1. Future crude oil and bunker fuel price scenarios .........................................................24 Table B1. Calculations for rerouting decisions .................................................................................25 Table C1. Calculations for rerouting decisions .................................................................................26 Table C2. Emission retention rate by delineation scenario, medium fuel price differential case .............................................................................................................................. 27 ii DELINEATING A CHINESE EMISSION CONTROL AREA EXECUTIVE SUMMARY When making travel plans, a traveler’s first choice is usually the quickest available trip from origin to destination. If the shortest route contains a toll, the traveler might consider a slight detour to avoid the additional charge. Ship operators make similar decisions while at sea. Because regional environmental regulations designed to reduce emissions from ships can increase operating costs, ship operators may choose a different route, avoiding the additional costs but also reducing the efficacy of the regulations themselves. As China tackles its air quality issues, government regulators have turned their focus to shipping, an industry that burns thousands of tons of highly polluting heavy fuel oil (HFO) near densely populated coastlines every day. Historically, one way to reduce air pollution from ships is by establishing an Emission Control Area (ECA), a geographic region designated by the International Maritime Organization (IMO) where more stringent emission standards apply. China has already implemented domestic emission control areas in three port clusters along China’s coastline, although they are smaller and currently have less stringent standards than an IMO ECA. As a next step, China could think about applying to IMO to designate an international ECA covering its entire offshore coastal region. China must first decide on the delineation of the ECA itself—should it be only the size of its territorial sea (12 nautical miles, nm), or as wide as its exclusive economic zone (up to 200 nm), or something in between? A delineation closer to shore is politically easier to achieve because China can unilaterally regulate ships in its territorial waters. However, a narrow ECA delineation may actually increase emissions if ship operators divert around the ECA to save on fuel costs, as ECA-compliant fuel is more expensive than traditional marine fuel. Therefore, China should consider how to delineate an ECA to prevent rerouting and ensure maximum emission reductions and public health benefits. In this paper, we quantify the emissions reduction potential of four ECA delineation scenarios, taking into account the potential for ships to route around the ECA. The scenarios are as follows: 1. ECA extending 12 nm from the coast, which is the boundary of China’s territorial sea. 2. ECA extending 24 nm from the coast, which is the boundary of China’s contiguous zone.1 3. ECA extending 50 nm from the coast. 4. ECA extending 100 nm from the coast. Starting with our 2015 ship emissions inventory, which is based on actual ship traffic near China, we estimated the amount of ship-related air pollution emissions that could be covered by an ECA if no ships rerouted (baseline) and compared it to emissions that would be covered ships did reroute (rerouting). This assumes that ship operators are economically rational and would try to minimize fuel costs by rerouting outside the ECA. 1 A contiguous zone, defined by the United Nations Convention on the Law of the Sea, is “a zone contiguous to its territorial sea, described as the contiguous zone,” and “may not extend beyond 24 nautical miles from the baselines from which the breadth

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