Södertörns Högskola SÖDERTÖRN UNIVERSITY Statutory Declaration

S¨odert¨ornsUniversity | School of business studies

Master’s Dissertation 30 ECTS | Spring Semester 2012

Cruise tourism on the Baltic Sea and implications of water quality legislation

A case study on balancing the interests of the cruise industry and local economies with long-term environmental sustainability

Author: Sandy R. Polack

Supervisor: Dr. Anders Steene

södertörns högskola SÖDERTÖRN UNIVERSITY Statutory declaration

”I declare in lieu of an oath that I have written this Master thesis myself and that I have not used any sources or resources other than stated for its preparation. I further declare that I have clearly indicated all direct and indirect quotations. This Master thesis has not been submitted elsewhere for examination purposes.”

Date: June 12th 2012 Signature:

2 Acknowledgements

First of all I would like to thank my parents for continuous support and opportunity to pursue my desires for personal growth! I express sincere gratitude to Anders Steene at S¨odert¨ornUniversity for the opportunity of writing this dissertation under his professional guidance. Your feedback during our personal meetings and in numerous emails was always of high quality, to the point and a source of motivation and new ideas. Of course I would like to thank all that contributed with their opinions and responses to the investigative component of this research; Mr. Thomas Johansson, Mrs. Stina Paulin, Mr. Dan Lindstedt, Mr. Nicholas Rose, Mr. James Van Langen and Mr. Olof Olsson. I would like to thank my sister Jessy, for helping me out around the house for the duration of this project! And lastly I would like to thank Bart, Iris and Erik. Bart for never ending support and relentless proof-reading. Erik and Iris for cheering mommy up in the moments she needed it most, with a laugh, a drawing or a song!

Sandy R. Polack

3 Table of Contents

Abbreviations and organisations 10

Abstract 13

1. Introduction 14 1.1. Background...... 14 1.2. The structure of this dissertation...... 17

2. Theoretical framework 18 2.1. Background: the cruise industry...... 18 2.1.1. Relevant terminology...... 18 2.1.2. The Cruise Industry...... 19 2.1.3. Definition of a Cruise...... 21 2.1.4. Cruise ships and cruise ship classes...... 21 2.1.5. Economic significance of cruise tourism for ports...... 21 2.1.6. Cruise Ships and their environmental impact...... 23 2.1.7. Laws, Regulations and Incentives...... 24 2.1.8. Magnitude of cruise traffic on the Baltic Sea 2006-2010...... 25 2.1.9. The Cruise Baltic project...... 25 2.1.10. Cruise Ship Tourism in the Baltic - threats...... 26 2.1.11. Stockholm as a Cruise Destination...... 28 2.1.12. Swedish organisations relevant for the Baltic Sea environment... 31 2.2. Background: the environment...... 31 2.2.1. Relevant terminology...... 31 2.2.2. Sustainable tourism...... 32 2.2.3. Oceanography of the Baltic Sea...... 33 2.2.4. MARPOL Annex I on ship generated oil waste...... 36 2.2.5. MARPOL Annex IV on ship sewage...... 36 2.2.6. MARPOL Annex VI on emissions...... 36 2.2.7. EU Strategy and Action Plan for the Baltic Sea Region (EUSBSR) 37 2.2.8. HELCOM...... 37 2.2.9. Waste water management...... 41 2.2.10. Waste water treatment onboard cruise vessels...... 42 2.3. Background: marketing...... 45 2.3.1. The 4 P’s of marketing...... 45 2.3.2. Influencing behaviour using cost and price...... 46

4 2.4. Problem analysis and research questions...... 46 2.4.1. Problem analysis...... 46 2.4.2. Research questions...... 47

3. Methodology 48 3.1. Research method...... 48 3.1.1. Desk research, qualitative and quantitative methods...... 48 3.1.2. Case study...... 49 3.1.3. Expert interviews...... 50 3.2. Advantages and disadvantages of the chosen methods...... 51 3.2.1. Validation and reliability...... 52 3.3. Researched stakeholders...... 53 3.4. Interview questionnaires...... 54 3.5. Survey of general public...... 55

4. Results and analysis 57 4.1. Response overview...... 57 4.2. Organisations’ response...... 57 4.2.1. Response from Swedish Agency for Marine and Water Manage- ment (Havs och Vattenmyndigheten)...... 57 4.2.2. Response from Swedish Maritime Administration (Sj¨ofartsverket). 60 4.2.3. Response from Ports of Stockholm (Stockholms Hamnar)..... 62 4.3. Cruise industry’s response...... 64 4.3.1. Response from Birka Cruises...... 64 4.3.2. Response from Carnival...... 66 4.3.3. Response from Royal Caribbean...... 69 4.4. Facebook survey on willingness to pay for responsible sewage handling on the Baltic...... 73

5. Conclusion, critical review and suggested future research 76 5.1. Conclusion...... 76 5.2. Research question: state of cooperation for long-term competitiveness?.. 76 5.3. Research question: how to deal with increased cost?...... 78 5.4. Closing remarks and personal opinion...... 78 5.5. Validation, limitations and critical review...... 79 5.6. Future Research...... 81

References 82 List of URL’s...... 83

A. Appendix: Cruise lines calling on Stockholm in 2012 86

B. Appendix: Cruise Tourism on the Baltic Sea Statistics 88

C. Appendix: Economic theory on price elasticity 91

5 D. Appendix: Economic theory on costs 94

E. Appendix: Example of questionnaires sent to various stakeholders 96 E.1. Example of questionnaire sent to the Swedish Agency for Marine and Water Management (Havs och vattenmyndigheten)...... 96 E.2. Example of questionnaire sent to Royal Caribbean Cruise Lines...... 97 E.3. Example of customised questionnaire sent to Tumlare Sweden AB.... 99

F. Appendix: Baltic Ports Organisation (BPO) on HELCOM guidelines for sewage discharge 100 F.1. BPO comments to HELCOM guidance on technical and operational aspects of sewage delivery to Port Reception Facilities...... 100

G. Appendix: Comments from CLIA on PRF’s 103 G.1. Technical problems related to port reception facilities...... 103 G.1.1. Comments from the CLIA and the ECC...... 103

6 List of Figures

2.1. The biggest cruise operators by market share in 2011. Adapted from: www.cruisemarketwatch.com/blog1/home/...... 20 2.2. Royal Caribbean International’s Oasis of the Seas, designed for 5400 passengers, entering the port of Nassau, Bahamas...... 22 2.3. Snapshot of ship traffic in the Baltic Sea on April 8th 2009, Source: HEL- COM AIS, accessed via www.helcom.fi/stc/files/shipping/Overview%20of% 20ships%20traffic updateApril2009.pdf...... 25 2.4. Number of ships crossing predefined AIS lines 2006-2009. Source: HEL- COM AIS...... 26 2.5. Cruise Baltic statistics on passenger numbers on cruises longer than 60 hours (source: www.cruisebaltic.com/media(1544,1033)/Cruise Baltic Market Review 2012.pdf)...... 27 2.6. Cruise Baltic statistics on top 5 ports for cruises longer than 60 hours (source: www.cruisebaltic.com/media(1544,1033)/Cruise Baltic Market Review 2012.pdf)...... 27 2.7. Left: Stockholm cruise vessel calls per year. Right: Stockholm cruise passengers (000’s) per year. The 2012 figures are estimates. Source: Cruise Baltic, appendixB)...... 29 2.8. The Baltic sea basin (source: www.baltex-research.eu)...... 34 2.9. Algal blooming in the Baltic Sea on 27-07-2008, source: University College London, Dept. of Space and Climate Physics (Source:www.ucl.ac.uk/ mssl/imaging/research)...... 35 2.10. Delivered sewage (in tons and m3) to the PRF compared to calls at a port. Source: HELCOM Baltic Sea Environment Proceedings No. 123 (2010)...... 40 2.11. Typical steps in a waste water treatment system...... 43

4.1. Survey results: how much would you be willing to pay additionally per day to have your sewage treated instead of dumped in the Baltic...... 74 4.2. Example of a cruise operator (TallinkSilja) implementing a fuel surcharge to deal with varying fuel prices that were not included when prices for the season were set. A similar approach to sewage surcharge is not recommended (see text). www.digipaper.ﬁ/tallinksilja/75337/...... 75

B.1. Cruise passenger numbers per port. Source: Cruise Baltic www.cruisebaltic. com/media(1560,1033)/Cruise Baltic statistics 2000-2012.pdf...... 89

7 B.2. Cruise vessel calls per port. Source: Cruise Baltic www.cruisebaltic.com/ media(1560,1033)/Cruise Baltic statistics 2000-2012.pdf...... 90

C.1. (Fictitious) demand curve for the number of consumers (x-axis) willing to pay the price for a 5-day-cruise (y-axis) to satisfy their ’need for a break’. 92

8 List of Tables

1.1. The various ’special areas’ under IMO...... 16

2.1. Examples of diﬀerent sizes (classes) of cruise ships and their tonnage. Adapted from Morgan and Power (2011)...... 22 2.2. Cruise Baltic statistics relevant for Stockholm (appendixB)...... 30

4.1. Summary of responses. Swedish names for the organisations listed can be found in section 2.1.12. In the ’survey’ colunn: • means: survey sent and response received, ◦ means survey sent but no response received...... 58

9 Abbreviations and organisations

A selection of relevant organisations (and their abbreviations) that will appear often in subsequent chapters is listed here for future reference.

BPO Baltic Ports Organisation: Organisation that aims to improve the competitiveness of maritime transport in the Baltic region by increasing the efficiency of ports, marketing the Baltic region as the strategic logistics centre, improving the infrastructure within the ports and the connection to other modes. Currently has just over 40 member ports from 9 countries around the Baltic sea. 1 BSAP Baltic Sea Action Plan: The Helsinki Commission’s strategy for achieving its goal of environmentally friendly maritime activities on the Baltic Sea. Its 8 management objectives are stated in section 2.2.8.1. CLIA Cruise Lines International Association: Founded in 1975, it is one of the largest industry organisations. From the CLIA website: ”CLIA’s mission is to promote policies and practices that foster a safe, secure and healthy cruise ship environment; educate and train its travel agent members; and promote and explain the value, desirability and affordability of the cruise vacation experience.” 2 ECC European Cruise Council: The European Cruise Council (ECC) represents the leading cruise companies operating in Europe and has 30 cruise members and 34 associate members. 3 EUSBSR EU Strategy for the Baltic Sea Region is the first EU macro-regional strategy. It centers around making Baltic Sea cleaner, making the region more dynamic and prosperous, and improving security. More on EUSBSR on page 37. GHG Green-house gas: a gas that contributes to global warming. In the case of shipping and maritime legislation CO2, SOx and NOx are of particular interest. HELCOM Helsinki commission: The Helsinki Commission is a collaboration between the countries that border the Baltic Sea (Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Russia and Sweden.) From the website: ”HELCOMs vision for the future is a healthy Baltic Sea environment with diverse biological components functioning in balance, resulting in a good ecological status and sup- porting a wide range of sustainable economic and social activities.” 4

1www.bpoports.com/about.html 2www.cruising.org/regulatory/about-clia 3www.europeancruisecouncil.com 4www.helcom.ﬁ/helcom/en GB/aboutus/

10 IMO International Maritime Organisation: The International Maritime Organisation is the United Nations entity concerned with the safety and security of shipping as well as the prevention of marine pollution by ships. The IMO Convention entered into force in 1958 and the organisation changed its name from IMCO to IMO in 1982. Although it started out as an organisation aimed mainly at making international shipping more efficient, during the late sixties and early seventies the important tasks of prevening pollution at sea were added. MARPOL (see below) is an important result of IMO’s efforts. 5 International Convention for the Prevention of Pollution from Ships see MARPOL. IPCC Intergovernmental panel on climate change: The Intergovernmental Panel on Cli- mate Change (IPCC) is the leading international body for the assessment of climate change. It was established by the United Nations Environment Programme (UNEP) and the World Meteorological Organisation (WMO) to provide the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socio-economic impacts. Currently 195 countries are members of the IPCC. 6 See also section 2.2.6 on MARPOL Annex VI Emissions. MARPOL convention MARPOL is short for ”International Convention for the Preven- tion of Pollution From Ships, 1973 as modified by the Protocol of 1978”. Its objective: ”to preserve the marine environment through the complete elimination of pollution by oil and other harmful substances and the minimization of accidental discharge of such substances.” 7 At this moment the convention is signed by 136 nations, representing basically all nations that have access to the sea. Different annexes of MARPOL are concerned with different types of pollution: I Oil II Noxious liquid substances carried in bulk III Harmful substances carried in packaged form IV Sewage (more on the content of this annex on page 36) V Garbage VI Air pollution For ratifying parties recognition of annexes I and II is compulsory, the remaining annexes are optional. The for this dissertation relevant annex IV (entered into force 2003) has been subscribed by 124 countries (October 2009 figure). It should be noted that the USA is one of the nations that have not ratified Annex IV to MARPOL. 8 MARPOL also defines Special Areas (stricter rules for certain areas) which follow the same numbering as the annexes (i.e. a ’Annex VI Special Area’

5www.imo.org/About/HistoryOfIMO/Pages/Default.aspx 6www.ipcc.ch/organization/organization.shtml.T5VQnLODuAg 7www.imo.org/about/conventions/listofconv....(marpol).aspx 8www.imo.org/about/conventions/listofconv....(marpol).aspx

11 is an area with increased requirements for shipping related air pollution). See also SECA below. MEPC Marine Environment Protection Committee: MEPC is a committee of the IMO (see above) and also stands for the MEPC amendments to MARPOL annex VI (see above). It speciﬁcally regulates the exhaust of substances that harm the ozone layer as well as the fuel change over when entering/leaving SECA areas (see below) and fuel oil sulphur limits. MSFD Marine Strategy Framework Directive A EU directive (2008) that explicitly states the objective that ”biodiversity is maintained by 2020.” 9

NECA (NOx) Emission Control Areas: Special areas in the MARPOL convention (see above) deﬁned by the International Maritime Organisation IMO that due to their unique geographical or ecological situation have to follow rules. See also SECA. 10 PRF Port Reception Facility: All ports handling any international shipping must provide facilities where vessels can dispose of waste and residues that cannot be discharged at sea. The adequateness of PRF’s is discussed further in section 2.2.8.3.

SECA (SOx) Emission Control Areas: Special areas in the MARPOL convention (see above) deﬁned by the International Maritime Organisation IMO that due to their unique geographical or ecological situation have to follow rules. SOx Emission Control Areas are: Baltic Sea (2006), North Sea (2007), US North Sea (2012) and US Caribbean (2014). 11

9ec.europa.eu/environment/water/marine/ges.htm 10www.imo.org/OurWork/Environment/PollutionPrevention/SpecialAreasUnderMARPOL/Pages/ Default.aspx 11www.imo.org/OurWork/Environment/PollutionPrevention/SpecialAreasUnderMARPOL/Pages/ Default.aspx

12 Abstract

”Environmental consciousness has progressed from a trend into a global way of life,” and customers expect environmentally friendly cruising. 12 As of July 2011, stricter sewage discharge regulation on the Baltic Sea requires vessels to either treat sewage on board or deliver untreated sewage to Port Reception Facilities for treatment at the municipal treatment plant. The present research investigates to what extent the stricter Baltic regulation, risks becoming an incentive for cruise companies to move itineraries to regions with less strict regulation (cost savings). The first research question; ”is the current state of cooperation between cruise operators and local (environmental, economic, development) organisations sufficient to ensure long term competitiveness for cruise tourism on the Baltic?” is answered by using desk research and expert interviews. The second, ”how should cruise operators deal with the increased sewage treatment cost?” was assessed by a short survey among potential customers. Regarding the cooperation between cruise companies and organisations, this research concludes that there are good examples of cooperation, but that more intensive cooperation is desirable, especially when stricter emission regulation enters into force in 2015. When it comes to cost management the survey strongly suggests that cost transfer to passengers is possible, but that a ’sewage surcharge’ (similar to current fuel surcharges) is not recommended but that cost increases should be included in the cruise price. Both research questions merit further investigation to define more specific actions and more detailed recommendations. Keywords: cruise tourism, sewage discharge, Baltic Sea, port reception facilities, waste water management, surcharge

12www.worldcruise-network.com/features/feature78425/

13 1. Introduction

This dissertation gives an overview of the current state of waste water discharge legislation on the Baltic, and tries to assess the level of cooperation (or tension) between tourism stakeholders on one side and involved (environmental- and stakeholders-) organisations on the other. Based on the analysis of the current state together with the outcome of a more general ’waste handling’ survey to potential cruise passengers, a recommendation to cruise operators will be made with respect to the desirability to add a surcharge for dealing with increased compliance costs.

1.1. Background

Tourism has become part of daily life for most inhabitants of developed countries. Cruise tourism is no exception to this and has shown growth for the past decades. Cruise tourism destinations have been impacted by this economically, socially, environmentally, culturally, sometimes positively, sometimes negatively. Like any other economic activity there is a significant environmental impact from this sector which has to be dealt with. Traditionally, a lot of attention has been given to carbon dioxide reduction measures that aim to limit the consequences of human emission of greenhouse gasses. Taking the 2009 United Nations Climate Change Conference or Copenhagen summit as an example, it is unlikely that legislation will be able to offer a complete sustainable solution to the sector’s impact on ecosystems where it is present. 1 Cruise tourism, and therefore its environmental impact, will not cease to grow and adequate response is required to advance the sector in a sustainable way. It is safe to assume that the adequate response will lead to increased costs for the cruise operators, but it is not trivial that the tourist will be willing to pay for this offset. With the advance of for example low cost air travel, all actors in the tourism sector have seen demand become more price elastic (customers are more sensitive to small price differences than before, since they can shop easily for alternatives on internet). With the margins under pressure due to increased competition, how will heavily cruise- tourism-dependent destinations manage the temptation to artificially boost attractiveness by lowering requirements for ships that call on that destination (and thus remain interesting for cruise operators reluctant to raise prices)?

1un.org/wcm/content/site/climatechange/lang/en/pages/2009summit

14 This poses an interesting dilemma for the cruise operators: how to balance the desire to operate more environmentally conscious with the related increased costs? Can the increased costs be absorbed in the cruise’s price or is a surcharge system (such as the one in effect for fuel with several cruise operators) desirable? Moreover, Steene (2011) cites that carbon dioxide emissions are a big contributor to the tourism industry’s environmental footprint. In 2035 emissions are expected to have increased by 150% and if no measures are taken tourism might become the largest sole responsible for climate deterioration compared to all other industry sectors. Can the partial results of this theses be successfully applied to a pricing recommendation for cruise operators when even stricter emissions-legislation comes into effect in 2015? The Baltic Sea region is a unique ecosystem because of its location at northern latitude, its narrow connection to the North Sea (seriously limiting its capability for refreshing its water) and its relatively low salinity. This makes the Baltic Sea much more sensitive to water pollution than other bodies of water where cruise liners operate. Although stricter environmental footprint regulation will probably be imposed, it is important to make sure that for operators cruising the Baltic the water pollution goals are made a specific and separate part of the requirement. Failing to do so, e.g. by defining only generic environmental impact limits, might tempt operators to focus on (more) easily attainable noise, CO2 or low sulphurous-content-fuel measures, and neglect water pollution (or vice versa). Since it is precisely water pollution that makes a difference for the health of the Baltic Sea, failing to address it specifically would in practice mean a failure of the intent of the environmental regulations. Since HELCOM (page 10) is most likely to impose the strictest environmental legislation, this paper will mainly focus on the cruise operator’s planned and anticipated measures to comply with the requirements on discharge water quality imposed by HELCOM. Attention will be paid to the industry’s environmentally friendly image against its actual behaviour and the difficulties of effective regulations. This paper will focus on waste discharges which are unavoidable and compliance in this area is expected to lead to higher operating costs for cruise operators. Other spills, such as oil spills for example, although detrimental for the health of the Baltic Sea, will be considered accidental and therefore not a cost driver (it is assumed that cruise companies will have taken every precaution to prevent spills, so that if an accidental spill might occur it will not lead to lower costs).

At this time the contribution of NOx and SOx emissions to eutrophication (see 2.2.1) are excluded from this paper’s scope since they do not present a challenge specific to the Baltic but more of a global challenge (especially by the stricter emission regulations in effect starting 2015). The effects of these emissions on global climate change are briefly discussed in section 2.1.6. The unique character of the Baltic being designated a Sewage Special Area is apparent in table 1.1 where all IMO special areas are listed. Almost all could be studied ’anywhere’ whereas the sewage Special Area status is unique to the Baltic and therefore focus of this dissertation.

15 Table 1.1.: The various ’special areas’ under IMO Special Areas Adopted Entry into Force In Effect Annex I: Oil Mediterranean Sea 2 Nov 1973 2 Oct 1983 2 Oct 1983 Baltic Sea 2 Nov 1973 2 Oct 1983 2 Oct 1983 Black Sea 2 Nov 1973 2 Oct 1983 2 Oct 1983 Red Sea 2 Nov 1973 2 Oct 1983 * ”Gulfs” area 2 Nov 1973 2 Oct 1983 1 Aug 2008 Gulf of Aden 1 Dec 1987 1 Apr 1989 * Antarctic area 16 Nov 1990 17 Mar 1992 17 Mar 1992 North West European Waters 25 Sept 1997 1 Feb 1999 1 Aug 1999 Oman area of the Arabian Sea 15 Oct 2004 1 Jan 2007 * Southern South African wa- 13 Oct 2006 1 Mar 2008 1 Aug 2008 ters Annex II: Noxious Liquid Substances Antarctic area 30 Oct 1992 1 Jul 1994 1 Jul 1994 Annex IV: Sewage Baltic Sea 15 Jul 2011 1 Jan 2013 ** Annex V: Garbage Mediterranean Sea 2 Nov 1973 31 Dec 1988 1 May 2009 Baltic Sea 2 Nov 1973 31 Dec 1988 1 Oct 1989 Black Sea 2 Nov 1973 31 Dec 1988 * Red Sea 2 Nov 1973 31 Dec 1988 * ”Gulfs” area 2 Nov 1973 31 Dec 1988 1 Aug 2008 North Sea 17 Oct 1989 18 Feb 1991 18 Feb 1991 Antarctic area 16 Nov 1990 17 Mar 1992 17 Mar 1992 Caribbean, Gulf of Mexico 4 Jul 1991 4 Apr 1993 1 May 2011 Annex VI: Prevention of air pollution by ships (Emission Control Areas) Baltic Sea (SOx) 26 Sept 1997 19 May 2005 19 May 2006 North Sea (SOx) 22 Jul 2005 22 Nov 2006 22 Nov 2007 North American (SOx, and 26 Mar 2010 1 Aug 2011 1 Aug 2012 NOx) United States Caribbean Sea 26 Jul 2011 1 Jan 2013 1 Jan 2014 ECA (SOx, NOx) * The Special Area requirements for these areas have not yet taken effect because of lack of notifications from MARPOL Parties whose coastlines border the relevant special areas on the existence of adequate reception facilities (regulations 38.6 of MARPOL Annex I and 5(4) of MARPOL Annex V). ** The entry into force is subject to the amendments being accepted by Parties by 1 July 2012.

16 The remainder of the paper is centered around the following research questions: 1. Is the current state of cooperation between cruise operators and local (environmental, economic, development) organisations suﬃcient to ensure long term competitiveness for cruise tourism on the Baltic? 2. How should Cruise operators deal with the increased cost of complying to local environmental regulation?

1.2. The structure of this dissertation

The general outline of the reasoning behind this dissertation’s research questions were presented in the previous section. Chapter two is divided in four parts, three discussing the specific backgrounds of the relevant cruise-industry-related, environmental and marketing concepts, and one part summarizing the research questions. Chapter three presents an analysis of research methodology and data collection methods used and lists interviewed stakeholders and typical questionnaires. Chapter four summarizes the results and presents a consolidated discussion of how cruise operators as well as Baltic organisations are coping with the Baltic sewage legislation challenges. It includes also results of an on-line survey on pricing with respect to the desirability of including increased sewage-handling cost in the cruise price or charge a surcharge. Finally chapter five draws conclusions from the material presented, provides a critical analysis of the possibilities of extending the conclusions to other research areas and offers suggestions for further investigation.

17 2. Theoretical framework

This chapter contains four parts: three of them address the background of the cruise industry, environment and marketing, whereas the fourth states the research problem together with the research questions. Every section is introduced by a short list of definitions that are used in the following paragraphs. The backgrounds on the cruise industry and environment are provided to give a summary of cruise-industry-related concepts and realities relevant for analysis of the force field between cruise industry and other stakeholders around the Baltic. It specifically reviews the statistics on cruise tourism on the Baltic together with its economic importance for the region, as well as, the different legislation and regulation frameworks in place (such as MARPOL, HELCOM etc.). Waste water management options on board cruise vessels is briefly discussed to gain understanding of the challenges for cruise operators to comply to ever-changing requirements for sewage quality. The research questions that conclude this chapter are introduced by the main research problem statement in section 2.4.

2.1. Background: the cruise industry

2.1.1. Relevant terminology

Not necessarily in alphabetical order, rather in logical-conceptual order. Cruise Sail from place to place for pleasure, calling at a succession of destinations, or to sail, journey or move about by a cruise ship coined by Morgan and Power (2011). More on this particular deﬁnition on page 21. Cruise ship Quoting Morgan and Power (2011), a cruise ship is a ﬂoating passenger vessel used commercially for pleasure voyages (more on page 21). Cruise tourist Again, Morgan and Power (2011); A cruise tourist is a person buying a cruise trip who spends at least one, but usually two nights or more on a cruise ship, usually for leisure purposes. Call When a ship enters a port, it ”calls”. The number of calls in a port is hence the number of ships visiting that port. A call is called a turn-around, if the passengers leave the ship at the port and new passengers board the ship. Turnarounds also include part-turnarounds. A call is called a part-turnaround if, not all, but a crucial part of the passengers leave the ship and new passengers board.

18 2.1.2. The Cruise Industry

The cruise industry is relatively young (40-50 years). 1 The purpose of travelling in this case is not entirely the destination it is also the means and the experience during the trip. For many tourists, the cruise experience embodies a series of powerful motivations; it is often perceived to be safe, social, customer friendly and service oriented. Travel expert Douglas Ward says: ”Cruising is popular today because it takes you away from the pressures and strains of contemporary life by offering an escape from reality. Ward (2002) elaborates; ”cruise ships are really self-contained resorts, without the crime, which can take you to several destinations in the space of just few days.” It is additionally an important means of income for the tourism industry as a whole. In 2011 the cruise industry was estimated at about US$ 29.4 billion carrying approximately 19.2 million passengers. These figures are expected to rise to 31 billion and 21.6 million respectively for 2014. 2 Apart from sound growth, the cruise sector has managed to pull off another impressive feat: it managed to add an image attracting younger passengers while not scaring away their existing customer base. In 2002 the median age of a cruise passenger was 52, in 2008 it was 46. 3 The major industry’s players widened their marketing programmes to appeal to a wider variety of customer segments, sometimes helped by sheer luck (cruise bookings soared in the month the film Titanic was released). However the cruise industry is nowadays used as a text book example of a segment successfully adapting to changing customer preferences and appealing to new potential customer segments. The cruise industry is used as an example of successful segmentation by Mullins et.al. (2003) in their text on Marketing. Factors that are frequently quoted in contributing to the cruise industry’s extraordinary marketing are: • Cruise operators invested significantly in larger, steadier ships that incorporated many additional facilities such as casinos, theatres, spas etc. • Shorter and cheaper cruises become more common, attracting more price-sensitive customers. Cruises can last from a couple of days up to several (6) months. • Cruise operators worked hard to extend their geographical footprint to offer cruises from more and more cities all over the world. • A considerable amount of resources was dedicated to advertising, campaigns and promotion programmes. During the late nineties Carnival, Royal Caribbean and Princess spent about $ 100 million annually on TV advertising. • The cruise industry succeeded in establishing a segmentation of its customer base and catering to the different needs of each segment. Examples are romantic settings

1For a brief historic description, see Morgan and Power (2011) 2www.cruisemarketwatch.com/blog1/.....projections/ (See References for full URL.) 3www.economist.com/node/15501665

19 2011 Global cruise company market share Other Disney Norwegian Cruise 8% 2% Lines 8%

Carnival 51%

Royal Carribean 26%

MSC Cruises 5%

Figure 2.1.: The biggest cruise operators by market share in 2011. Adapted from: www. cruisemarketwatch.com/blog1/home/

attracting honeymooners, Disney themes attracting families with kids, Broadway productions for a more conventional audience etc. ) Future success will largely depend on the cruise-industry players ability to sustain growth at a par with the building of new ships and opening up of new routes. Not all is positive though. The enormous growth of the sector has its downsides. Many different threats can be identified such as cruise tourism becoming a more interesting target for terrorist attacks (cruising revenue dipped in 2002 after 9/11). Another threat to the industry itself is over capacity. It is hard to adjust the total available supply of cruise beds to a varying global demand. This has already led to a significant consolidation in the industry with bigger players buying up the small players. Figure 2.1 shows the biggest global players by revenue in 2011. Cruise tourism has also been identified as a contributor to socio-environmental problems, ranging from water pollution to greenhouse-gas emissions and from low-wages-job-off- shoring to injecting sums of money in non-democratic societies. Cruise tourism is not only concerned with the destinations (shore excursions) and the travel in between (amenities and services on board). Many tourism packages include air

20 travel to and from the cruise’s embarkation port as well.

2.1.3. Deﬁnition of a Cruise

Cruise Europe’s definition: A Cruise is a voyage of at least 60 hours by a seagoing vessel, mainly for pleasure. Only passengers with tickets that should include accommodation and all meals are transported. The Cruise voyage must include at least two visiting ports apart from the starting and ending port. 4 We will however deviate from this definition by including also shorter cruises (24 hours). This allows us to include the inter-Baltic Cruises (cruises between Baltic ports for 1 or 2 days). Because of the size of the Baltic, using the 60 hour limit would exclude a large part of the inter-Baltic cruises. Since they operate on shorter distances but frequently, their environmental impact should not be neglected. We will for the purpose of this dissertation define a cruise as: Sail from place to place for pleasure, calling at a succession of destinations, or to sail, journey or move about by a cruise ship. Adapted from: Morgan and Power (2011).

2.1.4. Cruise ships and cruise ship classes

A cruise ship is a ﬂoating passenger vessel used commercially for pleasure voyages, see: Morgan and Power (2011). At the time of writing the largest cruise ships can take on more than 5000 passengers. Rather than the number of passengers, gross tonnage is used to indicate the size of a ship. Gross tonnage is a measure of the volume (not weight as the name might suggest) of a ship. Gross tonnage is used for the establishment of fees and the application of regulation. It can also be used to compare diﬀerent cruise ship’s sizes with each other, since the ratio of tonnage versus passengers, expresses roughly the space available to each passenger and/or services on board (see table 2.1).

2.1.5. Economic signiﬁcance of cruise tourism for ports

Considering the amount of passengers a single cruise ship can bring to a port or city, it is no surprise that the related spending is an important incentive for harbour cities to promote their port as a cruise destination. Arrival of cruises ships and their passengers is normally expected to stimulate economy activity. Some may be direct purchase of fuel, water, payment for berthings, port

4www.cruisebaltic.com/media(1315,1033)/Cruise Baltic Market Review 2010 ﬁnal.pdf

21 Figure 2.2.: Royal Caribbean International’s Oasis of the Seas, designed for 5400 passengers, entering the port of Nassau, Bahamas.

Table 2.1.: Examples of diﬀerent sizes (classes) of cruise ships and their tonnage. Adapted from Morgan and Power (2011). Classiﬁcation Example Passengers Tonnage Tnge/psngr Resort ships RCI Oasis of the Seas 5 400 220 000 41 Mega ships P&O Ventura 3 100 115 000 37 Large ships P&O Oceana 2 016 77 000 38 Medium-size ships Cunard Queen Elizabeth 2 200 92 000 42 Small ships Global Marine Marco Polo 826 22 080 27 Ultra-luxury ships Seabourn Odyssey 450 32 000 71

22 fees, etc. Most of the economy impact will however , be traced to the tourist and their activities, Manning (2008). The industries that are most likely to benefit from the visitor activities are: transportation (taxis, buses,automobiles, boat rentals), tour operators (including organizers, guides), selected attractions (mainly those marketed as a part of tours or shore activities by the tour staff on the ship) and shops (mainly those located close to the dock, or marketed directly by the ship activities staff.)

2.1.6. Cruise Ships and their environmental impact

”For tourism, climate change is not a remote event, but a phenomenon that already affects the sector and certain destinations in particular, mountain regions and coastal destinations among others. At the same time, the tourism sector is contributing to green-house gas emissions (GHG), especially through the transport of tourists.” 5 Manning (2006) distinguishes between the impact of ship operations and the impact of tourist activities and claims that the latter (e.g. socio economic impact on rural communities) has received less attention than the effects of the first (e.g. emission regulations for cruise ships). About one third of cruise-ship-generated air pollution is actually from emissions while docked in a port. Auxiliary diesel engines are used for power supply to the ship’s electric power circuits while the main engines are off. Efforts are ongoing to supply docked vessels with (cleaner) shore-power to reduce these emissions. In a 2007 estimate the carbon footprint of the total shipping industry is put at around 870 million tonnes per year, 2.7% of total global man-made-emissions. An important contributor to environmental impact of cruise tourism is the sulphurous content in ship fuel oil. SOx present in exhaust fumes of ships, will lead to particle contamination, but more relevant for the marine environment, acidification in the sur- roundings of ports and shipping lines. The same goes for NOx exhaust which leads to acidification and eutrophication (see 2.2.1) as well. The Baltic was declared a SOx Emis- sion Control Area (SECA) under MARPOL Annex VI (see page 10 and section 2.2.5), in 2006, which limited the allowed sulphur content of ship fuel to 1.5%. From 2010 this limit was decreased to 1.0% and from 2015 the limit will be even lower at 0.1% .6 The Cruise Industry is well aware of the international pressure on reducing environmental impact and realizes it is being scrutinized by international and/or self-proclaimed watch dogs (e.g. www.foe.org/cruise-report-card). This has also led to the Cruise Oper- ator’s articulating environmental policies and creating positions such as ’environmental officer’ to make sure procedures, recycling initiatives and for example sewage treatment regulations are followed. On a large cruise ship, there may be as many as ten crew members whose full-time job is to handle waste disposal.

5www.unwto.org/climate/bkg/en/bkg.php?op=1 6www.helcom.ﬁ/shipping/emissions/en GB/emisions/

23 Cruise companies recognize that their passengers ask questions about the ethical stance the company takes on pollution and the environment so it makes logical business sense to adopt sound practices to ensure that the maximum possible is done in the name of environmentalism, Vogel et.al. (2012). The Baltic Sea region’s stakeholders, assembled in the Helsinki Commission (see page 10 and section 2.2.8) are recognised globally as being a forerunner when it comes to environmental regulation and raising awareness for sustainability of Baltic Sea shipping and tourism in the region. At the same time, Ketkar (1995) emphasizes that environmental protection is high on every seagoing officer’s list of priorities. Both engineers and navigation officers are personally liable for the protection of the environment and, if negligent, can face criminal charges resulting in hefty fines, loss of licences, and even imprisonment.

2.1.7. Laws, Regulations and Incentives

Shipping is an international industry, connecting parties from various parts of the world. The sea presents the ”world’s greatest highway”, whose use is enjoyed by all nations and the continuance and safeguarding of the use is essential, according to Don- aldson (1994). To regulate their interactions and to ensure the safe, secure and sustainable operation of this industry, a regulatory framework has been developed. As the cruise industry is one sector of the shipping industry , cruise companies have to adhere to the same international rules and regulations as any other shipping sector. The international nature of maritime legislations poses additional challenges to stakeholders trying to put up incentives to promote a certain (e.g. environmentally-friendly) behaviour. The regulatory framework of the shipping industry is discussed in more detail by Boy and Neumann (2012). What’s important in the present discussion has been highlighted before as well: the relevant organisations and governments have already aligned themselves in the form of the Helsinki Commission, which reduces the risk for potential conﬂicts. Moreover the Helsinki Commission has proven to be ambitious in its goals, meaning that the HELCOM requirements exceed the international requirements. If the countries around the Baltic adhere to the HELCOM requirements, they automatically adhere to the looser MARPOL and IMO requirements (see page 10 and sections 2.2.8 and). This is however a bigger problem for Cruise operators that are required to adhere to international and local regulations at the same time. As local regulations diverge from region to region, this becomes a major cost driver for internationally operating cruise companies. A point emphasized by Norwegian Cruise Line’s mr. Fiebrandt in his expos´e for the December 2009 ASTM (American Society for Testing and Materials) meeting.7

7www.astm.org/COMMIT/F25Presentations/ﬁebrandt.ppt

24 Figure 2.3.: Snapshot of ship traffic in the Baltic Sea on April 8th 2009, Source: HELCOM AIS, accessed via www.helcom.fi/stc/files/shipping/Overview%20of%20ships% 20traffic updateApril2009.pdf

2.1.8. Magnitude of cruise traﬃc on the Baltic Sea 2006-2010

The Baltic Sea is heavily trafficked by passenger ships, cargo vessels and tankers. Figures 2.3 and 2.4 show a snapshot traffic density in the Baltic on April 8th 2009 and trend lines for ships counted crossing a reference line during one week between 2006 and 2009. Although the Baltic only accounts for 0.1% of the total water surface of the earth, it carries 10% to 15% of the world’s maritime traffic. Cruise traffic, including the numerous passenger ferries, accounts for 4.5% of maritime traffic on the Baltic. Every year there are between 120 and 140 shipping accidents (2008) in the Baltic, and that numbers grows as the magnitude of traffic increases. Many HELCOM data sources for Geographic Information Systems (GIS) are accessible through the Helcom AIS online mapping tool: www.helcom.fi/GIS/en GB/HelcomGIS/.

2.1.9. The Cruise Baltic project

In 2004 twelve Baltic ports, 26 organisations, in 10 countries established a collaboration in order to promote cruise tourism to and in the Baltic Sea. Over the years it has grown to include 25 destinations, 41 partners. Cruise Baltic’s statistics can be accessed on: www.cruisebaltic.com/composite-719.htm and are (partly) included in appendixB. It is important to note, though that Cruise

25 250000

200000

150000 Passenger Cargo 100000 Tanker

Number Number of ships Other 50000 No info

0 2006 2007 2008 2009 Year

Figure 2.4.: Number of ships crossing predeﬁned AIS lines 2006-2009. Source: HELCOM AIS

Baltic’s deﬁnition of a cruise excludes cruises shorter than 60 hours, which for the Baltic leads to a serious underestimate of total Cruise Tourism, considering the vast amount of ’Stockholm - Tallin’ type cruises! However trends when it comes to cruises longer than 60 hours, are reproduced in ﬁg- ures 2.5 and 2.6

2.1.10. Cruise Ship Tourism in the Baltic - threats

It is easy to describe the increasing (environmental) legislation on the Baltic as a threat in the eyes of the Cruise operators in the Baltic. The threat, however, is not the increasing legislation. The increasing legislation is required to preserve the Baltic environment as a cruise destination not only the next decade but for generations to come as well. In that light all legislation, and related costs or expenses, should be seen as investments allowing the (Baltic) cruise industry to be profitable well into the 21st century. The threat lies therein that too many different locally varying legislation will put practical limits to how much individual cruise operators are willing to invest and therefore achieve when it comes to actual exhaust and discharge reductions for example. Mr. Fiebrandt of Norwegian Cruise Lines showed at the December 2009 ASTM meeting ,mentioned in section 2.1.7, that at that time cruise liners are subject to no less than 8 different requirements on maximum concentrations of pollutants in sewage discharges, depending on the 8 regions they are serving. 8 It is this divergence in requirements

8www.astm.org/COMMIT/F25Presentations/ﬁebrandt.ppt

26 Figure 2.5.: Cruise Baltic statistics on passenger numbers on cruises longer than 60 hours (source: www.cruisebaltic.com/media(1544,1033)/Cruise Baltic Market Review 2012.pdf)

Figure 2.6.: Cruise Baltic statistics on top 5 ports for cruises longer than 60 hours (source: www.cruisebaltic.com/media(1544,1033)/Cruise Baltic Market Review 2012.pdf)

27 that is a threat to both the cruise industry as well as the environmental groups, since complying with all of them will be economically prohibitive. In a comment on the HELCOM guidance regarding waste discharges on the Baltic Sea, the Baltic Ports Organisation (BPO) sums up a number of issues complicating enforcement of Baltic HELCOM regulation. The document can be found in its entirety in appendixF. The BPO comments on HELCOM raise a few challenging points: • Regionally different and stricter sewage discharge regulations are causing more and more ships to actually install Advanced Water Treatment plants on board. This enhances the uncertainty for ports when it comes to installing their own Port Reception Facilities (a significant investment) since they might become obsolete as more ships carry treatment plants. • The term sewage is loosely defined which makes that actual chemical and biological composition of the sewage might differ from ship to ship (depending on its pre-treatment). This changing sewage composition might lead to municipalities raising treatment tariffs to the ports (or even reject sewage) due to time-wise high concentrations of undesirable substances (e.g. metal content) • While not all ports have Port Reception Facilities (PRF’s, see page 10 and section 2.2.8.3), how to deal with the increased treatment costs at the ports that do have PRF when they take in sewage that was not discharged at the last port of call.

2.1.11. Stockholm as a Cruise Destination

As was stated in the introduction, this research will often use Stockholm as a starting point for discussions for the following reasons: • Stockholm is part of the top 5 destinations in the Baltic. If Stockholm is taken as a reference for the other 4 top-5 Baltic cruise ports, 95% of Baltic cruise tourism is covered. • Stockholm and Sweden are recognised for being on the fore front of environmental legislation. So studying the impact of Swedish regulations on the Cruise tourism sector, will prepare the industry for the future when even other ports adopt stricter measures. • For geographical reasons stakeholders with an office or representation in Stockholm are more easily interviewed in person than organisations in other locations. Being one of the top five Baltic cruise destinations, Stockholm fully benefits from the impressive growth the sector has shown the past decade (see section 2.1.9). Calls are getting more numerous and vessels are getting larger, hence the total number of passengers visiting Stockholm grows even faster.

Calls to Stockholm port 2007-2012 Cruise passengers to Stockholm 2007-2012 300 500

450 290 400

280 350

300

270 (000's) 250 Calls 260 200 Passengers

250 150

100 240 50

230 0 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 Year Year

Figure 2.7.: Left: Stockholm cruise vessel calls per year. Right: Stockholm cruise passengers (000’s) per year. The 2012 ﬁgures are estimates. Source: Cruise Baltic, appendixB)

29 Table 2.2.: Cruise Baltic statistics relevant for Stockholm (appendixB). Year 2007 2008 2009 2010 2011 2012 Calls 255 265 293 261 263 274 Passengers 281 000 365 000 447 000 415 000 452 000 470 000 Turn-arounds 27 28 38 31 39 46

Stockholm appeals to cruise ship visitors because of its archipelago, its clean and interesting city, historic old town and signature buildings (e.g. city hall), the Vasa-museum, etc. Stockholm is not only an important call for cruise passengers but also an important turn-around port, where significant numbers of passengers (dis)embark and use other infrastructure such as the region’s hotels as well as airports for inbound (onward) travel. Income due to cruise tourism for the Stockholm region is estimated to SEK 5 billion per annum. There are approximately 4200 cruise-tourism-related jobs in the region.9 Growth usually also implies bigger impact on the environment and the growth of cruise tourism to Stockholm is no exception. Stockholm prides itself as being an environmentally friendly destination and actively works to balance the economic benefits with the possible adverse effects on the global and local environment. A portion of the Cruise Baltic statistics (see appendixB) relevant to Stockholm is reproduced in table 2.2. Cruise Baltic’s definition of a cruise does not include cruises shorter than 60 hours. The numbers in the table do not include the numerous short city-cruises from Stockholm to Riga, Tallin, Helsinki, Abo˚ and Aland.˚ The major incentive for ports to promote themselves as attractive cruise destination or turn-around is the economic gain to the city due to passenger spending while on shore. For Stockholm this amount is estimaded to SEK 1000 per passenger for regular passengers that call on Stockholm and SEK 3000 per turn-around passenger. 10 The Stockholm port authority, Ports of Stockholm (Stockholms Hamnar), claims it was ranked the 8th most-environmentally friendly port in 2007. 11 In its environmental mission, Ports of Stockholm explicitly state that: ”The environment is an integral and self-evident part of our daily operations. Our long-term and conscientious efforts have led to us being classed as one of the leading green ports in Eu- rope. We work actively, long-sightedly and strategically to create reliable and sustainable transportation.” 12 Ports of Stockholm uses a system of differentiated dues, where vessels that meet certain ’green’ requirements pay lower dues for port services. Vessels that use low-sulphur fuels

9www.stockholmshamnar.se 10www.stockholmshamnar.se/en/News-and-press/2008/.../Frihamnen/ (See References for full URL) 11www.stockholmshamnar.se/Documents/EN/Trycksaker/Miljofakta ENG.pdf 12www.stockholmshamnar.se/en/Prices-and-services/

30 and choose to discharge sewage and waste using the port’s facilities, get discounts on fees.

2.1.12. Swedish organisations relevant for the Baltic Sea environment

Since this dissertation takes the port of Stockholm as a starting point (for it being representative for a port imposing the strictest environmental regulations) some Swedish entities concerned with the Baltic are listed here. Despite their diﬀerent backgrounds, they all align themselves with the MARPOL convention and the HELCOM directives. They are listed here for completeness’ sake with clickable links to their respective websites. Swedish Agency for Marine and Water Management or Havs och vattenmyndighet www.havochvatten.se Swedish Environmental Protection Agency or Naturv˚ardsverket www.swedishepa.se Swedish Maritime Administration or Sj¨ofartsverket www.sjofartsverket.se Swedish Transport Agency or Transportstyrelsen www.tranporstyrelsen.se Ports of Stockholm or Stockholms Hamnar www.stockholmshamnar.se The remainder of this paper will in most cases only state the English name of the organisation.

2.2. Background: the environment

2.2.1. Relevant terminology

Eutrophication Excessive supply of nutrients to an environment leading to increased levels of organism growth. In marine context it is the excess supply of nitrogen and phosphorus to the water which leads to turbidity, algal blooms, disappearance of underwater vegetation and oxygen-depleted areas on the bottom. Sewage discharges Sewage discharges, or in the context of this dissertation residual eﬄuents from ships, contain many minerals, organic matter and in general nutrients that contribute to eutrophication (see above). White water fresh potable water. Grey water waste water from activities such as laundry, washing, bathing, dish washing which could (in theory) be recycled on site for use in irrigation or other activities that do not per se require fresh potable water. Black water or sewage waste water containing urine and faeces. Bilge water water that accumulates in the lowest parts of the ship (the bilge). It may be rain/sea/leakage/spillage water that on its way down from the deck takes with it pollutants (oil, detergents, urine etc.).

31 Salinity The salinity indicates the salt content of water. • Fresh water: salt content <0.05%. • Brackish water: salt content between 0.05 and 3%. • Salt, salty or saline water: salt content between 3 and 5% • Brine: salt content >5%. Port A port is a harbour where cruise ships can enter and leave a destination. The logistics at a port can be complicated since many passengers have to (dis)embark, at the same time as waste and provisions are taken off/on board. Ports offer different (paid) services, of which waste disposal is the most relevant in the framework of this dissertation (see also below, PRF). PRF Port Reception Facility: All ports handling any international shipping must provide facilities where vessels can dispose of waste and residues that cannot be discharged at sea. The adequateness of PRF’s is discussed further in section 2.2.8.3.

2.2.2. Sustainable tourism

Sustainable tourism is a blanket term used to describe the type of tourism that tries to take into account its environmental impact and ensure sustainability so that future generations can enjoy the same sites and resources we enjoy today. Blom and Nilsson (2005) state that: ”The tourism industry is the worlds fastest growing industry. In the 1950s 25 million travelled to a foreign country, and by 2020 it is counted to be nearly 1.56 billion tourist visiting foreign countries.” Any such growth will be accompanied by major challenges to minimize environmental and adverse socio-economic impact and be considered ’sustainable’. Addressing these challenges defines the area of sustainable tourism. It can be applied to all forms of tourism, but for the purpose of the research discussed here, focus will lie on the impact of Baltic Sea environmental sewage discharge legislation on cruise tourism. For the Baltic, sustainability presents a short term dilemma; how to promote environmentally friendly cruise tourism (with its benefits for the region) without putting a larger pressure on the sensitive ecosystem of the Baltic. In the long-term there is no such dilemma; failure to protect the Baltic’s unique character will make its appeal (and in consequence its related benefits) disappear.

Regulation to achieve sustainability (work place equality, no or less CO2 footprint, reduction of NOx and SOx emissions, reduction of sewage-discharge-generated nitrogen and phosphorous loads to the system) will add ’short-term cost’ to the region’s (cruise) operators. ’Short-term cost’ will aﬀect price and price does aﬀect demand. More on that in appendixC and further. Above ’short-term cost’ (the use of quotes) is used to denote that in reality it is not a real ’cost’ in the sense that it could be considered an investment to allow for the (cruise) business to continue not only in the short-future but also for generations to come.

32 2.2.3. Oceanography of the Baltic Sea

Figure 2.8 gives a quick overview of the entire Baltic Sea basin. With a surface area of 392 978 km2 it is a relatively small body of water (18th by size globally). The average depth is 55 meters (quite shallow), with the deepest point just off Gotland, at 459 meters. The total volume is 21 205 km3. There are several oceanographic features that make the Baltic unique to a certain degree when compared to other seas and oceans where Cruise Tourism operates. • The Baltic is connected to the North Sea through the relatively narrow Danish Straits. This means that mixing with the North Sea is very slow. For the purpose of this dissertation, it is particularly important that once pollutants are discharged into the Baltic, they’ve got a big chance of staying in the Baltic. The water renewal time is stated around 40 years (roughly from 500 km3 inflow per year on a volume of 20 000 km3.) • The coastline has a complicated shape with archipelagos, causing complicated currents and making hydrographic modelling more challenging. • The Baltic is composed of different gulfs and basins, which can differ significantly from each other in terms of hydrography and ecology. Measurements done in one part of the Baltic, may or may not be representative for other regions. • In summer a pronounced stratification of temperature is present. • Year round a stratification of salinity occurs, with higher salinity towards the bottom and more brackish water towards the surface. • The Baltic is partly covered with ice every winter. • Flow patterns are complex. About 940 km3 of brackish surface water discharges every year in the North Sea. Only 475 km3 of deeper, saltier water flows back. Not much mixing between the surface and deeper lying layers occurs, leading to salinity stratification with most of the salty water staying below depths of 40 to 70 m. The difference in flows is accounted for by the fresh water effluents from the streams from the basin (1.6 million km2 [85 million inhabitants], see the coloured land masses in figure 2.8), plus precipitation minus evaporation. • Overall the Baltic Sea is brackish with average surface salinity around 0.6-0.8 % compared to on average 3.5% for oceans. Salinity at deeper depths is on average between 1 and 1.5%. In general waters close to the Straits of Denmark are more saline whereas waters in the north of the Gulf of Bothnia are basically fresh waters. This makes ecosystems in the Baltic confined to narrow regions where life occurs that is adapted to the local salinity. • About three quarters of deeper parts of the Baltic is considered an anaerobe (oxygen-depleted) dead zone. Because of the heaver salty water not mixing with the lighter fresh water at the surface, the deeper salty waters do not have contact with the atmosphere and suffer therefore from oxygen depletion. It is not literally

33 Figure 2.8.: The Baltic sea basin (source: www.baltex-research.eu)

34 Figure 2.9.: Algal blooming in the Baltic Sea on 27-07-2008, source: University College Lon- don, Dept. of Space and Climate Physics (Source:www.ucl.ac.uk/mssl/imaging/research)

dead; (anaerobe) bacteria live in the dead zones digesting organic material and releasing hydrogen sulphide H2S.

• Myrberg (2008) writes: ”algal bloom occurs yearly in summer (and has been for decades) when certain parts of the Baltic Sea become so rich with nutrients (see section 2.2.1; eutrophication, SP) that phytoplankton thrives and become abun- dant in large parts of the Baltic.” (See ﬁgure 2.9).

All of the above make the Baltic diﬀerent from many other places where Cruise Tourism takes place. Many other subjects linking environment to Cruise Tourism could be studied easily or easier elsewhere, but the sensitivity of the Baltic with regards to its oceanographic properties, make it much more vulnerable to external pollutants, than many other seas. This is why the operators in the Baltic will have to ﬁnd a way to cope with increasing legislation and related cost drivers. That cannot be studied elsewhere.

This is acknowledged by for example the following (partly paraphrased) passage from HELCOM Baltic Sea Environment Proceedings No. 123 (2010): ”Currently the sewage- discharge-related nutrient addition is relatively small compared to the total nutrient load to the Baltic Sea, they are, however, signiﬁcant due to the sensitivity of the Baltic Sea to eutrophication. Nutrients in sewage discharge may have considerable eﬀects on the growth of pelagic phytoplankton since the nutrients are discharged directly to the open sea ecosystem.” Source: HELCOM Baltic Sea Environment Proceedings No. 123 (2010).

35 2.2.4. MARPOL Annex I on ship generated oil waste

Annex I of MARPOL (see page 11 for a refresher of the annexes of MARPOL) deals with waste containing oil or oily mixtures. It explicitly requires that any eﬄuent from the ship (be it deck run-oﬀ or discharge from cargo or oil tanks) must not contain more than 15 ppm (parts per million) of oil content. The reason it is highlighted here, since the more relevant annex for this dissertation is MARPOL annex IV, is that only the requirements of Annex I & II (noxious bulk substances) are mandatory for all member states. Member states are not required to comply with annexes III through VI.

2.2.5. MARPOL Annex IV on ship sewage

MARPOL Annex IV is the most relevant part of the MARPOL convention since it deals with sewage discharges from ships. As mentioned before, the special oceanography of the Baltic (little mixing and refreshing with the North Sea) make that sewage discharges are especially important to control in order to keep the Baltic Sea healthy. This is more or less unique to the Baltic, as opposed to the implications of other MARPOL annexes which apply to ships, and in particular cruise ships, everywhere else around the world. MARPOL Annex IV allows discharge of sewage or waste from a ship into the sea under the following criteria: 0-3 nautical miles (0 - 5.6 km) from the shore: discharge of sewage is only allowed if the ship has a certiﬁed sewage treatment plant on board. 3-12 nautical miles (5.6 - 22.2 km) from shore: discharge of sewage is allowed only after disinfection and after it is been ground to small pieces. at distances greater than 12 nautical miles (22.2 km) from shore: untreated, not dis- infected sewage may be discharged. Any discharge should occur gradually at a cruising speed of at least 4 knots (7.4 km/h). In July 2011, the IMO Marine Environment Protection Committee (MEPC) approved a joint proposal from the HELCOM countries to amend MARPOL Annex IV and designated the Baltic Sea a special area for sewage discharges from passenger ships. 13 In practice this means that no sewage discharges from passenger ships are allowed on the Baltic. See also the section on HELCOM’s The Baltic Strategy (section 2.2.8.2).

2.2.6. MARPOL Annex VI on emissions

The United Nations’ Intergovernmental Panel on Climate Change is internationally the leading advocate for greenhouse gas reductions, required to stop (or lessen) the trend of global warming caused by human actions. Relevant for marine vessels are CO2, SOx

13www.helcom.ﬁ/shipping/waste/en GB/waste/

36 and NOx emissions from sulphur in fuel oil and inefficient combustion in a ships engine. Although the specific effects of green-house gas (GHG) legislation are not an explicit part of this research, parallels with sewage legislation can be drawn. MARPOL Annex VI regulates the emissions from merchant and other vessels. The designation of SECA’s (see section ) is a result of recent enhancements of MARPOL Annex VI. The Baltic is such a designated SOx Emission Control Area and as a result the emissions of sulphur oxides in the region will be reduced by the use of low-sulphur fuel oil. More on this in section 2.1.6.

The shipping industry is also required to cut its NOx and CO2 emissions significantly. These are no different from emission-control efforts in any other industry and are not specific to neither the cruise industry nor the Baltic and, therefore, not part of the research problem (section 2.4.1) of this paper.

2.2.7. EU Strategy and Action Plan for the Baltic Sea Region (EUSBSR)

The European Union has initiated the EU strategy and Action Plan for the Baltic Sea region in the year 2009. It aims to make the Baltic Sea cleaner, more prosperous and dynamic and more secure. The Baltic Sea coastal states can participate on a voluntary basis in an Action Plan with 80 actions. From the Action Plan, specifically on Annex IV (waste water) regulations: ”Encourage ports, local and regional authorities, and shipping companies to adopt voluntary measures reducing wastewater discharges from shipping and boating and providing facilities in ports for preventing or limiting air emissions of vessels, for example through the introduction of voluntary labels for clean Baltic shipping and sustainable port management complemented by awards for clean shipping projects and environmentally friendly port”. [European Union Strategy for the Baltic Sea Region ACTION PLAN 2009] In addition to the Action Plan, the EUSBSR includes flag ship projects to share best- practices among the member countries. An example is the following: ”Promote measures to collect ship generated waste.” This flagship project promotes the enhanced applications of HELCOM’s ’no-special-fee’ system (see also bullet on page 39). It stresses the importance that ports around the Baltic follow a similar approach when implementing Port Reception Facilities (PRF) for example. At the same time it advocates the enhancement of the capabilities of the PRF’s so they can receive and treat not only oily waste waters, but also black sewage water. It builds on HELCOM’s proposal to the IMO to prohibit discharge of sewage from ships completely (accepted July 2011, see above).

2.2.8. HELCOM

HELCOM Baltic Sea Environment proceedings nr. 123 (2010) gives a good overview of the current state of environmental legislation on the Baltic. Since Helsinki Commission’s

37 (HELCOM, see also page 37) directives are adopted by the relevant cruise destinations in the Baltic, it served as a framework guide for the elaboration of interview questions used in this research. HELCOM has advocated and achieved a stricter sewage legislation than the one pre- scribed by MARPOL Annex IV (see section 2.2.5). The biggest amounts of waste water are produced by the vessels that transport the largest numbers of passengers: cruise liners and ferries. The longer the trip, the bigger the challenge ,and therefore cost, of correct sewage handling. According to Hänninen and Sassi (2009) longer cruise trip operators seldom discharge to the designated PRF but choose to discharge the ’treated sewage’ directly into sea. However, the so-called ’sewage treatment’ does not include the removal of nutrients such as phosphorous and nitrogen, since there are no maximum levels stipulated. So even the ’treated’ sewage from these cruise vessels will contribute to eutrophication of the Baltic (see both section 2.2.1 and page 35). If there were no waste water treatment whatsoever on board, the annual loads for nitrogen would be 356 tonnes and for phosphorous 119 tonnes according to Hänninenand Sassi (2009). These figures are quoted only as a reference to get a feeling for the order of magnitude, since some treatment is actually taking place and some sewage is actually offered to the Baltic’s Port Reception Facilities (PRF’s). From this overestimate we can state that the actual nitrogen load to the Baltic is probably in the ’hundreds of tonnes’ range, and the phosphorous loads in the ’tens of tonnes’ per year. Even these relatively small amounts are significant for marine life in the Baltic with its unique geography (little mixing with the North Sea, 40 years refreshing cycle) and hydrology (stratification, see section 2.2.3). MARPOL Annex IV water quality standards require ship generated effluents to comply with certain ranges of the following indicators: Biochemical Oxygen Demand (BOD): milligrams of oxygen consumed per litre of sample during 5 days of incubation at 20 C. This is a measure for the organic quality of water; 1 mg/l is common for clean water. Untreated sewage will score up to 600 mg/l and once treated sewage can come down to 20 mg/l. MARPOL requires BOD to be smaller than 25 mg/l. Total suspended solids (TSS): the amount of solid residue after passing through a filter (mg/l). MARPOL limit is 35 mg/l (plus correction for ship flushing water). Faecal coliforms: less than 100 per 100 ml. But as was already stated earlier, no allowable concentrations of nitrogen or phosphorous are stipulated. Further reading: In www.astm.org/COMMIT/F25Presentations/fiebrandt.ppt Mr. R. Fiebrandt from Norwegian Cruise Line outlines the issues caused by different discharge standards applied in different parts of the world.

38 2.2.8.1. The Baltic Sea Action plan

The Baltic Sea Action Plan (BSAP) is the name of the Helsinki Commission’s strategy towards the goal of environmentally friendly maritime activities on the Baltic Sea. Its 8 management objectives are: • Enforcement of international regulations - no illegal discharges • Safe maritime traffic without accidental pollution • Efficient emergency and response capability • Minimum sewage pollution from ships • No introductions of alien species from ships • Minimum air pollution from ships • Zero discharges from offshore platforms • Minimum threats from offshore installations

2.2.8.2. The Baltic Strategy

The Baltic Strategy, or in full: Strategy for Port Reception Facilities for Ship-generated Wastes and Associated Issues, imposes much stricter rules for waste and sewage discharge than MARPOL Annex IV (see page 36). • Discharge of all garbage and waste is prohibited with the exception of food wastes which may be discharges at distances from shore greater than 12 nautical miles (22.2 km). • All ships with home port in one of the Baltic Sea states are required to have garbage collection and separation facilities on board. • All ships are required to send their waste and sewage to the Port Reception Facility (PRF) before leaving the port. • A ’no-special-fee’ rule aims to discourage illegal dumping of waste and sewage by making the PRF service free of charge for the visiting ships. At the initiative of HELCOM, in 2009 the participating countries submitted a proposal to the International Maritime Organisation (IMO) to impose stricter rules than the ones in force under MARPOL Annex IV for the Baltic. Where MARPOL Annex IV still allows the discharge of untreated sewage under certain circumstances, HELCOM advocated for making the entire Baltic a Special Area for sewage discharge, similar to the SECA areas for sulphur (see page 12). This is also called ”The Baltic Strategy” (see section 2.2.8.2) In practice it means that no untreated sewage may be discharged into the Baltic and that there are maximum levels of phosphorus and nitrogen for treated sewage that have to be observed.

39 Figure 2.10.: Delivered sewage (in tons and m3) to the PRF compared to calls at a port. Source: HELCOM Baltic Sea Environment Proceedings No. 123 (2010).

The March 2010 meeting of the MEPC (page 12) accepts the creation of the Special Area for Sewage Discharge concept and at the same time designates the Baltic as such an area. However, one of the conditions for the designation of the Baltic as a Special Area for Sewage Discharge is the fact that the submitting countries should provide adequate port reception facilities (PRF, see section 2.2.8.3) for large quantities of sewage from passenger ships. This leaves the stricter rules not legally binding until all ports have such facilities.

2.2.8.3. Port Reception Facilities (PRF)

Port Reception Facilities (PRF’s) are essential to the implementation and enforcement of the Baltic Sea as a Special Area for Sewage Discharge, completely prohibiting the discharge of untreated effluents from passenger ships. HELCOM Baltic Sea Environment Proceedings No. 123 (2010) provides statistics (figure fg:sewagepercall) on the amount of delivered sewage in comparison to the number of calls at ports. These are based on the data available in 2010 and cannot be compared between countries because of the different measures used; cubic metres versus tonnes. Of course it is important to specify what is considered adequate Port Reception Facilities and the working definition adopted by HELCOM currently states: ”The cruise industry considers port reception facilities to be adequate when a port can receive all wastewater effluent via a direct line/shoreside pipe connection at its cruise berth, which can then be effectively treated at the municipal wastewater treatment plant.” HELCOM considers that in 2010 the only ports that qualify for approval according to the definition above, are Helsinki, Stockholm and St. Petersburg.

40 2.2.9. Waste water management

Dickinson and Vladimir (2007) conclude that ”historically, waste disposal was never a concern in the cruise business or the shipping business at large. Contributions of shipping to pollution were literally considered of so little impact as to be without any signiﬁcance”.

Water and waste water management are of increasing importance for the survival of mankind in the 21st century. Only 1% of the water on earth is apt for human consumption (97% is salinated, 2% frozen which leaves 1% fresh water) and the scarcity is making itself felt not only in increased global attention but also in that water has become a source of conﬂict in the world. The demand for water will increase ﬁve times by 2050, but the available amount of water will not. 14

Global efforts are trying to make the general population more aware of for example the water footprint of every day consumables. By adding all the water needed from the beginning of the supply chain to the end, some organisations allow for people to learn how much water is needed to produce a cup of coffee (190 liters), a pair of jeans (1000 liters), a hamburger (5000 liters). 15 Existing water use is all but efficient. Ageing infrastructure (old pipes) for example causes leaks of up to millions of liters a day for bigger cities (680 million liters per day for London for example, the USA 26 billion liters a day). 16

Since the amount of total available water (1%) does not change, the same water is used, treated, cleaned and reused all the time (we are drinking the same water the dinosaurs did). The cycle becomes shorter and shorter. For example dinosaur drinking water would have returned to the fresh drinking water cycle after hundreds of maybe thousands of years. Used dinosaur drinking water would end up in water streams and eventually seas and lakes. Evaporate, build clouds and precipitate in the form of rain or snow. Snow would build glaciers and slowly work its way down through the glacier to end up puriﬁed in melt water streams hundreds or thousands of years later. To be used again by creatures and humans.

The cycle is getting shorter: instead of letting nature take care of the purifying, many industrialized nations actually treat the effluents of its activities and population before it reaches streams, lakes or seas. It is actively recycled so that total water intake for a city for example becomes a combination of fresh water from a source (lake, river, ground water aquifier) and treated and purified water from the waste water treatment plant.

14www.xyleminc.com/ 15www.waterfootprint.org 16www.xyleminc.com/en-us/media-library/Pages/video-library.aspx

41 2.2.10. Waste water treatment onboard cruise vessels

2.2.10.1. Types of waste water; black water and grey water

As was mentioned in the section on concepts, MARPOL Annex IV (section 2.2.5) is the regulation that specifically deals with sewage from ships (excluding the oil-contaminated waters that are covered by MARPOL Annex I (section). In its turn sewage water is often divided in black water (sewage or waste water containing faeces and urine) and grey water (waste water from activities such as laundry, washing, bathing, dish washing which could (in theory) be recycled on site for use in irrigation or other activities that do not per se require fresh potable water). This is not limited to waste water on cruise ships, land based municipal treatment plants are offered the same type of waste water streams, be it that for cruise ships the streams are often more concentrated and that retention times are much shorter compared to municipal retention times. The discharge of sewage is covered by MARPOL Annex IV, the discharge of grey waters from ships is not internationally regulated and according to Hänninenand Sassi (2009) grey water is often discharged directly into the environment.

2.2.10.2. Typical amounts of waste water generated by passengers on board a cruise ship

The amount of sewage generated on board per passenger per day depends on what type of flushing systems are used. Conventional gravity type flushing (comparable to the domestic flushing system) requires 6 times more water than the vacuum feed toilet flush (comparable to air planes). Hänninenand Sassi (2009) calculate that between vessels the effluent streams per passenger can lie anywhere between 10 and 200 liters per day and more specifically for cruise ship passengers between 19 and 38 liters per day. For completeness’ sake some typical waste water quantities for waste water on board of cruise ships are: Activity Quantity Conventional toilet flush (gravity feed) 6-8 liters per flush Toilet flush (vacuum feed system) 1.2 liters per flush 1 minute shower 12-14 liters grey water accumulation less than 300 liters per day HELCOM uses the following guidelines for estimated passenger generated effluent flows on board of cruise vessels: • Conventional gravity fed system: 230 liters per person per day of black and grey water, of which 70 liters are black water. • Vacuum fed system: 185 liters per person per day of black and grey water, of which 25 liters are black water.

42 Waste water Pre- Clarification / Oxidation Disinfection accumulation treatment Filtration iue2.11.: Figure

Mechanical Chemical & Enhanced Holding tanks Sludge removal screening bacteriological purification •Receive flows •Filtering out •Chemicals •Membrane •Ultra-violet that exceed the larger particles (ozone, filtration, light treatment yia tp nawsewtrtetetsystem treatment water waste a in steps Typical process flow of to make other hydrogen dissolved air to eliminate the treatment stages more peroxide, too a flotation (small any residual plant and store effective and lesser extent air bubbles compounds or for treatment protect the chlorine drag solids to bacteria at a later time later stages (causing toxic the surface •If the water is from too large by-products) where they are not clear particles that oxidize the skimmed) and enough for UV might damage organic settling to light to shine the equipment compounds separate the through, ozone •Residue: sludge •Bacteria active biomass, may be used to be stored consume sediment and organic bacteria. compounds •Bacteria have Purified and turn into to be returned water concentrated to the previous sludge stage

Bacteria sludge sludge Sludge disposal 43 Since cruise ships usually experience a peak in waste water generation in the mornings, holding tanks are required to store the ﬂows during peak hour to allow for treatment during the day. The capacity (Cr in m3) can be calculated by multiplying the amount of sewage per person per day (A in m3), the number of people on board (Np) and the amount of days (Da) the holding tank should cover (usually 1 day).

Cr ≥ A · Np · Da (2.1)

For a typical cruise ship of say 3000 passengers, a daily sewage quantity of 60 liters a day (0.06 m3) and 1 day retention, the size becomes 3000 · 0.06 · 1 = 180 m3. For comparisons’ sake that is a three meter high 60 m2 area. While not necessary a large space too consider when a cruise ship is built, it might be hard to ﬁnd this amount of space on board of a ship when retroﬁtting a waste water treatment plant to existing ships.

2.2.10.3. Treatment options

Treatment methods are divided into mechanical (filter type), chemical (disinfectant type) and biological (bacterial processes that reduce and concentrate and settle contaminants). Most treatment systems consist of a combination of at least two of these. The purpose of any treatment system is to achieve contaminant concentrations within the specified limits. In the case of cruise vessels the limits agreed upon in HELCOM (section 2.2.8) are repeated here: Biochemical Oxygen Demand (BOD): milligrams of oxygen consumed per litre of sample during 5 days of incubation at 20 C. This is a measure for the organic quality of water; 1 mg/l is common for clean water. Untreated sewage will score up to 600 mg/l and once treated sewage can come down to 20 mg/l. MARPOL requires BOD to be smaller than 25 mg/l. Total suspended solids (TSS): the amount of solid residue after passing through a filter (mg/l). MARPOL limit is 35 mg/l (plus correction for ship flushing water). Faecal coliforms: less than 100 per 100 ml. But as was already stated earlier, no allowable concentrations of nitrogen or phosphorous are stipulated. A typical more or less conventional system and short descriptions of the treatment steps is presented in figure 2.11. For a more detailed description see Hänninenand Sassi (2009). Although the re-use of treated waste water is common in municipal treatment installations, it is doubtful that cruise ships will soon re-use treated waste water. The risk that a malfunctioning treatment plant leads to mass-illness on board a ship together with the PR challenges (newspapers writing articles on how cruise ships try to ”save money by recycling your neighbour cabin’s sewage”) are considered too big to overcome for the time being (source: personal communication with Xylem employees).

44 2.3. Background: marketing

2.3.1. The 4 P’s of marketing

The impact of legislation and (disposal/emission) penalties to influence supplier (cost) and buyer behaviour (price), can be studied using the framework and concepts provided by the field of marketing. Marketing is a social process involving the activities necessary to enable individuals and organisations to obtain what they need and want through exchanges with others and to develop ongoing exchange relationships, as defined by Mullins et.al. (2003). The above definition stresses among other things the exchange component of marketing. An unsatisfied need is the gap between a person’s actual state on some physical or psychological dimension. ’Wants’ are preferred ways to satisfy needs. A person ’needs’ to drink, but a person ’wants’ a Coke. Or, more applicable to this research: a person ’needs’ a break but a person ’wants’ to go on a cruise. The parties can be almost ’anything’ considering that not only individuals and businesses have ’needs’, and not only big corporations (Coca Cola, Royal Caribbean) can supply. Museums, hospitals, universities also have ’needs’ as do they ’supply’ at some point. The term marketing mix is often used to describe the controllable marketing variables that a marketing manager would use to pursue a firm’s objective in a given target market. The mix consists of the famous 4 P’s: Product: products satisfy needs or wants and doing so they represent a benefit for the party acquiring it. Many product-related decisions influence the marketing mix: product position (’premium’ or ’value for money’) with respect to identified target markets (a process called segmentation in section 2.1.2). Price: pricing decisions influence demands in price-sensitive markets (see appendixC). Pricing can be cost based (a certain gross margin target. It can be value based (a customer is willing to pay X ’extra’ because use of the product [e.g. with a higher quality and longer life-span] saves him in the long term). Prices can be market- based (competitors charge X for a similar product), as long as the supplier can produce at a cost smaller than X, the company makes a profit. Pricing strategies can differ over the life cycle of a product (more on this can be found in texts on marketing, for example Mullins, Walker, Harper and Boyd, 2003). Place: the distribution channel for the product: how does the product reach the consumer in the most effective way. Promotion: how to promote the product? Advertising or personal selling? Web-based promotion? Although variations on the 4 P’s have been proposed to include other dimensions (for example researchers have advocated adding a fifth P for ’personnel’), this research chooses to group relevant variables in these groups (and for example ’personnel’ in the ’product’ ingredient of the mix).

45 From the 4 P’s the price parameter (through inﬂuence of a potential higher cost for cruise operators) is most relevant for this research. Which does not say it cannot be mixed with for example product-related advantages when using ’state of the art sewage treatment’ can back-up a company’s claim to be ’environmentally-friendly’ and attract a new segment of ’environmentally-conscious’ consumers.

2.3.2. Inﬂuencing behaviour using cost and price

Governments try to influence supplier behaviour (taking responsibility for the environmental implication of their activities) by implementing legislation, charging taxes and penalties according to the environmental impact of their choice of policy or technology. Customers evaluate how and where they get most value for money when making purchase decisions. These two groups: suppliers and customers, meet in the middle where the benefit for the customer is valued a fair price offered by the supplier. More specifically: Governments (or other authorities) try to influence supplier- (cruise operator) cost by adding taxes, requirements or penalties. Suppliers will have to increase their prices in order to compensate and maintain operating income contribution. Customers (passengers) will decide whether the increased price is still ’value for money’ and in general demand will decrease with increased price. When cruise operators are faced with the choice; increase prices and risk number of passengers, or move the activity elsewhere with less ’taxes and/or penalties’, it can be seen that the Baltic environmental legislation might scare cruise tourism to other parts of the world, putting tourism-generated jobs and economic revenue in the Baltic at risk. AppendicesC andD contain more detailed descriptions of the process underlying influencing buying behaviour. An important distinction with other industries is that for cruise tourism a large part of the product cost is represented by fixed costs, costs that cannot be reduced easily when demand drops. This makes cruise operators relatively more sensitive to cost increases than other industries.

2.4. Problem analysis and research questions

2.4.1. Problem analysis

Unclear and regionally varying sewage discharge regulations eﬀectively create competition between regions when it comes to remaining an attractive (not disproportionally expensive to comply with local regulations) cruise destination while at the same time taking environmental responsibility (necessary for long-term sustainability of the economically important cruise tourism in the region). Aforementioned competition between (cruise destination) regions is currently underestimated by local organisations and cruise operators and long-term competitiveness of the Baltic as a cruise destination will require extensive cooperation between the stakeholders in the region (governments, organisations such as HELCOM, ECC, BPO, CLIA and cruise operators).

46 2.4.2. Research questions

The problem described in the preceding section will be tested by investigation of the following research questions: 1. Is the current state of cooperation between cruise operators and local (environmental, economic, development) organisations suﬃcient to ensure long term competitiveness for cruise tourism on the Baltic? 2. How should Cruise operators deal with the increased cost of complying to local environmental regulation?

47 3. Methodology

This chapter will introduce the research methods used for the investigation underpinning this dissertation. A general introduction on diﬀerent research methods is given, as well as a short discussion on the advantages and disadvantages of the chosen method. The interviewed parties are listed together with the respective investigative method. The interview questionnaires are discussed and the chapter concludes with a brief overview of the survey of the general public that will prove to give a ’order of magnitude’ ﬁgure for the acceptable additional cost for environmentally sewage handling on-board Baltic cruise ships.

3.1. Research method

In order to obtain viable results and provide new valuable information to the academic sphere concerning relationships (cooperation or tension) between Baltic cruise operators and interest organisations, the author selected literature review and in-depth expert interviews as research methods for the compilation of this dissertation. Both these approaches belong to the discipline of qualitative research methods, which stands in contrast to quantitative techniques. Veal (2006) summarizes the diﬀerences as follows: ”in qualitative research, the collected information is not based on numbers and consequential statistical analysis and conclusions, as it is the case with quantitative methods.”

3.1.1. Desk research, qualitative and quantitative methods

Desk research was used to process existing information on the subject. The main investigative research was conducted following the conventional split of methodology in quantitative and qualitative methods. The research in this dissertation relies primarily on qualitative methods.

Desk research (or secondary research): gathering and analysing information, already available in print or published on the internet, Smith (2010. The available information on the subject is very often very generic (too generic for the specific and unique oceanography of the Baltic) or too much USA-specific-legislation-oriented. The background in the preceding chapter were compiled after extensive desk research on generic as well as Baltic-specific sources and serves as a concise summary

48 on the application of generic and global concepts to the specific and unique situation in the Baltic. On-line as well as conventional sources were used and are referenced accordingly via internet-hyperlinks and references. Quantitative methods deal explicitly with measuring a certain before-state, adjusting parameters or circumstances according to the research questions and measuring the resulting end-state. The difference between the expected result and the actually observed end-state can be used to verify of falsify theories and hypotheses. E.g. questionnaires try to limit the range of responses to a defined number of possible outcomes to facility one-to-one comparison. Qualitative methods deal with the intangible, unmeasurable processes that underlie behaviour, intention or even strategy (the intuitive part of decision making). E.g. interviews are a typical qualitative method to elicit ’honest’ answers to open questions. One method does not exclude the other, as a matter of fact they often result comple- mentary to each other. No 100% qualitative methods without some quantitative aspects (how many objects and their interdependency are researched: 1, 2, more?). Likewise, no 100% quantitative methods where the choice of subject and variables to research somehow was made by the researcher, subject to intangible forces such as culture, interest, previous studies etc. This research dissertation will use a mix of all three methodologies, with an emphasis on desk research and qualitative methods for reasons outlined below. The research questions (section 2.4) of this dissertation might suggest a highly measur- able, and therefore quantifiable, nature: pollution can be measured. As can cost, prices and demand. Sewage discharge regulations are somehow expressed in quantifiable terms (”gradual discharge at a speed of at least 4 knots at least 12 nautical miles from shore”). On the other hand, the before-state and end-state cannot be unambiguously measured: the pricing strategy of the cruise operators is something that will evolve over time and cannot be studied solely as a computer simulation. We cannot isolate the sewage- treatment-generated part of the total cost from the rest. It heavily relies on the cruise operator’s existing cost structure, which they will not share with anyone (corporate confidentiality). It cannot be reliably anticipated what the cruise industry’s answer to future legislation is going to be. It is very much a reasoning around ’what if...’ typical for qualitative research.

3.1.2. Case study

In addition, in order to best contribute to the body of human knowledge, a case study was conducted by collecting primary data. Case studies are a very suitable research method oﬀering comprehensiveness and profundity for understanding a particular phenomenon. Beeton (2005) explains that through the examination of a speciﬁc instance, a general problem can (...) become illuminated. Additionally, case studies demonstrate a

49 high degree of ﬂexibility and are used extensively in tourism research, see Hudson and Ritchie, (2009). Xiao and Smith (2006) provide an overview of the uses , methods and topics of case studies as tourism research strategy. The reason for the growth of popularity of case studies in many ﬁelds, is that they can provide a richer understanding of interesting and important phenomena that could no be achieved through other methods, and in a way that provides a fuller description of the context of the phenomenon under study. Case studies are a tool to produce ’deep’ insights into some phenomenon , including conclusions based on the context of the topic being studied, and involve the use of multiple methods and data sources. In a research context, ’case study’ is best thought of as a research strategy or design rather than a distinct method. In order to gain insight into cruise tourism on the Baltic Sea and implications of water quality legislation, the case of Stockholm as long term environmental sustainable cruise destination was chosen to be analysed.

3.1.3. Expert interviews

To obtain the appropriate information, the conduction of expert interviews was identified as a crucial element of the research process. The aim behind the author’s decision to conduct expert interviews was to gain primary data, to fill the gap in knowledge and to better comprehend of the cruise industry’s work to keep up with innovative solutions and compliance to stricter environmental regulations being introduced in the Baltic Sea Region. So, in addition to conducting a thorough review of the relevant literature, the author also conducted a series of email exchanges with appropriate stakeholders, based on the beforehand gathered theoretic information. In that way, the author wanted to identify and explore the issues and challenges that the Cruise Industry as to face in order to be green or environmental friendly. According to Dunn (2005), interviews are an excellent method of gaining access to information and collecting a diversity of opinions and experiences. The following suggestions and recommendations outlined by Dunn (2005) were taken into consideration and provided a valuable basis for the conduction of the interviews: Select participants The informants listed in section 4.1, were chosen purposefully on the basis of their considerable knowledge about Swedish cruise market or Swedish maritime environmental regulations. They were approached and agreed to provide answers to the questionnaire by e-mail. All interviews were conducted in English but since some of the respondents’ mother tongue was Swedish and for reasons of better fluency, the answers were collected in Swedish. All translations from Swedish to English, presented in chapter four, were done by the author. Construct the survey The instruments utilised for the expert interviews were questionnaires, consisting of between 5 and 10 questions, each individually adapted to the field of expertise of the respective interview partners. At the end of the questionnaire the author decided to add one extra question asking for any other thoughts

50 or comments that they think would contribute to the research. The research topics covered in the questionnaires were the result of thorough literature review and con- siderations about how the gained theoretical knowledge could be combined with practical approaches. Collect the data All questionnaires were answered by e-mail, there was no immediate possibility for the author to dig deeper by asking further questions, however, the respondents provided very comprehensible answers and there was no lack of clarity. Analyse the data After the collection of all opinions and the response translation, the results and findings were compared and separated in two groups, the first one called ’organisations’ and the second one called ’cruise operators’. It is very important to point out that the author decided to divide the second group in two sub-groups due to geographical factors (’Baltic-only’ and ’others’). The analysis of the findings is integrated in results as well as in the paper’s conclusion.

3.2. Advantages and disadvantages of the chosen methods

The benefits of literature review have already shortly been outlined above and include deepening the researcher’s knowledge of the topic at hand as well as serving as a basis for the development of a suitable research protocol. Additionally, a thorough literature review can facilitate to place the study in the context of existing research. However, one major concern the researcher should be cautious about, is the risk of confirmation error. Smith (2010) reminds that ”when it comes to interpreting the own case study’s findings in light of other existing models from the literature, one should be aware of and open for the possibility that the findings contradict each other.” Generally, case studies use a wide variety of different sources. The data sources for this dissertation consisted of the already mentioned personal interviews with key informants, but also of in-house documents, company-specific studies and the organisations website. Smith (2010) points out that all the sources used for case studies need to be used with sensitivity and caution, and that it is good to have a certain degree of scepticism, as documents might not necessarily be accurate or could be incomplete. Similarly, the content of websites might be highly biased or even inaccurate, because it only shows how the organisation wishes to be portrayed. Also, as already mentioned above, misinterpretations of interviews and the other sources are very likely. Case studies can be time-consuming. Not only must multiple data sources be accessed, but substantial time and effort may be required to be able to get key informants to agree to interviews. Then you need time to code and interpret the transcriptions of the interviews. Finally, you should go back to your original subjects to show them your summary of those interviews to ensure that your interpretation is accurate. Finally , case study researchers can become emotionally involved in their work and subjects. However, a researcher doing a case study needs always to maintain a degree of separation from her or his topic to minimize the risk of bias or misinterpretation.

51 The main limitation of case studies is normally the fact that even though they can only describe insights gained from one specific studied case, there is temptation for generalising these results. Like most case study researchers, the author of this thesis is aware that it is not possible to generalise to a larger population. Still, there is often a desire by researchers to report some general principles based on their findings that might have broader implications. This is definitely possible, as good case study research can without doubt teach important lessons, as shown by Smith (2010). Decrop (1999) argues that ”regarding the virtue of expert interviews, it can be found that even though qualitative research is often criticised to lack credibility and rigour, it undoubtedly has some benefits.” First of all Walle (1997) argues that due to the fact that qualitative research is free to ask questions, it may be possible to examine reality in all its complexity, which may not be the case with quantitative research. Consequently, it may provide a deeper understanding of the research area. However, Dunn (2005) is aware of the disadvantages and reminds that carrying out expert interviews may be very time-consuming, as the formulation of the questions and the definition of the specific topics to be covered within the interview have to be carefully planned and prepared. Another potential negative aspect, reiterated by Jamal and Hollinshead (2001), is that ”human beings are very complex and thus, the researcher might have difficulties to correctly interpret the behaviour of the interviewees.” Apart from rigorous literature review using articles, reports and books on the topic, the author extensively used the method of data collection by internet. Although often criticised for having the disadvantage of being a subjective rather than an objective source (companies will state their objectives, but usually no objective feedback is available on the data presented), this method was included for three reasons. Firstly, the amount of information available is just so extensive that the mere presence of the data indicates the importance given to the subject by the respective organisations or companies. Secondly, by disregarding the data present on the internet the author’s questionnaires would probably only elicit ’please refer to our web-page’-replies. There is no reason to believe that the intentions in a response to a questionnaire are any more than intentions instead of objective data, thereby invalidating the second argument to discard internet sources for data collection. Thirdly, is the tourism industry a dynamic one where new developments happen all the time. Even the legislation proposals (usually not the implementation though) are made available as they are conceived by the legislative authorities. Relying solely on printed or peer-reviewed research channels, would mean a too big delay for this contemporary research subject.

3.2.1. Validation and reliability

The limitations mentioned above lead to the issue of the concepts of validity and reliability, which are the key challenges of research and should be addressed at this point. Yin (2003) proposes that validity, on the one hand, is about whether the applied instruments actually measure what is intended to be measured. There are three forms of validity, namely construct, internal and external validity.

52 • Construct validity indicates whether the author’s judgement and evidence are sound and allow him or her to obtain valid conclusions. • Internal validity is about whether the conclusions made about causes and effects are reasonable and make sense, hence if they are functionally related. • External validity, moreover, implies whether the findings lead to deeper insights or support other concepts and models related to the topic of the study. These concepts, which are commonly used to judge the quality of any empirical social research, are also vital for this dissertation. Especially during the empirical data collection, the author of this dissertation aimed at assuring high validity. Increased validity was thereby assured by avoiding subjective data collection. Instead, multiple information sources, ranging from personal interviews to website and other published data were used for the compilation of the relevant chapters. Smith (2010) defines that ”reliability, on the other hand, is the degree to which the researcher, or any other person, would come to the same results if the exact same study was to be carried out again.” The author’s aim was to conduct a reliable study, however, it is not possible to determine its true reliability unless the same investigations would be carried out again under the same conditions and with the same subjects.

3.3. Researched stakeholders

Following the methodology described in previous sections, the following stakeholders were identified for further research. They are grouped in ’organisations’, ’cruise operators’ and ’other’. Web-research was conducted on all of them. From the information on their website it was decided on whether to elicit further input by sending out an interview. Organisations or cruise operators with extensive information on their website, were regarded less suitable to send questionnaires to, since the reply would most probably be along the lines of ”please read the information on our web site”. When several cruise operators belong to the same group, usually on the group was contacted, assuming that there is no differences in environmental policies between companies within the same group. In general, the type of sampling used for this purpose was non-probability sampling, this means that the subjects were not chosen at random, but after pre-selection process based on desk research. This method is preferred over probability sampling because the total number of stakeholders (different opinions) is relatively small (adding all cruise companies, organisations would yield a total population in the ’tens of subjects’, not hundreds or thousands). When dealing with relatively small populations, selecting a truly random sample (and verifying the randomness of the sample) is too difficult. The nature of the research therefore changed from a statistical survey to a case study on the degree of cooperation between stakeholders.

Organisations An email survey was sent to the following organisations:

53 • Swedish Environmental Protection Agency or Naturv˚ardsverket • Swedish Agency for Marine and Water Management or Havs och Vatten Myn- digheten • Swedish Transport Agency or Transportstyrelsen • Swedish Maritime Administration or Sj¨ofartsverket • Ports of Stockholm or Stockholms Hamnar Cruise operators Email surveys were sent to the respective holding companies for the following brands. For cruise operators with extensive information on their web site, web research was used as input. • Royal Caribbean International, representing brands such as: Azamara Club Cruises, Celebrity Cruises, Pullman Tours. • Carnival Cruises, representing brands such as: Aida Cruises, Cunard, Holland America Line, Ibero Cruceros, P& O Cruises, Seabourn, Princess Cruises, Costa Cruise Lines. • Prestige Cruise Holdings, representing brands such as: Oceania Cruises, Re- gent Seven Seas Cruises. • Tallink Silja Line • Viking Line • Birka Cruises • Destination Gotland Other A broader perspective on the impact of water quality legislation on the Baltic was obtained by interviewing and miscellaneous contact with the following adja- cent stakeholders:

• Tumlare Sweden AB, the Stockholm-based oﬃce of an international supplier of city-tours to cruise companies calling on Stockholm. • Xylem Water Solutions AB, manufacturer of water treatment systems with headquarters in Stockholm.

3.4. Interview questionnaires

Since the two stakeholder groups of organisations on one side and cruise operators on the other, have diﬀerent angles on the issue, two diﬀerent surveys were elaborated. Complete survey examples are included in appendixE and the main questions are outlined here. In the actual questionnaires sent out to organisations and cruise operators, much more context was given in order to facilitate a quicker and better understanding of the purpose with the questions. The questions to organisations boil down to the following:

54 1. How is [organisation] involved when it comes to balancing the benefit that tourism brings to the region with the local point sources of pollution that come with it? 2. Having adequate PRF’s in all ports of call is a prerequisite for enforcing the latest no-untreated-sewage-discharge regulation from HELCOM. How does [organisation] deal with the challenge these loopholes offer? 3. How does [organisation] look upon the fact that nitrogen and phosphorous concentrations contribute to eutrophication but are not regulated in the latest MARPOL concentration limits? 4. Does [organisation] have an opinion on HELCOM legislation affecting the possibilities of ports trying to encourage cruise operators to call on their city? 5. Any other comment relative to the subject being discussed? Whereas the questions to cruise companies were angled slightly differently (again, the real questionnaires contained other phrasing and more context for clarity’s sake [see appendixE]): 1. How has [cruise operator] dealt with increasing sewage regulation on the Baltic? Have you had to expand treatment facilities? How? 2. Have you analysed the financial impact of increasing treatment requirements on operating cost and passenger prices? 3. Although not required by MARPOL, do your treatment plants remove nitrogen and phosphorous or do you alternatively only discharge in PRF’s? 4. If you use PRF’s, are they sufficiently flexible and adequate as to not interfere with operations? 5. Is your competitive position with respect to other tourism forms (e.g. low-cost airline city trips) affected by increasing treatment requirements on the Baltic? Results and responses to the surveys will be presented in sections 4.2 and 4.3 preceded by a summary of entities that chose to respond and those that didn’t (section 4.1). The expert interviews conducted with for example Tumlare Sweden AB did not follow a standard questionnaire.

3.5. Survey of general public

A survey was held via Facebook, asking participants to indicate how much of a cost increase per day they were willing to accept for their onboard generated sewage to be disposed of in an environmentally sustainable way.

SOx and NOx emission impact were excluded because it is a too abstract subject for the general audience to be considered in their cruise-destination-choice behaviour. The survey was held to ﬁnd out how much a typical cruise passenger would be willing to pay in order to have their onboard generated sewage not dumped in the Baltic, but

55 treated and/or discharged in the next port of call. This cannot be done in a meaningfull way for SOx and NOx since the typical cruise passenger has no grasp of the concept or implications and the question (how much are customers willing to pay extra) cannot be researched in a quantitative way. Survey: How much would you be willing to pay per day, so the sewage you generate while on the cruise is not dumped into the Baltic Sea, but disposed of in an environmentally friendly way? 1. nothing 2. between 5 and 10 euros per day 3. between 10 and 20 euros per day 4. more than 20 euros per day The number of survey questions was purposely limited to one question, in order to enhance the probability of the survey actually be answered by sufficient respondents to be statistically meaningful. Smith (2010) cites ratios of 1:4 to 1:10 of questions per respondent to be representative (so 1 question needs between 40 and 100 respondents). It was at the same time also decided not to aspire 95% confidence interval for this survey. These levels of confidence on a population of potential cruise customers to the Baltic, would require a sample size of 380-385 respondents (see table 4.4 in Smith, 2010). This number of respondents was judged to be unattainable within the scope (time and resources) of this research. A smaller scale but attainable survey with lower confidence requirements was desirable. Results will show a strong suggestion to engage in further research.

56 4. Results and analysis

The results are grouped by organisations and cruise industry’s response on the basic questions outlined in section 3.4. Followed by the outcome of a semi-informal survey conducted on Facebook to get a ﬁrst idea of whether and how much a certain segment of cruise passengers would be willing to pay for responsible waste water handling on the Baltic.

4.1. Response overview

Table 4.1 summarizes the responses of the diﬀerent organisations and cruise operators and lists the type of research that was conducted and whether a response was received. Some (not necessarily all) brands that are owned by the same parent company are listed as well. A more extensive list of which brands calling on Stockholm belong to the bigger players, can be found in appendixA.

4.2. Organisations’ response

In the following sections the responses of the Swedish Agency for Marine and Water Management, Swedish Maritime Organisation and Ports of Stockholm will be presented and analyzed.

4.2.1. Response from Swedish Agency for Marine and Water Management (Havs och Vattenmyndigheten)

When the Swedish Environmental Protection Agency (Naturv˚ardsverket) was contacted they referred to the Swedish Agency for Marine and Water Management as their proxy in these matters. The following can therefore also be interpreted as the Swedish Envi- ronmental Protection Agency’s position on the subject. On the issue of balancing the region’s economic and socio-economic interests with the sustainability of the Baltic, Mr. Thomas Johansson, Division manager sustainable ex- ploitation and maritime issues, answers as follows (author’s translation from Swedish to English): ”The Swedish Agency for Marine and Water Management (HaV) uses the following guideline: advocating in the widest sense of the word that sea and

57 Table 4.1.: Summary of responses. Swedish names for the organisations listed can be found in section 2.1.12. In the ’survey’ colunn: • means: survey sent and response received, ◦ means survey sent but no response received. Name and brands Web Survey Baltic-only Comments Organisations - Swedish Environmental Protection • ◦ - Refer to Swedish Agency Agency for marine and water management - Swedish Agency for marine and • • - See section 4.2.1 water management - Swedish Transport Agency • ◦ - Refer to Swedish Mar- itime Administration - Swedish Maritime Administration • • - See section 4.2.2 - Ports of Stockholm • ◦ No response. Desk research in section 4.2.3 Cruise operators - Royal Caribbean Int. • • - See section 4.3.3 - Azamara Club Cruises • - - Celebrity Cruises • - - Pullman Tours • - - Carnival Cruises • • - See section 4.3.2 - Aida Cruises • - - Cunard • - - Holland America Line • - - Ibero Cruceros • - - P & O Cruises • - - Seabourn • - - Princess Cruises • - - Costa Cruise Lines • - - Prestige Cruise Holdings • - - Part of Apollo Manage- ment L.P. - Oceania Cruises • - - Regent Seven Seas Cruises • - - Tallink Silja Line • ◦ Contact, no response - Viking Line • - - Birka Cruises • • See section 4.3.1 Other - Tumlare Sweden AB • ◦ - Tour operator, personal communication - Xylem Water Solutions AB • - - Water treatment spe- cialist, personal communication

58 water be used, but not over-exploited. Sea and water shall contribute to well- being and purpose for both people and the ecosystem, now and in the future. In other words: we promote an active use, by for example the cruise industry, that at the same time is adapted to the environment it operates in. It should also be sustainable in the long term. Of course does the industry have good cause to keep costs down, among others, but our mission is to cooperate, support and challenge the industry for enhanced environmental conscience. All have to implement measures. Some of the ones benefiting most from improved environmental status is exactly the tourism industry, including the cruise segment. To sell a destination which has a low environmental status is harder. To sail a cruise vessel in algal bloom affected seas does not have the same development potential as cruising a healthy sea has. Although HaV does is not directly involved with the creation of legislation and regulation, we also try to influence the requirements and legislative process. In this effort we collaborate extensively with the Swedish Transport Agency (Transportstyrelsen) which is Swedish representative in HELCOM and IMO.”

Mr. Johansson makes it clear that HaV is aware of the tension between economic and socio-economic interests and the environment. He also clearly states that it is in the cruise industry’s own interest to make the investments necessary to make sure the Baltic is also on the long term environmentally healthy. He does not comment the fact that point sources of pollution are carrying a disproportionate share of the responsibility since they are easily identifiable (as opposed to the more diffuse sources (e.g. agriculture in the Baltic catchment area) contributing much more to eutrophication [Hänninenand Sassi, 2009]). On the matter of the tension between the cruise industry and the Port Reception Facil- ities regarding the latest HELCOM regulation on ’no sewage discharge whatsoever on the Baltic’ (see sectionG and appendicesF andG), Mr. Johansson reasons as follows:

”The answer is that in the end all is politics. The agreement that was reached was about as far as one could get at that time and opportunity. In general it is better to have a imperfect agreement than no agreement at all. (...) And it is important to remember that even if we advocate enhanced consideration for the environment, there are other stakeholders, e.g. the industry, that do not want special regulation, strict requirements etc. But even other authorities have to take into account other factors, e.g. Swedish Transport Agency (Transportstyrelsen). Even if we agree on the desired state, even then can Swedish Transport Agency through its expert-role claim that the proposal goes against for example international regulations (e.g. IMO’s). That can take time; to change regulations to allow for new rules to be applied. (...) There are forces that can contribute to ports wanting to build Port Re-

59 ception Facilities; to be an attractive cruise-ship call, to have clean and attractive in the waters around, and in some cases the opportunity to use waste in biogas generation. Waste, including sewage, will increase in value in the future.” Mr. Johansson further describes some of the practicalities on how HaV liaises with the different organisations and how they in turn relate to HELCOM. Mr. Johansson displays a rather pragmatic view when he states that it was the best we could achieve at the time, it’s better than nothing, in the end it’s all politics (Author’s paraphrasing, SP). On the subject of whether stricter regulation in the Baltic, compared to other regions, will present an incentive for interregionally operating cruise companies to move lines to other regions with less regulation (thus lower investments and operating costs), Mr. Johansson argues as follows: ”HaV does not have a formal active role, but we work to enhance the understanding that the Baltic is a especially sensitive area. Does one want to operate there, with all the different advantages, than one has to take a bigger environmental responsibility. The Baltic only represents a tenth of a promille of the world’s water, but at the same time 10-15% of the world’s maritime traffic. From our point of view it is logical that environmental responsibility is allowed to cost its fair share, after all, the cruise industry has free access to the waters as a means for transport (with the exception of fees for use of certain waterways.” Mr. Johansson’s comments here a no surprise. Given the organisation’s assignment and mission, there is little incentive to actively participate directly in discussions with the cruise companies on whether local regulations pose a barrier to developing the Baltic as a cruise destination. Mr. Johansson and his organisation were the ones that elaborated most on their answers and input.

4.2.2. Response from Swedish Maritime Administration (Sj¨ofartsverket)

When contacted, the Swedish Transport Agency (Transportstyrelsen) refers to the Swedish Maritime Administration. Mrs. Stina Paulin (Section environment of the maritime division) at the Swedish Trans- port Agency explains that their role is merely to ”develop the rules, grant permissions, monitor compliance and maintain records, whereas we do not take a political position. We execute the tasks we receive from the government,” (author’s translation from Swedish to English). Mrs. Paulin answers as follows to the question of whether the current deﬁciencies in MARPOL/HELCOM legislation present loopholes for cruise companies (enforcement is diﬃcult until there are PRF’s all around the Baltic, and ports are reluctant to invest in PRF’s):

60 ”We operate within the HELCOM cooperation platform by creating guidelines on how the reception of black water is required to happen. The ports shall have reception facilities for the vessels that normally call on them.”

Mrs. Paulin’s response is reaﬃrming the explanation she gave in the introduction that the agency is concerned with creating legislation more than taking an active role or position on the political issue at hand.

Mrs. Paulin further comments on the fact that no existing nitrogen and phosphorous limits exist in MARPOL legislation:

”There is an ongoing project by a correspondence group of MEPC/IMO that is deﬁning requirements for sewage treatment on the Baltic. I believe they are due to present a proposal to MEPC in October 2012. When the legislation comes into eﬀect, it will be adopted by the Swedish legislation. (...)”

Mrs. Paulin’s statement that MEPC is working on limits for nitrogen and phosphorous to be proposed in October, could not be conﬁrmed independently within the scope of this research. She included a comment in her answer regarding this that since this is going to be implemented in the future, it does not represent a problem any more. It could be said that that misses the point the author tried to make by stating that more and ever-changing regulation on the Baltic might become an incentive for cruise operators to move operations and lines to other parts of the world.

On this particular question (question 3 of the questionnaire (see appendixE) Mrs. Paulin replies:

”No, (we don’t have an active role in discussions between HELCOM and cruise operators, SP), Sweden has been taking the initiative within HELCOM to implement the ban on sewage discharge on the Baltic, which we did on the government’s orders. HELCOM consists of representatives for all Baltic states and has no power, as such. It is a cooperation between members and when something is decided in HELCOM, it’s because the member states back that decision. Already today the cruise vessels that operate in the Baltic have treatment plants in place. However there is no nitrogen and phosphorous removal yet, which are processes that will have to be added once MEPC has decided which concentration limits to impose.”

Being the executing part of the legislative authority in Sweden when it comes to maritime issues in the Baltic, Mrs. Paulin’s comments and answers align with the mandate the Swedish Transport Agency has gotten from the government. From the replies Mrs. Paulin sent, there seems to be a rather high degree of ’we-and-them’ and a high degree of specialisation (’that’s not our area’-type responses) when it comes to dealing with the Baltic from and economically important and environmentally challenging point of view.

61 4.2.3. Response from Ports of Stockholm (Stockholms Hamnar)

Despite repeated attempts to follow up on the questionnaire sent to Ports of Stock- holm, to date no direct response has been received. Fortunately for this research the information on Ports of Stockholm’s web site is exhaustive and can be expected to be representative for their answers, if they had answered the questionnaire directly. The following analysis was based on the questions in the questionnaire and the expected response deducted from the information on Port of Stockholm’s web site. Compared to other organisations they have a very complete array of information published and they explicitly apply both an environmental as well as a socio-economic view on the subject. On the issue of balancing the region’s economic and socio-economic interests with the sustainability of the Baltic, Mr Rudeberg General Counsel and Head of Environmental Affairs writes on different occasions: ”Part of Ports of Stockholms mandate is to promote tourism and passenger traffic, as well as archipelago and waterborne local traffic. This also includes maintaining and developing the city’s inner city quays so that residents and tourists alike can enjoy the maritime city of Stockholm. Considering our public activities, our owners, our geographical location in Stockholm and the vulnerable nature of the archipelago and the Baltic Sea, environmental and societal responsibilities has been an integral factor of our work for a long time.” 1 On the matter of the tension between the cruise industry and the Port Reception Facili- ties regarding the latest HELCOM regulation on ’no sewage discharge whatsoever on the Baltic’ (appendices F and G), Ports of Stockholm publishes the following statements:

”There have been facilities in place for a long time, with good capacities, to enable black and grey water to be offloaded at the quayside at Ports of Stockholm’s ports. These facilities are used in the daily operations of all of the shipping companies operating regular scheduled services. It is also possible to offload black and grey water at each of the quays used by cruise ships, free of charge. Vessels also have the option of offloading black and grey water to tanker trucks and barges in Stockholm.” 2

As was to be expected Ports of Stockholm, being one of the fore-runners when it comes to environment in the Baltic, can state that this is not an issue. It does however not address the fact that not all ports have similar facilities and that until then the enforcement of the strictest MARPOL rules remains a challenge. Ports of Stockholm (a corporation owned by the City of Stockholm) describes some of the practicalities on how they liaise with the diﬀerent organisations and that shipping

1www.stockholmshamnar.se/en/About-us/Network-and-collaborations/ 2www.stockholmshamnar.se/en/Prices-and-services/Enviromental-Measures-for-Shipping-Company-Customers/

62 is governed by international laws, including the MARPOL Convention, the Helsinki Commission and EU directives. ”These conventions form the basis of the Swedish Maritime Administra- tion’s (Sjöfartsverket) Code of Statutes. These state, among other things, what certain regulated exceptions there are to the ban on the release of sewage waste, for example when a vessel has a certified waste water treatment facility aboard, that the results of sample testing in such cases is available and that waste is finely dispersed. Ports of Stockholm is therefore unable to make it mandatory for shipping companies to offload black and grey water while in port, run on low sulphur fuel, use catalytic converters etc.” 3 This mainly confirms the question: until all ports have PRF’s, vessels (including cruise ships) with waste water treatment on board are exempt from mandatory off loading their black/grey water and can continue to discharge effluents from the plant in the Baltic. On the subject of local regulations ’scaring’ global cruise operators off to ’cheaper’ regions, Mr. Rudeberg explains (on their web site) that: ”Ports of Stockholm offers environmentally differentiated port fees. In other words; shipping companies using our ports pay a discounted fee when they call in to our ports if they meet certain environmental standards. The largest discounts in fees are given to the vessels that use low sulphur fuels and those with catalytic converters fitted to all engines. 4 (...) Ports of Stock- holm is an active participant in several national and international networks, which helps us to develop our environmental work. (...) Safeguarding the environment necessitates cross-border efforts to be able to achieve change, whilst development requires cooperation with other stakeholders, exchanges of ideas and experiences. It is important that we learn from each other and jointly drive issues forward. Ports of Stockholm are working with other cities and ports in different networks such as Baltic Ports Organisation (BPO) and The European Sea Ports Organisation ESPO and the Environmental Manager of Ports of Stockholm also serves as the Chair of the ESPO Environmental Committee.” 5 From the information on their web site Ports of Stockholm seems to be one of the stakeholders that is most aware that in order to maintain long term attractiveness in an environmentally sustainable way, more cooperation is required: ”An important tool in being able to attain stringent environmental tar- gets is to work together with ports from which there are regular sailings to Stockholm. In 2009 Ports of Stockholm signed an agreement with the Port of Helsinki concerning joint initiatives, including the management of black and grey water and the provision of vessel electricity

3www.stockholmshamnar.se/en/Prices-and-services/Enviromental-Measures-for-Shipping-Company-Customers/ 4www.stockholmshamnar.se/en/For-Customers/Environmental-measures-for-shipping-company-customers/ 5www.stockholmshamnar.se/en/Prices-and-services/Collaborations-and-networks/

63 We are also part of BaltMet is a network whose members comprise the major cities of the countries bordering the Baltic Sea. Stockholm currently chairs the BaltMet Network, which means that Ports of Stockholm actively participates in the work of reaching a consensus of opinion when it comes to port-specific environmental issues. In 2000 the Ports of Stockholm launched the Environmental Buoy Award as a way of honouring notable environmental achievements in the field of shipping. After each cruise season, a special group at the Ports of Stock- holm will nominate ship(s) based on certain criteria. The winner(s) will be announced at the Environmental Buoy ceremony scheduled during the Seatrade Convention in Miami.” 6 This if further emphasized by the realisation that more work needs to be done, especially in preparation for the regulations to come into effect by 2015: ”We will increase our focus on societal and environmental responsibility in the coming years, We offer shipping companies who regularly or on occasion visit Ports of Stockholms ports assistance and services to reduce our environmental effects to the minimum, while at the same time gathering more knowledge about the resources that are used.” It was however not possible to find specifics on ideas on solutions for the challenges that lie ahead.

4.3. Cruise industry’s response

In general the web-sites for the Cruise companies were among the most informative ones when it comes to their environmental conscience and responsibilities. That provides evidence for the thesis that the environment is successfully used in marketing campaigns to promote a ’greener’ image. That also makes the investigative research more diﬃcult since most cruise companies that were contacted, one way or another refer to their website for information, without any guarantee that the information presented there is either correct or relevant. To this date Tallink Silja have acknowledged reception of the survey and are forwarding it from one department to another in their respective organisations. No answer was received within the time frame stipulated for this research.

4.3.1. Response from Birka Cruises

Birka Cruises was one of the few cruise companies contacted that replied to the email survey. Mr. Dan Lindstedt (Development Manager Environment, Ship Management) answers as follows to the question of whether local Baltic regulations translate into higher operating costs:

6www.stockholmtown.com/templates/page 15096.aspx

64 ”We pump all our black and grey water to shore and we have done so for many, many, years. This is not a problem for us.” Mr. Lindstedt’s reply should be taken as typical for a ’Baltic-only’ cruise operator. Since they have no (easy) choice of moving lines to other regions, they just have to implement all the various regulations that are implemented on ’their’ Baltic Sea. Mr. Lindstedt’s answer to the question whether the installation of treatment plants has led to higher operating cost, he answers: ”To start installing treatment plants on a vessel would be to go back in time and is therefore not relevant.” Again this reply can be considered typical for a Baltic-only operating player, since the cruise duration is short and the destination ports (in the case of Birka at least) well equipped to receive the grey and black water generated while at sea. Other cruises might not have the same advantage (longer times at sea, not all ports of call have adequate reception facilities). Another interesting observation can be made from Mr. Lindstedt’s answer: apparently Birka’s vessels rely completely on the PRF’s at the ports and the vessels do not have any independent treatment plant at all. A follow up question would be what does a vessel do when a PRF for some reason (failure at the plant, shore personnel strike) cannot receive the black and grey waters? The third question for cruise companies diﬀered a bit from the question that was sent to organisations, in this case the survey tried to elicit information on whether nitrogen and phosphorous are removed on board prior to discharge (at sea or otherwise). Mr. Lindstedt’s answer is both clear and concise and at the same time it raises another question:

”Onboard the Birka Paradise there is a treatment that reduces the hydrogen- sulphide concentrations in black and grey water before it is pumped to shore in Stockholm. In all other cases all black and grey water is delivered to the city’s/country’s treatment plants where nitrogen and phosphorous are removed.”

The question is then: does Stockholm impose additional requirements on the quality of the sewage delivered to the PRF compared to other PRF’s around the Baltic? if so, that would back the claim by Baltic Ports Organisation (BPO) that the requirements are not the same from PRF to PRF and that compliance becomes a moving target (and thereby an unpredictable economic risk factor, what happens if, say, Helsinki starts to impose other concentration limits on other substances? Or discharge in the PRF is denied because of concentrations of a certain substance [heavy metals, hydrogen-sulphide etc.]). See appendixF for a more complete list of BPO pain points with the HELCOM regulation and PRF’s. Mr. Lindstedt is very clear in his response that Birka has never had any problems with discharging into the PRF’s in the ports it is calling on.

65 On the issue of the discharge regulations being a moving target, Mr. Lindstedt states: ”Since we are pumping everything to shore already, this is not an issue for us. We traffic the Baltic on a regular basis and I feel your questions are more relevant for the bigger cruise companies that cruise different oceans and seas all the time.” Which justifies the decision to look at two different groups of cruise companies: the ones that only sail the Baltic and the ones that sail in other regions as well. The assumption being that ’Baltic-only’ operators have no choice but to comply to the latest regulation since they can’t (easily) relocate operations to other waters. Mr. Lindstedt concludes his response as follows: ”The big issue for maritime traffic in the Baltic region are the emissions (EU sulphur directive) where we are required to use fuel oil with less than 0.1% sulphur from the year 2015. This is an enormous challenge of great importance for the free competition all over the world. This will be very costly and the competition with the rest of the world will be very much affected.”

4.3.2. Response from Carnival

Carnival Corporation & PLC was one of the few cruise companies contacted that replied to the email survey and at the same time provided the author with the latest corporate report and other useful information. For Carnival Mr. James R. Van Langen (Vice President Management Systems Maritime Policy & Compliance) replied as follows: ”(...) I would like to provide you with answers to your questions. However, these are quite broad issues and giving the full discussion that they deserve could require quite a bit of time and writing eﬀort, both of which are in short supply. Therefore, I would like to suggest that, if you have not done so already, you read the information that we have already published about our management approach to sustainability, particularly in the environmental area. The best sources of such information from Carnival’s perspective are the sustainability reports that we have published for both the Corporation as a whole, for several of our subsidiary Operating Lines. These reports can be accessed online in the ’Sustainability Reporting’ section of our Corporate website. I have also attached a copy of our latest Corporate report, for your convenience.” Which is in line with the assumption made in the chapter Methodology: desk research can be considered as good a source for information, since many stakeholders will refer to their web sites for information. The analysis that follows is therefore based on web sources 7 and the Corporate Report mentioned by Mr. Van Langen (referenced Langen 2011).

7phx.corporate-ir.net/phoenix.zhtml?c=140690&p=irol-sustainability env

66 The Sustainability Report states the following on waste water management:

”(...) Our Corporate Standard for discharges of black water and gray water is more stringent than international and national regulations. Where adequate shore facilities are available, Carnival ships sometimes dispose of waste water to an approved shore-side reception facility. Gray water from Carnival ships is discharged only while the ship is under way and proceeding at a speed of not less than six knots. Gray water is not discharged in port and not within four nautical miles from shore or such other distance provided for by local law or as agreed with the authorities that have jurisdiction, except in case of an emergency, or where the ship is geographically limited.” These rather generic remarks do not speciﬁcally address the challenge that regionally varying regulations pose. The untreated grey water can also contain high concentrations of nitrogen and phosphorous from for example laundry and other facilities.

”(...) Prior to discharge, all black water from Carnival ships is processed through a sewage treatment plant called a Marine Sanitation Device (MSD) that is approved in accordance with applicable international and national regulations. Discharges of treated black water take place only when the ship is at a distance of more than 12 nautical miles from the nearest land and when the ship is travelling at a speed of not less than six knots. On more than one-third of Carnival ships, black water and gray water are treated in advanced waste water purification systems (AWP, SP) that utilize technologies designed to produce a higher effluent quality that may meet or surpass standards for secondary and tertiary effluents and reclaimed water. The above distance and speed limits do not apply to black water or gray water discharges that have been processed through an AWP. However, such discharges comply with all applicable international and national laws and regulations.”

The statement that the treatment plants and consequent discharges comply ’with all applicable international and national laws and regulations’ is a strong one and it does not address the issue of the regulations changing continuously. The systems that comply ’today’ to all regulations in all regions, will probably not comply with ’all regulations tomorrow’ when new regulation comes into eﬀect in a certain region (e.g. the Baltic).

(...) The biological treatment portion of an AWP requires routine testing to determine the concentration of microbes and other solids in the tank. If the solids exceed a set limit (...) the tank must be emptied to recreate optimum conditions (...). This partially treated waste water is called biomass and is discharged more than 12 nautical miles from shore while the vessel is traveling more than 6 knots or landed ashore.(...) Sewage sludge accumulates at the bottom of an MSD and is periodically cleaned out. It is discharged from the system when the vessel is more than 12 nautical miles from shore and traveling at a speed of more than 6 knots, or it is landed ashore.”

67 The timing of the response from Carnival was such that further follow up questions could not be asked before the deadline of this research. It would be interesting to learn how Carnival addresses the sludge removal in the Baltic? Are PRF’s used? Is it discharged at the required distances? Or is the sludge always accumulated in the Baltic but discharged in other regions with less stringent sewage discharge regulation? The Sustainability Report further mentions: ”We are strongly committed to protecting the fragile natural environments in which we operate, and we have a solid record of developing and implementing sound environmental practices. We have dedicated senior shipboard and shoreside staﬀ who are responsible for environmental systems and initiatives, including compliance with applicable environmental regulations, training, and implementation of Corporate and Operating Line standards. (...) We are subject to the decrees, directives, regulations and other requirements of the more than 500 ports that our ships visit every year as they apply to the various aspects of ship operations. (...) The laws, regulations and other legal requirements applicable to our operations do not remain static based on a ﬁxed geographic location, but change regularly, sometimes on a daily basis, depending on the itineraries of our ships and the ports and countries visited.” In another part of the report Carnival elaborates on this:

”(...) We must, of course, consider the additional costs of new regulations, particularly those relating to air emissions. (...) Being a global company we are primarily regulated at the international level. However, as our ships travel around the world, we must also understand and comply with an in- tricate labyrinth of regulations issued by flag states (our ships countries of registry) and port regulatory authorities in countries where our ships visit. Wherever possible, we seek technical solutions to regulatory issues that are based on sound science and engineering. One of the most dramatic areas of rapidly changing regulations is in the area of air emissions. Current and pending regulations address sulfur oxides (SOx) and nitrous oxides (NOx). In addition, the issue of global warming and the impact of production of greenhouse gases (CO2 and CO2 equivalents) is an area of major technical discussion and focused regulatory activity.” and more specific on waste water: ”Around the world Carnival ships operate in or near numerous environmentally sensitive regions, where biodiversity and habitat protection are particularly critical. Such areas include: • MARPOL-defined ’Special Areas’ and ’Particularly Sensitive Sea Areas’ • Marine Protected Areas • Marine Sanctuaries

68 • No Discharge Zones • National parks • Other areas where discharges are restricted or subject to local agree- ments. We comply with all applicable requirements, laws and regulations regarding waste water discharges in these regions. (...) We are also working with the Ocean Conservation and Tourism Alliance, a collaboration between Con- servation International and the Cruise Lines International Association, to identify and map sensitive marine areas. (...)” According to the information Carnival provides, they comply to all regulations, everywhere. Although that this is of course not impossible it must be a cost driver for Carnival and there is no information on how this cost is handled. Carnival goes even further: ”Carnival established an alliance with the International SeaKeepers Soci- ety to house scientific data-gathering devices on five Carnival Cruise Lines and Holland America Line ships (...) the devices gather a wide range of data to aid in assessing ocean pollution and researching global climate change and cyclic weather patterns. (...) Carnival has also supported the organization with annual contributions of $50,000 since 2008.” This also demonstrates the commitment of Carnival to a sustainable cruise industry and the apparent marketing advantages that justify financial contributions to this cause.

4.3.3. Response from Royal Caribbean

Much of the data to follow is based on the information from Royal Caribbean’s informative website. 8 It was the outspoken environmental attitude and responsibility that caught my interest and the inclusion of Royal Caribbean in my research. Royal Caribbean owns several brands such as Azamara Club Cruises, Celebrity Cruises and Pullman Tours, and Royal Caribbean’s environmental policies are applied equally across the different brands. To this date Royal Caribbean have acknowledged reception of the survey and are forwarding it from one department to another in their respective organisation. The first contact was to Mr. Jamie Sweeting, Vice President - Environmental Stewardship and Global Chief Environmental Office Royal Caribbean Cruises Ltd. who kindly forwarded the email to his assistant. Somewhat later an email from Nicholas Rose (Lead, Environ- mental Regulatory Environmental Stewardship) was received, expressing the desire to receive a draft of this dissertation to have a better idea of what the research was about and have a background to answer the survey.

8www.royalcaribbean.com/ourCompany/environment/rcAndEnvironment.do

69 Unfortunately, after submitting the draft to Mr. Rose, no response was received within this research’s stipulated time frame. Therefore secondary research (desk research) was used to predict Royal Caribbean’s probable position with respect to the questions raised. Fortunately for this research’s purposes, the information on Royal Caribbean’s web site is exhaustive and can be expected to be representative for their answers, if they had answered the questionnaire directly. The following analysis was based on the questions in the questionnaire and the expected response deducted from the information on Royal Caribbean’s web site, 9 the article ”Cruising to a Greener Future” 10 and Royal Caribbean’s (RCCL) ”Stewardship Report 2010”, 11 all of them under Mr. Sweeting’s responsibility. On the subject of continuously changing regulation, Mr. Sweeting states on RCCL’s web site: ”Our Above and Beyond Compliance (ABC) policy challenges us to rise above what is required by law. Similarly, our policy of Continuous Improve- ment drives us to look at new and different ways in which we can improve on our past performance. With regard to our stewardship of the environment, we constantly strive to minimize our environmental footprint, increase our support for conservation, and set new environmental standards in the travel industry. ” In the Stewardship report he adds: ”(...), we aim to thoroughly treat both grey water and blackwater before discharging anything into the ocean. In 1999, we began the research and development needed to install and operate Advanced Wastewater Purifica- tion (AWP) systems (...) on our ships. These systems treat black water and grey water and produce an effluent that is cleaner than what is required by international sewage regulations and what is discharged from most municipalities.” Especially the comment on the fact that the effluent from their AWP exceeds the quality from municipal treatment plants, echoes the vision of Cruise Lines International Asso- ciation (CLIA) that forcing cruise operators to discharge via PRF’s is not necessarily better than the ship’s AWP. This does not motivate ports to actually continue installing PRF’s. In the 2010 Stewardship report, RCCL mentions that: ”We are installing these (AWP, SP) systems onboard all of our Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises ships, at a cost of more than U.S.$150 million. Our goal is that every ship in our fleet will be equipped with an Advanced Wastewater Purification system.”

9www.royalcaribbean.com/ourCompany/environment/rcAndEnvironment.do 10www.worldcruise-network.com/features/feature78425/ 11viewer.zmags.com/publication/49a26be2%23/49a26be2/1

70 In the rather technical, but (for this research) insightful article ”Royal Caribbean Inter- national Advanced Wastewater Puriﬁcation Systems”, RCCL states further: 12

”We install the new systems either when a ship goes into its normally scheduled dry dock, or while the ship is in service. Our new ships will be delivered with AWP systems already installed. Ideally, it takes approximately four to five months to manufacture a system and four months to install one onboard. Then it takes approximately two months to commission the system, which includes a sampling period to ensure the system’s performance meets standards comparable to the U.S. federal standards for ships operating in the State of Alaska (regardless of where the ship is operating.)” The article also explains with a certain degree of detail three types of AWP’s that are being used on board of RCCL’s vessels. So as to the question ’how much does it cost’ RCCL claims it invested 150 million dollars to upgrade 22 ships. That is 6.8 million USD per ship, a somewhat higher figure than the figure used by Hänninen and Sassi (2009), which was 4 to 5 million USD (3-3.5 million EUR). On the subject of nutrient removal, the RCCL 2010 Stewardship report informs the following: ”One of the challenges we share with shore side waste water treatment facilities is the effective removal of nutrients (phosphates and nitrogen) from our treated waste water. (...) There are two ways to reduce the phosphate load of waste water: eliminate them at the source or remove them during treatment. (...) On the treatment end, our Advanced Wastewater Purification Systems remove some of the nitrogen and phosphates from solids during the course of treatment, but there are still some residual contaminants that remain. Removing phosphates requires the use of additional chemicals, which create another waste stream that requires treatment and/or disposal. Removing nitrogen is much more difficult, as it requires a very complex, specialized process. While technology does exist to carry out such treatment on land, its land use has been limited, and, to our knowledge, it has thus far never been applied on a ship.” This statement strongly suggests that PRF’s together with municipal treatment plants that remove nitrogen and phosphorous are the most viable way for avoiding nutrient loads from cruise ships in the Baltic. The accessible information does not provide much information on the use of PRF’s by RCCL or their level of adequateness for RCCL’s purposes, other than (Stewardship report): ”Unfortunately, there are not many waste water treatment plants that can actually remove nutrients in the Baltic region, and only two ports that are

12//www.royalcaribbean.com/content/en US/pdf/RCI wastewater pur.pdf

71 equipped with hookup facilities to adequately allow cruise ships to discharge waste water ashore.” It does however not indicate whether RCCL’s vessels use the facilities or if they rely on their own treatment plants and discharge effluents to the Baltic. The next question on the questionnaire is how RCCL deals with continuously and regionally changing regulation, turning compliance into a moving target. Part of the answer is given above, RCCL designs and orders their AWP’s to comply with the strictest (Alaska’s) so that they are automatically suitable for other regions as well. ”(...) in keeping with our policy of going Above and Beyond Compliance, our internal policies for discharge of grey water and black water are stricter than U.S. and international governmental regulations. For example, although U.S. and international laws allow grey water to be discharged from ships inside of 12 nautical miles from land in many locations, since 1998, our company policy has restricted discharge of grey water to outside 12 nautical miles from land in all areas of the world. Similarly, international standards require ships to discharge untreated black water outside 12 nautical miles and at a speed of not less than four knots (for effective mixing); our company standard is to only allow discharges of treated blackwater outside 12 nautical miles and only at a speed greater than six knots.” The statement above does not indicate whether exceptions are being made for the Baltic (no discharge whatsoever?). RCCL cooperates with other organisations (from the 2010 Stewardship report): We are also working with the Ocean Conservation and Tourism Alliance, a collaboration between Conservation International and the Cruise Lines Inter- national Association, to identify and map sensitive marine areas that would further benefit from additional protection beyond our current Above and Beyond Compliance policies. Once identified, we intend to integrate these areas into our company policies, so that we can avoid discharging even treated waste water in these areas. When it comes to future developments, Mr. Sweeting is quoted as follows in the ”Cruising to a Greener Future” article: 13 ”Sweeting thinks the industrys environmental image is sometimes misun- derstood. ’I have brought colleagues in from the conservation world who have been stunned by what we are doing,’ he says. Despite the improvements already made by Royal Caribbean, Sweeting acknowledges that there is always potential for further development. ’The greatest opportunity is when we design and construct new ships,’ he says. ’We have broken new ground with the launch of the Oasis of the Seas and based on sea trial data for our first few months in operation, we believe the carbon footprint per passenger per

13www.worldcruise-network.com/features/feature78425/

72 day is around 30-40% lower than ships built a dozen years ago.’ However, the company is not resting on its laurels. ’We are far from perfect, but we are paying attention,’ he adds. ’Our mantra is that we will be better tomorrow than we are today.’

4.4. Facebook survey on willingness to pay for responsible sewage handling on the Baltic

The semi-informal survey outlined in section 3.5 ran on Facebook between April 28th and May 6th 2012. Out of 96 invitations to participate, 42 responses yielded usable data. The survey reached out to a sub segment of the cruise market described by the following traits: • Age composition of the respondents: mainly between 20 and 40 years of age approximately. • Bias towards environmentally conscious sub-group of the sample (they are more likely to respond to a question concerning the Baltic environment). • Bias towards tourism-interested sub group (there are relatively more tourism- interested people in the researcher’s immediate circle of contacts, than in the general population. • Bias towards the Stockholm area with people familiar with the relatively short 24 hour and 36 hour city cruises (therefore less representative for segments that would engage on longer (e.g. 7 day) cruises). Despite the semi-informal character and the semi-representative sample (explained above), some interesting observations can be made. The responses of the 42 participants that returned the survey are graphed in figure 4.1. It shows that most people (62%) are willing to pay between 5 and 10 euros per day for responsible sewage treatment or discharge in a PRF. None of the respondents are willing to pay more than 20 euros, and 14% does not want to pay at all. Grouping the people that would be willing to pay for adequate waste water treatment of the sewage they generate, the figure climbs to 86% (62% + 24%). General comments on the survey included: • ”I would want to make sure that the cruise operator does not make a profit on the fee, the fee should be the same as the cost” • ”I would like the fee to be included in the total cruise price” Hänninenand Sassi (2009) present a solution for a cruise ship of 2500 passengers plus 800 staff, producing about 185 liters of black and grey water. The cost for the system is 3-3.5 million euros (here the 3M euro figure is used) investment plus another 170 000 euros per year in operating expenses. Assuming a lifetime of 30 years, the following

73 Willingness to pay for responsible sewage disposal

Number of respondents 0 5 10 15 20 25 30

0 EUR

5-10 EUR

10-20 EUR

20 EUR or more

Figure 4.1.: Survey results: how much would you be willing to pay additionally per day to have your sewage treated instead of dumped in the Baltic.

74 Figure 4.2.: Example of a cruise operator (TallinkSilja) implementing a fuel surcharge to deal with varying fuel prices that were not included when prices for the season were set. A similar approach to sewage surcharge is not recommended (see text). www.digipaper.ﬁ/ tallinksilja/75337/ annual costs have to be covered in addition to normal operating expenses: 3M / 30 = 100 000 + 170 000 = 270 000 euro per year. Assume the cruise ship has 200 sailing days with paying passengers, the additional cost to be covered is then 270 000 / 200 = 1 350 euro per day. So if the cruise is always fully booked that becomes 1350 / 2500 = 0.54 EUR per passenger per day (the staﬀ is excluded because they are not charged for responsible waste water handling). So the instinct of survey respondents to gain some insight on whether the fee charged is in proportion to the incurred cost is valid. Although much can be said on the way the 0.54 EUR above was established (e.g. cruise ships not always fully booked), cruise companies are probably better of including the waste water handling costs in the cruise price, instead of charging them separately as is happening with for example the fuel cost (see picture 4.2). One preliminary objective: see how PRF’s will be able to help preserving the Baltic, could not be answered because of lack of answers from ports and cruise companies reluctance to release data on that matter.

75 5. Conclusion, critical review and suggested future research

5.1. Conclusion

When it comes to the environment, the cruise industry has not always enjoyed the best reputation, but in recent times, the sector is working together in order to made substantial efforts to improve their practices and use the environmental friendly concept as a marketing tool. The Baltic Sea continues to be one of the most popular cruise destinations and is re- sponding fast to the challenges posed by a huge increase in cruise traffic. While the new IMO, HELCOM regulations affect all areas of the shipping industry, cruise ship operators face a particular challenge when it comes to compliance; it is a challenge for cruise operators to keep up with the continual changes in environmental laws that vary from region to region. But with increased traffic comes an additional strain on port infrastructure, an issue that is being handled better than average in northern Europe. Ports actually want to upgrade their infrastructure and put in place adequate facilities to deal with the rise in passengers and the challenge of waste water disposal. All cruise ship operators either the big ones who operate worldwide and the other local (Baltic) ones, are taking environmental responsibilities seriously because they know that their livelihood depends on the environment.

5.2. Research question: state of cooperation for long-term competitiveness?

Collaboration and communication between cruise ship operators and legislative and regulating organisations is the key to go further. This research has shown that many such good initiatives exist but also pinpointed a few areas where improvement is needed; • When asked to comment, the Swedish Transport Agency refers to the Swedish Maritime Administration, who then states that ’we only execute what the Swedish Transport Agency and the government decide’. • The response from Birka, stating in a matter-of-fact tone that this is not an issue (which is partly understandable since they are a ’Baltic only’ player).

76 • The standpoints of the Baltic Ports Organisation explaining the difficulties for ports to upgrade their waste water reception facilities. • The comments of CLIA on the Baltic sewage regulations, expressing doubts to the degree of treatment at municipal plants compared to the on-board treatment systems. Comments that are also made by Mr. Sweeting for Royal Caribbean. From the above, and the need to preserve the Baltic for the future, it is desirable to intensify the collaboration. This will become even more important when the SECA and NECA’s become effective in 2015. There are also valuable examples of cooperation; for example cruise operators sharing best practices on treatment technologies and new and alternative ways for treating waste water. Both Carnival as well as Royal Caribbean boast participation in the Ocean Conservation and Tourism Alliance, a collaboration between Conservation International and the Cruise Lines International Association (CLIA). One organisation that stands out when it comes to their realism (there is a relation between attractiveness for cruise operators and local regulations) is Ports of Stocholm. Environment is an integral and self-evident part of Port of Stockholm operations and this can be confirmed with the fact that now the Stockholm Port is being classed as one of the leading green ports in Europe. They also understood that creating long-term and sustainable means of transport is challenging and collaboration of different partners is needed. They work together with several international and national organisations to jointly create the preconditions to make shipping greener. Their environmental efforts can be summarised by the development of financial incentives (price differentiation), collaborating with their customer, transport industry and organisations, and by extending and sharing their knowledge in research and development. It is also very important to mention that they are working with the Stockholm Cruise Network to establish Stockholm on the map of attractive cruise destinations. The long- term goals are to gain new markets and to increase the numbers of turnarounds in Stockholm. Other cruise-attractiveness related examples are the way Ports of Stockholm is preparing the Stadsg˚ardenquays for the Grace (Viking Line’s new cruise vessel, to come into service January 2013). At the same time Ports of Stockhom are upgrading the ferries’ waste water management with new lines, new sewer pumps and new connections to the municipal treatment plant. The responses from Birka and Royal Caribbean (RCCL) are not always in agreement. For example the matter of nutrient removal is completely avoided by Birka’s answer (’we rely on PRF’s’), whereas the RCCL answer is much more open in recognizing that there is no practical on-board solution for this yet, other than transferring the problem to the municipal treatment plant. At the same time RCCL admits there are only 2 ports with adequate PRF’s today and it can be concluded that for all other destinations they still rely on their own AWP, without nitrogen and phosphorous removal.

77 These diﬀerences in views can be partly explained by the fact that Birka is a Baltic-only player whereas Carnival and RCCL are typical global players.

5.3. Research question: how to deal with increased cost?

As was to be expected, cruise operators are reluctant to share their cost structure and cost drivers, because of competitive forces between them. Royal Caribbean (RCCL) published a figure of ”150 MUSD for 22 ships or 6.8 MUSD”, which is higher than the Hänninenand Sassi (2009) estimate of 3-3.5 MUSD. Possible explanations could be that the information of Hänninenand Sassi (2009) is based on quotes and not real installations. Others could be that RCCL includes other costs in this figure, for example the cost of ’downtime’ during installation and commissioning of the Advanced Wastewa- ter Purification (AWP) plant. If we assume the 22 AWP-equipped vessels to carry on average 3500 persons, the extra cost per person becomes approximately 0.67 USD per passenger per day (using the same assumptions and operating cost as in section 4.4), very close to the figure of Hänninenand Sassi. Customers express a general distrust of surcharges. Surcharges are too non-transparent and the amount is almost always believed to be a ’over-estimate’ to have some safety margin for future variations. This research hints that including increased costs in the cruise price is the better way to go. The reason for surcharges, cruise companies claim, is that the cruise prices are fixed for an entire year and that they cannot increase prices to their intermediaries to offset increased operating costs. The cruise industry is required to find different pricing models that actually allow for a more flexible pricing, to avoid the surcharge. Two specific suggestions are given here: • A more on-line price look-up system comparable of that of the airlines, where an intermediary can enter and get today’s price. • A clause (common in other industries) in the price list to their intermediaries where they state that if fuel prices rise/fall with more than 10% during the year, the cruise company reserves the right to update prices up/down. This is done for example with exchange-rate risks in industries where price lists are in one currency, but the seller’s cost structure in another.

5.4. Closing remarks and personal opinion

Although the re-use of treated waste water is common in municipal treatment installations, it is doubtful that cruise ships will soon re-use treated waste water. The risk that a malfunctioning treatment plant leads to mass-illness on board a ship together with the PR challenges (newspapers writing articles on how cruise ships try to ”save money

78 by recycling your neighbour cabin’s sewage”) are considered too big to overcome for the time being (source: personal communication with Xylem employees). Another important fact to notice is that environmental consciousness has progressed from a trend into a global way of life, and customers expect environmentally friendly cruising. 1 However,there is always more to be done and it is important to point out the cruise industry is not resting on its laurels. One very positive impression on the state of collaboration that can be achieved, was made by Ports of Stockholm that does not deny the tension between attractiveness as a cruise destination on one side and cost factors for cruise operators on the other. The approach Ports of Stockholm chose should be considered a ’best practice’ for the industry as well as the region and has a high potential to be exported within as well as outside the Baltic region. A good example from the cruise industry’s side are the actions and (easily accessible) information provided by Royal Caribbean (RCCL) and Carnival. The analysis RCCL makes in their 2010 Stewardship Report displays ambition and a fair amount of self- criticism and realism.

5.5. Validation, limitations and critical review

The author’s personal concerns discussed above can somewhat be considered limitations already. Other than that, some additional issues became apparent during the work on this dissertation. As outlined before, the main limitation of this dissertation is the fact that it included a case study and the generalisation of the empirical findings is therefore limited. Moreover, one of the main problems detected during the compilation of this thesis was the fact that few experts responded within the time frame stipulated for the investigative part of the research. This has led to more weight being given to the case-study character of this dissertation. The critical review will be structured in accordance with the definitions of validity and reliability, introduced in section 3.2.1. Construct validity: The construct validity of this dissertation’s logical structure, the problem analysis and the research questions, have been confirmed by the responses from the respondents. Both from the side of Ports of Stockholm as from Carnival and Royal Caribbean’s information compiled from other sources, the author’s these of the problem existing, has been confirmed. The research part therefore exhibits construct validity. Internal validity: The cause-effect chain of the thesis has been made plausible. None of the questionnaire respondents and none of the background and research material examined, contradicts the causality-assumption that ’more unique regional

1www.worldcruise-network.com/features/feature78425/

79 regulation’ −→ ’higher operating cost in this particular region’ −→ ’competitive forces between regions’ −→ ’ incentive for operators to move itineraries to cheaper regions.’ The research exhibits therefore internal validity. External validity: The author claims that external validity is partially attained. The limited time frame made it harder to conclude data collection with more responses, at the same time there is no indication that additional responses would have con- tradicted the ones already received. Much of the material reviewed speaks for the other responses being in line with the responses received and analysed. Full external validation could have been achieved if more time had been available for the study. Especially the strong suggestion that ’cost-absorption/transfer is prefer- able from marketing standpoint over applying surcharges’ is worth a more detailed study, adding external validation to this result. Reliability: Other researchers conducting similar studies within a short to medium term are expected to come to the same findings. Due to the changing nature of one of the underpinning concepts (the changing legislation and degree of cooperation) it is very likely that studies conducted in the longer term come to different conclusions on the degree of cooperation between cruise operators and organisations. Since the author claims that more cooperation is needed to successfully remain competitive as a touristic cruise destination, future research confirming that increased cooperation has led to increased competitive position compared to other region, should be interpreted as a confirmation of this study. All experts were offered the option to include their responses anonymously. None of the respondents used this option which is taken as an indication that they are committed to the answers they provided. Therefore, no further approval for publication of the material and analysis was deemed necessary. With regard to the Facebook survey of a selected group of potential customers, the following remarks can be made (the first four were already mentioned in section 4.4): • Age composition of the respondents: mainly between 20 and 40 years of age approximately. • Bias towards environmentally conscious sub-group of the sample (they are more likely to respond to a question concerning the Baltic environment). • Bias towards tourism-interested sub group (there are relatively more tourism- interested people in the researchers immediate circle of contacts, than in the general population. • Bias towards the Stockholm area with people familiar with the relatively short 24 hour and 36 hour city cruises (therefore less representative for segments that would engage on longer (e.g. 7 day) cruises). • The sample size of 42 respondents is on the lower limit for being statistically significant for a one-question-survey (ratio questions:respondents between 1:4 to 1:10 required, see section 3.5).

80 • Extrapolation from Table 4.5 in Smith 2010 (p.104) the sample size of 42 together with a 20/80 attribute incidence (conservative since 86% indicated to be willing to pay more than nothing) indicates a conﬁdence interval of approximately 85%-90%. • For a more rigorous analysis, requiring 95% conﬁdence interval, assuming a population (passenger numbers) in the 100 000’s, table 4.4 in Smith 2010, requires a sample size of roughly 380-385 participants. Since a sample size of this magnitude was beyond the allotted time and resources for this particular dissertation, the validation of the result is left to future research.

5.6. Future Research

Academic research is crucial to the cruise industry. One of the diﬃculties with cruise research is that cruise studies are subject to quickly varying knowledge where information can change rapidly. This research is about the impact of Baltic Sea cruise tourism on the environment and tries to give an overview of the current environmental state regarding the ban on sewage discharge. A lot of research needs to be done on the same environmental subject. For example the eﬀect of the following regulations;

• IMO’s SOx marine fuel regulations, that requires reduction in sulphur content in marine fuel for ships to 0.1%, to take eﬀect from 1st January, 2015 in SECA areas.

• IMO’s NOx regulations that designate the Baltic Sea as a NOx Emission Con- trol Area (NECA)to be submitted in October 2012 (according to Mrs. Paulin at Swedish Maritime Administration). As stated in the introduction, both of these were explicitly excluded from this research since it is not an issue speciﬁc for the Baltic, but more of a global research subject and for reasons of scope limitation. From the result that potential cruise customers do not like to see surcharges but prefer cost variations to be included in the price, the cruise industry should initiate a thorough look at its ’surcharge’ pricing model, backed up by more rigorous research (380-385 sample size required). The conﬁdence interval of 85%-90% for this preliminary research, warrants further investigation. Future research might take up issues that were not considered in the present research. Research into the economic and sociocultural impacts of the cruise industry in developing countries is needed as there is a global trend of increasing cruise tourism to these destinations. Focus is needed on regions, such as the Red Sea, The Indian Ocean and also the Far East, where ships are drivers for economic growth but at the same time a danger to the sociocultural environment when up to 5000 passengers arrive at once, especially at smaller ports.

81 References

Beeton (2005) ”The Case Study in Tourism Research: A Multi-Method Case Study Approach”, Tourism Research Methods. Integrating Theory and Practice, edited by Ritchie, Burns and Palmer, CAB International Publishing. Blom and Nilsson (2005) ”Turismens historia och utveckling - en lärobok”, Liber AB. Boy and Neumann (2012) ”Regulatory Frameworks of the Cruise Industry”, The Busi- ness and Management of Ocean Cruises, edited by M. Vogel, A. Papathanassis and Ben Wolber, CAB International Publishing. Cartwright and Baird (1999) ”The Development and Growth of the Cruise Industry 1999”, Butterworth and Heinmann. Decrop (1999) ”Triangulation in Qualitative Tourism Research”, Tourism Manage- ment, Research - Policies - Practices, Vol. 20 (1), Elsevier. Dickinson and Vladimir (2007) ”Selling the Sea , An Inside Look at the Cruise Indus- try”, Wiley. Donaldson (1994) ”Safer Ships, Cleaner Seas: Government Response to the Report of Lord Donaldson’s Inquiry into the Prevention of Pollution from Merchant Ship- ping”, International Comparative Law Quarterly, 44 , pp 939-948, British Institute of International and Comparative Law. Dunn (2005) Interviewed by Iain Hay in ”Qualitative Research Methods in Human Ge- ography”, Oxford University Press Canada. EUSBSR09 ”European Union Strategy for the Baltic Sea Region ACTION PLAN”, {SEC(2009) 712}{COM(2009) 248 final}{SEC(2009) 702}{SEC(2009) 703}, 2009, www.interact-eu.net/downloads/1725/Action Plan (EUSBSR).pdf Gibson (2012) ”Cruise Operations Management, Hospitality Perspectives”, Routledge. HELCOM Baltic Sea Environment Proceedings Nr. 123 (2010) ”Maritime Activities in the Baltic Sea An integrated thematic assessment on maritime activities and response to pollution at sea in the Baltic Sea Region.”, HELCOM. Hänningenand Sassi (2009) ”Estimated nutrient load from waste waters originating from ships in the Baltic Sea area (updated 2009)”, Research Report VTT-R-07396- 08 www.vtt.fi/inf/julkaisut/muut/2009/VTT R 07396 08.pdf Jamal and Hollinshead (2001) ”Tourism and the Forbidden Zone. The underserved power of qualitative inquiry”, Tourism Management, Vol. 22 (1), pp. 63-82, Elsevier..

82 Ketkar (1995) ”Protection of Marine Resources:the US Oil Pollution Act of 1990 and the future of the maritime industry”, Marine policy, vol. 19 iss. 5, pp. 391-400, Elsevier. Langen, van (2011) ”Sustainability Report Fiscal Year 2010”, received in personal communication with Mr. James van Langen. Lunden (2008) ”Economics”, Edinburgh Business School MBA course text. Manning (2006) ”Managing Cruise Ship Impacts: Guidelines for Current and Potential Destination Communities”, Tourisk Inc. Morgan and Power (2011) ”Cruise tourism and the tourism industry”, Research Themes for Tourism ed. by P. Robinson, CAB International Publishing. Mullins, Walker, Harper and Boyd (2003) ”Marketing”, Edinburgh Business School MBA course text. Myrberg (2008) ”The physical oceanography of the Baltic Sea”, Finnish Institute of Ma- rine Research Helsinki. www.helsinki.ﬁ/henvi/yvv/HERCseminarseries08/Myrberg. pdf Ritchie and Hudson (2009) ”Understanding and Meeting the Challenges of Consumer/Tourist Experience Research”, Int. Journal of Tourism Research 11, pp.111126, Wiley. Smith (2010) ”Practical Tourism Research”, CAB International Publishing. Steene (2011) ”The Impact of Carbon Discharge Legislation on the Future Develop- ment of Maritime Tourism and Cruising”, TOURISMOS: volume 6 nr. 2, pp.53-64, University of the Aegean (Greece). Veal (2006) ”Research methods for leisure and tourism, a practical guide”, 3rd edition, Harlow Pearson Education. Vogel, Papathanassis and Wolber (2012) ”The Business and Management of Ocean Cruises”, CAB International Publishing. Walle (1997) ”Quantitative versus Qualitative Tourism Research”, Annals of Tourism Research, Vol. 24 (3), pp.524-536, Elsevier. Ward (2002) ”Complete Guide to Cruising and Cruise Ships”, Berlitz Publishing. Xiao and Smith (2006) , ”Case studies in tourism research: a state of the art analysis”, Tourism Management 27, pp.738-749, Elsevier Yin (2003) , ”Case study research: design and methods”, Sage, Thousands Oaks, Cali- fornia.

List of URL’s

The following is a complete list of URL’s used as a reference in this dissertation. For readability reasons, if a particular URL was too long to be included in the context,

83 it was abbreviated using ”.....” in the URL name (digital readers can still click on the abbreviated link). The table can be used to identify the full URL. All relevant pages were downloaded by the author and are saved in case the link or information disappears at some point. Relevant copies of the downloaded web pages can be requested by emailing [email protected]. All links were downloaded and accessible on June 3rd 2012.

84 ec.europa.eu/environment/water/marine/ges.htm un.org/wcm/content/site/climatechange/lang/en/pages/2009summit

www.astm.org/COMMIT/F25Presentations/fiebrandt.ppt www.baltex-research.eu www.bpoports.com/about.html www.bpoports.com/assets/files/MoS/BPOCommentstoHELCOM.pdf www.cruisebaltic.com/composite-719.htm www.cruisebaltic.com/media(1315,1033)/Cruise_Baltic_Market_Review_2010_final.pdf www.cruisebaltic.com/media(1544,1033)/Cruise_Baltic_Market_Review_2012.pdf www.cruisebaltic.com/media(1560,1033)/Cruise_Baltic_statistics_2000-2012.pdf www.cruisemarketwatch.com/articles/cruise-market-watch-announces-2011-cruise-line-market-share-and-revenue-projections/ www.cruisemarketwatch.com/blog1/home/ www.cruising.org/regulatory/about-clia www.digipaper.fi/tallinksilja/75337/ www.economist.com/node/15501665 www.europeancruisecouncil.com www.foe.org/cruise-report-card www.foe.org/news/blog/2008-11-the-facts-about-cruise-ships www.havochvatten.se www.helcom.fi/helcom/en_GB/aboutus/ www.helcom.fi/GIS/en_GB/HelcomGIS/ www.helcom.fi/shipping/emissions/en_GB/emisions/ www.helcom.fi/shipping/waste/en_GB/waste/ www.helcom.fi/stc/files/shipping/Overview\%20of\%20ships\%20traffic_updateApril2009.pdf www.helsinki.fi/henvi/yvv/HERCseminarseries08/Myrberg.pdf www.imo.org/about/conventions/listofconventions/pages/international-convention-for-the-prevention-of-pollution-from-ships-(marpol).aspx www.imo.org/About/HistoryOfIMO/Pages/Default.aspx www.imo.org/OurWork/Environment/PollutionPrevention/SpecialAreasUnderMARPOL/Pages/Default.aspx www.interact-eu.net/downloads/1725/Action_Plan_(EUSBSR).pdf www.ipcc.ch/organization/organization.shtml.T5VQnLODuAg www.royalcaribbean.com/content/en_US/pdf/RCI_wastewater_pur.pdf www.royalcaribbean.com/ourCompany/environment/rcAndEnvironment.do www.stockholmshamnar.se/Documents/EN/Trycksaker/Miljofakta_ENG.pdf www.stockholmshamnar.se/en/About-us/Network-and-collaborations/ www.stockholmshamnar.se/en/News-and-press/2008/New-Stockholm-landmark-dedicated---Stockholm-Cruise-Center-Frihamnen/ www.stockholmshamnar.se/en/Prices-and-services/ www.stockholmshamnar.se/en/Prices-and-services/Collaborations-and-networks/ www.stockholmshamnar.se/en/Prices-and-services/Enviromental-Measures-for-Shipping-Company-Customers/ www.stockholmtown.com/templates/AgentManualPDF.aspx?pid=18136&cid=2&pall=0 www.stockholmtown.com/templates/page____15096.aspx www.ucl.ac.uk/mssl/imaging/research www.unwto.org/climate/bkg/en/bkg.php?op=1 www.vtt.fi/inf/julkaisut/muut/2009/VTT_R_07396_08.pdf www.waterfootprint.org www.worldcruise-network.com/features/feature78425/ www.xyleminc.com/ www.xyleminc.com/en-us/media-library/Pages/video-library.aspx 85 A. Appendix: Cruise lines calling on Stockholm in 2012

source: www.stockholmtown.com/templates/AgentManualPDF.aspx?pid=18136&cid= 2&pall=0)

86 Cruise companies calling on Stockholm grouped by origin American Azamara Club Cruises (RCCL), www.azamaracruises.com Celebrity Cruises (RCCL), www.celebritycruises.com Crystal Cruises, www.crystalcruises.com Elegant Cruises & Tours, www.elegantcruises.com Holland America Line (Carnival Corporation), www.hollandamerica.com Lindblad Expeditions, www.expeditions.com Norwegian Cruise Line / Orient Lines (Star Cruises), www.ncl.com Oceania Cruises, www.oceaniacruises.com Princess Cruises / Cunard (Carnival Corporation), www.princess.com Regent Seven Seas Cruises, www.rssc.com Royal Caribbean Cruise Line (RCCL), www.royalcaribbean.com Seabourn Cruise Line (Carnival Corporation), www.seabourn.com SilverSea Cruises, www.silversea.com Disney Cruise Lines, www.disneycruise.disney.go.com British Cunard Line, www.cunardline.com Fred Olsen Cruise Line, www.fredolsencruises.com Noble Caledonia, www.noble-caledonia.co.uk Page & Moy, www.pageandmoy.com P&O Cruises, www.pocruises.com Saga Shipping Company, www.saga.co.uk Swan Hellenic, www.swanhellenic.com Thomson Cruises, www.thomson.co.uk/cruise Travelscope, www.travelscope.co.uk Voyages of Discovery, www.voyagesofdiscovery.co.uk German Aida Seetours (Carnival Corporation), www.aida.de Hansa Kreuzfahrten, www.hansakreuzfahrten.de Hapag Lloyd Kreuzfahrten, www.hlkf.de Lord Nelson Seeresen, www.lord-nelson-seereisen.de Peter Deilmann, www.deilmann-cruises.com Phoenix Reisen, www.phoenixreisen.com Plantours und Partners, www.plantours-partner.de Sea Cloud Cruises, www.seacloud.com Transocean Tours, www.transocean.de TUI Cruises, www.tuicruises.com Italian Costa Cruises (Carnival Corporation), www.costacruises.com MSC Cruises (Mediterranean Shipping Company), www.msccruises.com Spanish Ibero Cruceros, www.iberocruceros.com Pullmantur Cruises (RCCL), www.pullmanturcruises.com French Plein Cap Croisires, www.plein-cap.com Compagnie du Ponant, www.ponant.com

87 B. Appendix: Cruise Tourism on the Baltic Sea Statistics

Source: HELCOM AIS data, Number of ships crossing pre-defined AIS lines in the Baltic Sea, 2006-2009. Source: HELCOM Baltic Sea Environment Proceedings Nr. 123 (2010). Year Passenger Cargo Tanker Other No info Total 2006 42731 226855 67458 39627 - 376671 2007 43215 237342 69335 56981 6901 413774 2008 49355 210021 61996 122029 10297 453698 2009 42408 200595 69021 73906 8096 394026 The statistics presented in tables B.1, B.2 are based on Cruise Europe’s definition of Cruise which excludes all cruises shorter than 60 hours. This excludes for example the numerous Finland-cruises organised from Stockholm. They are, however, facing the same challenges, with the difference that Baltic-only cruises (roughly the ones excluded in the tables that come) do not have an easy way of moving their business to other regions. The figures in the table to come can therefore be interpreted as the numbers of passengers and calls that are at risk, when the Baltic ’regulates itself out of the market’.

88 Figure B.1.: Cruise passenger numbers per port. Source: Cruise Baltic www.cruisebaltic. com/media(1560,1033)/Cruise Baltic statistics 2000-2012.pdf 0

000 000 000 000 000 00 4.161.511 2012

2011 2.126 1.800

0 0 5.500 2.600 .486.003 3.933.655 2010 % -0,4% 12,8% 5,8%

0 1.000 680 850 2009

4 2.426 5.312 3.500 4.200 900 25.987 15.648 7.600 9.000 3.276 16.753 8.378 6.787 10.000 .996 2.736 2.000 5.456 3.500 1.100 1.158 325 - 500 2008 50.077 69.413 58.248 63.527 90.000 4 12.445 35.598 51.730 62.154 70.000

80 32.820 33.300 35.201 21.478 28.450 437 437 23.331 25.945 9.384 1.707 3.500 9.088 123.521 134.884 125.005 78.418 100.000 2.000 22.000 24.000 31.709 53.323 76.466 3.046 16.921 21.864 14.894 18.095 8.043 40.000 25.536 22.815 6.325 39.472 45.000

2007 115.000 171.500 160.000 222.000 259.000 300.000 62.263 64.324 32.874 52.067 42.819 58.000 0 172.937 222.130 291.388 341.391 377.205 370.000

234 197.173 239.991 269.763 261.000 312.859 315.00 0.000 260.000 360.000 360.000 342.000 385.000 400. 8.000 509.000 560.000 675.000 662.000 819.000 830. 5.835 335.502 5.026 394.827 292.158 425.665 375.578 427.500 415.575 472.000 390.000 500. 437.517 430. 7.000 281.000 365.000 447.000 415.000 452.000 470. 2006

2005 2.370.487 2.520.632 2.553.300 3.096.177 3.499.946 3

2004

2003

2002

2001

2000 149.252 163.895 142.647 204.405 252.553 299.703 30 166.000 185.000 173.000 259.000 362.000 428.000 45 14.000 20.000 21.500 16.600 35.000 43.000 38.000 5 10,6% -3,4% 42,0% 14,7% 22,8% 6,3% 1,3% 21,3% 13,0 6.266 8.422 2.678 3.205 3.062 5.984 8.311 7.350 3. 1.678 2.461 324 5.282 6.027 3.764 3.366 4.934 2.17 - - 1.160 1.270 1.095 1.350 2.460 3.100 5.778 1.25 ------157.000 170.000 135.000 202.000 210.000 250.000 28 ------4.909 2.580 1.974 1.030 683 5.655 1.4 3.400 3.600 2.440 5.500 14.167 12.700 11.272 11.40 4.613 11.886 7.766 9.115 14.250 23.701 24.914 35.6 400 - 169 1.042 4.519 3.245 3.322 1.800 - 450 2.60 140.000 148.000 127.000 161.000 195.000 240.000 27 52.622 69.499 3.047 77.656 3.356 95.092 2.255 92.000 1.833 124.500 780 143.000 6.200 19.099 3. 3.643 3.486 3.609 3.367 7.359 8.353 9.703 12.193 1 - - - - - 523 1.350 565 500 625 850 777 - 4.100 14.000 13.800 3.700 1.600 2.134 2.717 1.007 57.610 56.460 26.666 58.411 72.977 88.723 94.135 8 109.511 134.176 127.000 204.151 205.578 295.424 30 ------750 1.700 1.918 - 1.600 - - 12.000 14.250 12.200 10.800 17.000 13.800 16.311 1 - - - - - 495 657 510 560 - - - - 12.868 13.279 15.880 24.978 17.136 30.514 26.317 1 ------302 380 - 1.245 5.654 5.327 7.398 6.338 12.132 9.700 3.273 2.372 2 48.339 33.657 78.249 102.418 68.631 113.387 77.578 1.109.449 1.226.915 1.184.785 1.682.672 1.930.102 600 - - - 600 1.750 2.000 2.020 2.000 2.145 1.773 108.813 92.726 86.408 120.044 145.726 183.725 206. - 22.307 54.040 89.949 62.306 48.028 40.843 65.438

48.033 51.128 65.940 93.172 128.604 131.784 154.25 Name of port Helsinki Kalmar Göteborg Karlshamn Karlskrona Kemi Gdynia Helsingborg Kiel Klaipeda Korsør Kotka Kristiansand Malmö Mariehamn Copenhagen Elsinore Growth rate Gdansk Oslo Average annual growth rate (2000-2011): p.a. 12,2% Riga Rostock Rønne Saaremaa Sassnitz St. Petersburg Stockholm Tallinn Turku Umeå Visby Århus Total

89 Figure B.2.: Cruise vessel calls per port. Source: Cruise Baltic www.cruisebaltic.com/ media(1560,1033)/Cruise Baltic statistics 2000-2012.pdf

7 7 1 1 5 4 0 2012

2011

-6,3% -6,3% 6,0% 9,5% 2010

2009

303 303 2.378 2.227 2.361 2.585 2008

2007

2006

2005

2004

2003

2002

2001

2000

238 221 212 275 303 364 302 292 311 321 304 309 30 193 215 176 246 264 282 280 289 301 334 307 368 37 19 34 22 15 24 33 23 27 17 16 20 32 57 4,6% -4,6% 28,0% 5,3% 17,0% -5,4% -3,4% 4,5% 3,3% 6 9 3 18 18 5 6 3 4 13 6 9 5 4 5 1 21 30 28 12 19 9 10 19 18 21 - - 2 2 2 2 3 4 9 3 2 1 2 ------180 191 175 214 208 259 260 255 265 293 261 263 27 ------7 6 6 5 2 8 3 9 13 5 13 18 20 18 23 18 34 41 52 63 15 22 23 28 49 59 48 65 46 50 45 36 37 1 - 3 3 9 7 7 3 - 2 1 5 1 185 191 168 191 208 247 259 238 269 12 263 15 247 258 11 28 11 3 8 20 7 13 19 10 3 6 47 64 62 76 85 97 138 92 116 114 114 158 181 14 17 14 7 28 32 29 39 36 40 26 21 34 - - - - - 2 4 2 2 2 2 2 - 7 12 17 6 5 4 6 3 4 2 2 - 2 72 74 53 95 82 94 89 87 89 96 85 56 72 181 175 165 236 232 324 289 268 298 305 279 293 30 ------1 2 3 - 2 - - 27 34 28 34 47 33 34 29 31 36 24 25 51 - - - - - 1 2 1 2 - - - - 18 13 16 23 15 20 23 16 21 14 3 18 20 - - - - - 5 - 7 - 9 - 9 - 18 17 1 6 1 9 - 9 2 8 6 7 4 100 61 107 118 97 150 104 80 72 53 66 53 78 1.531 1.601 1.528 1.956 2.060 2.411 2.281 2.204 2. 1 - - - 1 3 4 3 3 4 3 4 3 112 115 88 109 114 144 156 138 148 149 150 173 176 38 41 94 126 105 83 58 88 76 88 63 69 91 47 72 74 80 95 93 93 116 125 117 136 120 139 Nameofport Copenhagen Elsinore Gdansk Gdynia Göteborg Helsingborg Helsinki Riga Rostock Rønne Saaremaa Sassnitz stPetersburg Growthrate Average annual growth rate (2000-2011): 4,0% p.a. Kalmar Karlshamn Karlskrona Kemi Kiel Klaipeda Korsør Kotka Kristiansand Malmö Mariehamn Oslo Stockholm Tallinn Turku Umeå Visby Århus Total

90 C. Appendix: Economic theory on price elasticity

Mullins et.al. (2003) list some factors affecting the customer’s sensitivity to price: • Buyer’s perceptions and preferences – Unique value effect: customers are less price-sensitive when they perceive a product or service provides unique benefits; there are no acceptable substitutes. – Price-quality effect: customers are less price sensitive when they perceive the product or service offers high quality, prestige or exclusiveness. • Buyer’s awareness of and attitude towards alternatives – Substitute-awareness effect: customers are less price sensitive when they are relatively unaware of competing brands or substitute products or services. – Difficult-comparison effect: customers are less price sensitive when it is difficult to compare objectively the quality or performance of alternative brands or substitutes. – Sunk-investment effect: customers are less price sensitive when the purchase is necessary to gain full benefit from assets previously bought. • Buyer’s ability to pay – Total-expenditure effect: customers are less price sensitive when their expenditure for the product or service is a relatively low proportion of their total income. – End-benefit effect: customers (manufacturers) are less price sensitive when the expenditure is a relatively small proportion of the total cost of the end product. – Shared-cost effect: customers are less price sensitive when part of the cost of product or service is borne by another party. – Inventory effect: customers are less price sensitive in the short run when they cannot store large quantities of the product as a hedge against future price increases. In its most theoretical form, demand for a product or service is inversely proportional to its price, i.e. the higher the price the lower the demand.

91 Figure C.1.: (Fictitious) demand curve for the number of consumers (x-axis) willing to pay the price for a 5-day-cruise (y-axis) to satisfy their ’need for a break’.

Figure C.1 shows a linear relationship between the price of a cruise and the number of potential consumers that are willing to pay that price to satisfy their ’need for a break’. For example if the cruise would cost EUR 1000 there would be 2000 buyers. An commonly used term that expresses the sensitivity of demand to price changes is called the (price) elasticity. It indicates the change in demand when a certain change in price is made: ∆Q Q E = ∆P (C.1) P with Q for quantity of demand and P price. For example, the price elasticity for cruise demand as in ﬁgure C.1 is at the point of the example1 equal to 1. When price-elasticity is equal to one, it is said that the price-elasticity is unitary. A price reduction of, say, 10% will lead to a demand-increase of 10% as well. Other values for the elasticity are: E < 1 Demand is price-inelastic: variations in price have little inﬂuence on demand. For example gasoline price are relatively inelastic due to their unavoidable nature. Many consumers(especially corporate ones) have no alternative than to use gasoline to power their cars, trucks, vans, they cannot change to public transport as private consumers could. E > 1 Demand varies more than proportionally with price changes. For example ’roast beef dinners’ at a restaurant, when promoted as ’lunch special’ with a 10% dis- count might lead to 20% increase in demand. The market for roast beef (in that restaurant, that particular day) is said to be price-elastic.

1∆P = 100, P = 1000, ∆Q = 200 and Q = 2000

92 E = 1 Discussed in the example (and included here for completeness): price elasticity is said to be unitary: 10% change in price, leads to 10% change in demand. E 1 In this special situation the the demand curve approaches a horizontal line and denotes the case where no price-increases are possible: for example a wheat farmer being able to sell its entire produce at the going wheat price, but nothing at all at a price above that. The is also called a perfectly elastic demand curve. E 1 The demand curve approaches a vertical line, demand is constant, whatever the price level is. It is also called a perfectly inelastic demand curve. Demand-curves are not the same for all consumers. Consumers with a higher income are less sensitive for price (and price variations) than low-income consumers. This will in practice (together with other factors) lead to non-linear demand-price curves. This is of less relevance for the scope of this research. Demand as a function of price is summarized above for the sake of clarifying that changing legislation, increases cost, which increases prices that can influence demand and therewith the profitability of the Baltic Sea Region cruise segment. Price-elasticity of the Baltic Sea cruise market is deciding for whether cost increases can (and will) be passed on to the end customer (cruise passengers) and the consequences for actual cruise demand (and therefore growth of the sector in the Baltic). This can be relevant since large cruise operators do have the possibility to actually change routes to other destinations if the restrictions in the Baltic start influencing their customer numbers and profits (assuming they are hindered in passing the entire cost increase on to their customers).

93 D. Appendix: Economic theory on costs

For an in-depth analysis of cost in relation to supply curves see for example Lunden (2008). For the purpose of this research it suffices with the following train-of-thought to understand the influence of legislation on cost, price and therefore possibly demand and competitiveness. Costs for a company can be divided in two types: fixed costs, that are constant in the short term, and variable costs, which vary directly with the level of production. For example for a cruise operator, costs related to owning and maintaining vessels are fixed. They cannot be adjusted on the short term when ’production volumes’ (passengers) vary from day to day. Other examples are rent, interest on loans, heating cost, executive salaries, cost for functional departments such as purchasing etc.) Other costs vary directly with the number of passengers transported and can be adjusted on the short term: meals served on a cruise, amount of laundry required to keep passengers quarters with a set of fresh bed linen every day, commission paid to travel agents for every sold cruise package. Fixed costs per unit, contrary to what their name might suggest, go down with increasing quantities sold, whereas variable costs per unit are constant. Total cost per unit (passenger) is the sum of fixed cost per unit plus variable cost per unit. For any business to be profitable in the long term it is imperative that total unit price is larger than total unit cost. Example: A cruise operator expects to transport 300 000 passengers one year. Its fixed costs are US$ 200 M and its variable costs US$ 20 per passenger. From that it follows that its unit cost becomes: 200000000 Unit cost = 20 + = US$20 + 667 = US$687 (D.1) 300000 This holds as long as the actual number of passengers is 300 000 for that year. If at the end of the year it turns out that only 250 000 passengers were convinced by the company’s advertising campaign (a fixed cost), the new incurred unit cost becomes 20 + 800 = US$ 820. If the company had been selling cruises that year at US$ 750, it would have made a significant loss. The example above showed a greatly simplified situation, but it illustrates the difficulties of ’costing’ (as it is known in accounting) remarkably well. Unit cost estimates are based

94 on fixed cost projections, as well as expected quantity estimates. Deviations in either of these will lead to a cost figure that does not match the cost-estimate any longer. This is particularly true for cost-estimates for cruise vacations as such a large part of the unit cost is represented by fixed costs. Cruise liners will have a relatively large part of the cost per passenger represented by fixed costs, since the infrastructure (big cruise ships) requires enormous investments (US$ 1 400 000 000 for the Oasis of the Seas). These fixed costs are typically hard to reduce in sudden changes in demand. For example during the downturn in cruise demand after 9-11, cruise company’s might manage to cut variable costs (e.g. laundry) but fixed costs (e.g. personnel, interest pays on loans for purchasing big cruise ships) not immediately. Personnel is especially sensitive because for example doing away with skilled employees at the onset of a downturn, might turn out expensive to replace and train when customers return. This explains also why cruise companies (similar to airlines) have a unique opportunity for offering last-minute deals which cost ’next-to-nothing’. Once the fixed costs have been covered by the minimal number of passengers required to do so, the next cabin (or airliner seat) costs almost nothing to offer. As a matter of fact, the margins on those ’last-minute’ deals turn out to consist of almost 100% profit for the company. The reverse is also true; every passenger short of reaching cost-break-even, represents an almost 100% loss (unit cost) for the company. Anything a little more akin to reality than a fictitious costing example, represents genuine difficulties for accountants. Measuring costs is all but trivial and topic of discussion in all industries and sectors.

95 E. Appendix: Example of questionnaires sent to various stakeholders

The following questionnaires are an example of the type of questions sent out to the stakeholders in section 3.3. Three diﬀerent set-ups were chosen: one for organisations, one for cruise operators and one more customised questionnaire for expert interviews, in this case with Tumlare Sweden AB.

E.1. Example of questionnaire sent to the Swedish Agency for Marine and Water Management (Havs och vattenmyndigheten)

Although the Baltic Sea in global terms is a small market for cruises, its growth is strong. Cruise tourism in the Baltic Sea has increased dramatically in recent years. The number of cruise passengers arriving in Stockholm has tripled in the last ten years and last year was over 450 000 visitors. 1. Cruise tourism is important for the destinations in the Baltic Sea region in terms of economic growth, employment, public relations. In Stock- holm the contribution of cruise tourist spending to the local economy is estimated to 5,1 billion Swedish crowns under one year when they visit Stockholm. They use 345 000 hotels rums in Stockholm per year. This is an incentive to continue developing Stockholm as an attractive cruise destination. How is Havs och vattenmyndigheten involved when it comes to balancing the beneﬁt that tourism brings to the region with the local point sources of pollution that come with it? 2. The latest Helcom legislation completely prohibits raw sewage disposal while at sea. On paper an important initiative to reduce the contribution of cruise tourism to Baltic Sea euthrophication and pollution. However a) A clause in Helcom legislation speciﬁcally limits enforcement of the new rules until all Baltic destinations have adequate Port Reception Facilities. Cruise companies can (and probably will) continue to dispose of raw sewage in the Baltic until all destinations actually have PRFs (at the moment of writing only a hand full of the biggest ports have adequate PRFs) and at the same time it can be argued

96 what is considered to be ’adequate’ (not disturbing the cruise liner’s schedule, availability around the clock, with a better effluent quality of what could otherwise be achieved by using the onboard treatment systems. All in all many loopholes that make the newest Helcom legislation easy to circumvent for cruise companies. How does HaV deal with these challenges? b) Current legislation (MARPOL) for the onboard treatment plants only prescribes limits for BOD, TSS and faecal coliforms. It does not address the nitrogen and phosphorous loads present in cruise ship generated sewage. So even if cruise ships treat their own sewage to comply with Helcom regulations, this does not help nitrogen and phosphorous eutrophication. How does HaV see on these shortcom- ings? 3. For cruise ships to comply with the stricter Helcom legislation poses several challenges for the cruise companies as well: a) An adequate onboard treatment plant can cost up to EUR 3.5 M. Operating cost for the system EUR 150 K per year. b) Retrofitting a treatment plant to existing vessels means sacrificing other profit generating square meters c) Or choosing to discharge in PRFs instead of at sea requires holding tanks with the same draw back as under b. Balancing the above the cruise companies are faced with a local (Baltic) cost increase which will serve as an incentive to consider alternative destinations for their fleet where compliance with sewage regulations is ’cheaper’ (assuming also that cruise passenger are price sensitive and are scared away if Baltic cruises come disproportionally more expansive compared to cruises in/to other parts of the world). Does HaV have an idea of the forces between Helcom on one side and popular cruise destinations wanting to increase their appeal to potential cruise operators? Does HaV have an active role in these discussions? 4. Any other initiatives on the interface between economic interest of the Baltic and the cruise ship operators operating in the Baltic, you would like to highlight?

E.2. Example of questionnaire sent to Royal Caribbean Cruise Lines

Many of the questions to follow are based on the information on your excellent website: www.royalcaribbean.com/ourCompany/environment/rcAndEnvironment. do and it was the outspoken environmental attitude and responsibility that caught my interest and the inclusion of Royal Caribbean in my research.

97 HELCOM has reached an agreement with the member states around the Baltic to completely ban the discharge of untreated sewage and waste into the Baltic (the discharge of treated sewage is still permitted). My thesis tries to find answers to the question how to balance the desire for a sustainable environmental development of the Baltic with the direct competitive position of cruise destinations (in this case the Baltic). By imposing local Baltic regulations that are much stricter than regulations in other popular cruise destinations, the added cost to comply to these stricter regulations, might actually become an economic incentive to cruise companies to (partly) move their operations to other (’cheaper’) parts of the world (provided that they cannot or do not wish to (due to effects on passenger volumes at increased prices) transfer the higher costs for sewage storage and/or treatment to the customers). 1. How has Royal Caribbean dealt with the increasing sewage legislation on the Baltic? At some point all sewage had to be carried to the next port-of-call for treatment, what areas were sacrificed to make room for this storage? 2. When it comes to treatment; do you have any idea of the total expenditure in acquiring and installing the treatment plant on board of the ships? Do you have any idea of the operating cost per day per passenger of the plant? Have you been able to include the higher sewage treatment costs in the price the passenger pays? 3. MARPOL sets limits for treated sewage for BOD, TSS and faecal coliforms. However, there are no limits on nitrogen and phosphorous content in effluents, which both contribute to Baltic eutrophication and algal blooming. What are the operating characteristics of your onboard treatment systems? Are nitrogen and phosphorous removed before discharge or is 100% of black and grey water delivered to the sewage Port Reception Facilities around the Baltic? 4. Many cruise lines have criticized the PRFs for being too restrictive on their working hours which then interferes negatively with the cruises schedule for example. Is this something that has affected Royal Caribbean? 5. Cruise Lines International Association (and others) have repeatedly pointed out that different requirements on sewage discharge in different parts of the world are presenting challenges to actually comply with all of them. Since you also operate in the Baltic, how do you deal with the ever moving target of sewage discharge and emission restrictions in the region? 6. Stricter regulations will force cruise operators to upgrade or install ever more sophisticated treatment installations. How do you anticipate to balance the increased operating costs to comply with environmental legislation with medium term direct competition with other tourism forms such as low-cost airlines weekend city trips?

98 E.3. Example of customised questionnaire sent to Tumlare Sweden AB

When it comes to the environment, the cruise industry hasnt always enjoyed the best reputation, but in recent times, cruise ship operators have made substantial efforts to improve their practices. Experts now agree that when visiting some of the worlds most ecologically sensitive regions, cruise lines are duty bound to help preserve these vulnerable areas. For operators, this means a range of measures including the reduction of fuel consumption, cutting down on unnecessary waste and the introduction of the latest technology to help re-use water and conserve energy. While there is always more that can be done, the cruise industry is taking significant steps to reduce its impact upon the environment. Although the Baltic Sea in global terms is a small market for cruises, its growth is strong. Cruise tourism in the Baltic Sea has increased dramatically in recent years. The number of cruise passengers arriving in Stockholm has tripled in the last ten years and last year was over 450 000 visitors. Cruise tourism is important for the destinations in the Baltic Sea region in terms of economic growth, employment, public relations. In Stockholm the contribution of cruise tourist spending to the local economy is estimated to 5,1 billion Swedish crowns under one year when they visit Stockholm. They use 345 000 hotels rums in Stockholm per year. This is an incentive to continue developing Stockholm as an attractive cruise destination. 1. How is Tumlare involved when it comes to balancing the benefit that tourism brings to the region with the local point sources of pollution that come with it? 2. ECC (European Cruise Council) and CLIA (Cruise Lines International Association) and others have repeatedly pointed out that different requirements on sewage discharge in different parts of the world are presenting challenges to actually comply with all of them. Since the Baltic has one of the strongest environmental laws; Do you think this is a threat for the Baltic as a cruise destination? How does this affect Stockholm as a Cruise Destination? 3. What do you think about IMOs new rules for less sulphurous content in maritime fuel? 4. What kind of costs will be related to their work in improving the environment? 5. Will there be higher costs for the tourists and are they willing to pay the higher price for their holiday? 6. What do you think the Baltic Cruise Tourism market will be like after 2015?

99 F. Appendix: Baltic Ports Organisation (BPO) on HELCOM guidelines for sewage discharge

The following is a copy of the Baltic Ports Organisations (BPO) comments on the HELCOM regulations for the Baltic Sea. Source: www.bpoports.com/assets/ﬁles/MoS/ BPOCommentstoHELCOM.pdf

F.1. BPO comments to HELCOM guidance on technical and operational aspects of sewage delivery to Port Reception Facilities

The enforcement of the recent IMO and HELCOM requirements on passenger ships on sewage discharge in the Baltic Sea area raises a number of significant challenges for the ports in question and for the passenger ships operating in the Baltic Sea Area. A port is only the link between the ship and the municipal treatment plant. The port has limited possibility of pretreatment of the sewage, especially at old terminals and quays. Passenger ships in regular traffic is the largest group which are no longer allowed to discharge sewage into the sea, unless they are equipped with sufficient and approved sewage treatment facilities which hold back nutrients. Cruise ships are the group of ships which causes the largest challenges to the ports due to the large quantities of sewage to be discharged at port reception facilities during port calls which only last a few hours and due to a relatively limited number of port calls during a relatively short season, compared to the large investments needed for upgrading the port reception facilities. The challenges for the ports are mainly the uncertainty to what extent new investments are needed, what port reception solution (or solutions) is the most suitable and cost efficient to meet the requirements, the costs of establishing and running the reception facilities and various requirements from the city sewage treatment plant with respect of volumes and content of the sewage. The passenger ships are allowed to discharge sewage into the Baltic Sea if the ship is equipped with an approved waste treatment plant which holds back the nutrients. If all or most of the passenger ships were equipped or are being equipped with such a sewage treatment plant, no further or only very limited investments in ports would be needed. Because of the uncertainty the ports then make large unnecessary investments in sewage reception facilities for which the ships has to

100 pay for anyway through the no-special-fee system. This is the first challenge for the ports and the shipping industry. There is a need to clarify to what extent the investments are needed in the single port, and which ships are or are being equipped with sufficient sewage treatment facilities before the regulation comes into force. An annual update of the list would be appropriate. Main challenges/obstacles to enforcement of the new regulations for sewage reception in ports from ferries and cruise ships that should be met in the HELCOM guidance are: 1. Different international regulations are in mutual conflict. This must be solved before the new sewage regulation comes into force. For example, there are no exemptions set up in the new regulation, which is a problem if for some unexpected reason the ship cannot discharge to port reception facilities. 2. The No-Special-Fee system is not adapted to the regulation or vice versa. The regulation should be in compliance with the EU-directive on port waste facilities, which is about to be revised. There is a need for flexibility on how to comply with the regulations, and it must be allowed for the ports to charge for exceeding volumes that are not produced since the last port of call. 3. Definition of sewage is not in place. The content and character of sewage varies significantly, which makes it difficult to decide which technical solutions meet the requirements. 4. Ships are equipped with different sewage treatment systems which produce sewage with different velocity and content. This again must be received with different technology and treated differently in the ports. There is a need to clarify which technological solutions are needed in the ports and it may be necessary through regulations to make requirements to ships in this respect on which sewage quality the port can receive. Bio-sludge can block the piping system and back flush valves. 5. The existence of hydrogen sulphide in sewage threatens the working environment. The guidance must come up with reasonable solutions to this problem. Further- more odour problems cause great inconvenience to passengers, crew and staff at shore as well as offices and housing in the neighbourhood. 6. Limit exceeding metal content threatens the municipal treatment plants quality demands. This leads to significant exceeding costs for the port (we have seen examples of trebling of the costs) 7. We have seen examples of, that municipalities reject reception of sewage either motivated with large volumes or motivated with metal content or hydrogen sulphide exceeding limits. The guidelines must come up with a solution to this problem. Best solution would be if all municipalities could be forced to accept sewage as it is to their treatment plants. Technical obstacles must be solved between the ship system and the municipal system. 8. Minimum (and maximum) pumping capacity from ship to fixed installations or to barges is not agreed upon. The pumping capacity at the ship side is not always adequate. The guidance and the regulation must deals with this problem.

101 9. There are not commonly agreed diﬀerent connections and size of pipelines and connection equipment. Agreed standards would ease the operations and reduce investment costs. 10. Winter condition problems with movable pipelines. Movable pipelines are heavy. The guidance should deal with how this could be solved. 11. The guidance should highlight the legal and actual possibilities for investment subsidies and loans. 12. The cruise ship does not always berth. Sometimes it anchors outside a city (and a port) and the next port of call must receive double or triple volumes. This can imply delay to the ship if all the sewage must be discharged at the port and it imposes extra costs to the port. The guidance and the regulation should deal with how this problem can be solved. 13. When a cruise ship berths in a port which is not one of the selected ports that have to apply to the new sewage regulation, the port is not necessarily able to receive the sewage. What should be the solution for the ship and the next port of call if the port does not receive the sewage? What does this impose on the no-special-fee system? 14. It must be highlighted in the guidance, that it is not imposed on the port to receive greywater under MARPOL Annex IV. This makes it necessary for the ship to keep the black water and grey water separately. However some ports receptions facilities cannot receive high velocity sewage. The guidance must deal with solutions to this issue also in respect to the functioning of the no-special-fee system. 15. Some cities are not able to receive sewage at extreme situations, such as when heavy rain blocks the city sewage system and delay tanks. The guidance should deal with a solution to this issue too.

102 G. Appendix: Comments from CLIA on PRF’s

Adapted from H¨anninen and Sassi (2009).

G.1. Technical problems related to port reception facilities

Information concerning technical problems related to the discharge of sewage into PRFs was received mainly from the CLIA, the Finnish Port Association and the ECC. The ports that replied to the ad hoc HELCOM Correspondence Group had few com- plaints concerning their own systems.

G.1.1. Comments from the CLIA and the ECC

Cruise ships rarely find reception facilities in ports sufficient in capacity and quality of treatment. Treatment on-board ship is frequently better than is available onshore, or one may find that the vendor accepts the waste, only to discharge it into the port without treatment (this is unacceptable to the cruise lines, therefore, promoting treatment onboard). Amongst the deficiencies of port vendors in meeting the needs of vessels are that they are sometimes unreliable (do not show up) are not equipped with certified hoses or communications equipment, or have not undergone emergency response training. Discharge connections to a sewer are rare (the Port of Helsinki does have them but they are not always reliable). Discharge to shore has also been attempted in Copenhagen and in St Petersburg (by barge). Discharges to tank trucks require a constant supply of trucks since they each only hold 25-30 tonnes, with the ships duty officers monitoring the connections all day/night. According to the ECC response, Cruise Baltic has conducted a survey for the cruise industry concerning the adequacy of PRFs, and 25 ports representing all HELCOM countries were reviewed. The results indicated that 15 out of 25 ports had no direct shore connection available, while most ports utilized trucks to offload the waste waters from ships. This practice may be suitable for cargo ships or tankers but it is completely inadequate for cruise ships. The ECC response remarked that the ship-to-shore interface for unloading waste water requires considerable improvement to ensure safe and environmentally responsible practices in line with those adopted by the International Shipping Management (ISM) code and the environmental policies and procedures adopted by ECC member lines. The ECC

103 is aware of a number of operators that have attempted to discharge ashore with various degrees of success depending upon the PRFs. While ECC member companies welcome the opportunity to use shore-based facilities, the vast majority of facilities available are inadequate to serve the cruise industry (ECC, 2009b).

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