Universidade Aberta Shipping and Sustainability Liquefied Natural Gas As an Alternative Fuel: Evidence from Portugal

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Universidade Aberta Shipping and Sustainability Liquefied Natural Gas As an Alternative Fuel: Evidence from Portugal UNIVERSIDADE ABERTA SHIPPING AND SUSTAINABILITY LIQUEFIED NATURAL GAS AS AN ALTERNATIVE FUEL: EVIDENCE FROM PORTUGAL Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development 2018 Shipping and Sustainability. Liquefied Natural Gas as an Alternative Marine Fuel: Evidence from Portugal II Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development UNIVERSIDADE ABERTA SHIPPING AND SUSTAINABILITY LIQUEFIED NATURAL GAS AS AN ALTERNATIVE FUEL: EVIDENCE FROM PORTUGAL Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development Ph.D. adviser Prof. Dr. Fernando José Pires Caetano (Universidade Aberta) Ph.D. co-adviser Dr. Vítor Manuel dos Ramos Caldeirinha (CEGE/ISEG) 2018 III Shipping and Sustainability. Liquefied Natural Gas as an Alternative Marine Fuel: Evidence from Portugal The sole responsibility for the content of this document and possible inaccuracies of information lies under the responsibility of the author. IV Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development ABSTRACT The objective of this Ph.D. thesis is to provide important inputs for the decarbonisation of marine transport and climate change mitigation policies concerning liquefied natural gas (LNG) as a substitute fuel. Real-world results show efficiency gains from LNG compared with traditional fossil fuels burned on-board vessel’s engines even when equipped with mitigation technologies. Yet, this is a necessary but not a sufficient condition to LNG be elected as a substitute fuel. For a fuel switch of such order of magnitude to occur within a major end-use sector, other requirements are to be fulfilled: the government intervention in the public interest, and, to justify such policy intervention, the degree of social acceptability. This is accomplished by developing a social cost-benefit analysis (SCBA) performed at a regional basis after the assessment of the trade-off between the provision level of the good and Portuguese nationals’ disposable income had been examined. SCBA attaches money prices - a metric of everything that everyone can recognise - to as many costs and benefits as possible in order to uniformly weigh the policy objectives. As a result, these prices reflect the value a society ascribe to the paradigm change enabling the decision maker to form an opinion about the net social welfare effects. Empirically, emissions from the Portuguese merchant fleet weighted by their contribution for the National Inventory were used to quantify and monetise externalities compared with benefits from LNG as a substitute marine fuel. Benefits from the policy implementation are those related with the reduction of negative externalities. Costs are those determined from the price nationals are hypothetically willing-to-pay for. Conclusions show that benefits are largely superior to the costs, so action must be taken instead of a doing nothing scenario. Apart from the social ex-ante evaluation, this thesis also imprints the first step for developing furthermore complete studies in this aspect and it can help fill policy makers’ knowledge gap to what concerns to strategic energy options vis-à-vis sustainability stakeholders engagement. Although it addresses Portuguese particularities, this methodology should be applied elsewhere. Keywords: Shipping and sustainability; Liquefied Natural Gas; Alternative Marine Fuels; Cost-benefit Analysis; Willingness-To-Pay V Shipping and Sustainability. Liquefied Natural Gas as an Alternative Marine Fuel: Evidence from Portugal VI Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development RESUMEN El objetivo de esta tesis es proporcionar insumos importantes para la descarbonización del transporte marítimo y políticas de mitigación del cambio climático abordando el gas natural licuado (GNL) como combustible sustituto. Los resultados en el mundo real muestran un aumento de la eficiencia del GNL en comparación con los combustibles fósiles tradicionales, incluso cuando los motores son equipados con tecnologías de mitigación. Sin embargo, esta es una condición necesaria pero no suficiente para que el GNL sea elegido como sustituto. Para que se produzca un cambio de combustible de tal orden de magnitud otros requisitos se deben cumplir: la intervención del gobierno en el interés público y, para justificar dicha intervención, el grado de aceptabilidad social. Esto se logra realizando un análisis de costo-beneficio social (SCBA) a nivel regional. La SCBA asigna los precios en dinero, una medida de todo y que todos reconocen, a tantos costos y beneficios posibles para sopesar de manera uniforme los efectos de las políticas. Como resultado, estos precios reflejan el valor que una sociedad atribuye al cambio de paradigma que permite al tomador de decisiones formarse una opinión sobre los efectos netos del bienestar social. Empíricamente, las emisiones de la flota mercante portuguesa ponderadas por su contribución al Inventario Nacional se utilizaron para cuantificar y monetizar las externalidades en comparación con los beneficios del GNL. Asimismo, los beneficios de la implementación de la política son aquellos relacionados con la reducción de las externalidades negativas. Los costos son aquellos determinados a partir del precio que los nacionales hipotéticamente están dispuestos a pagar. Las conclusiones muestran que los beneficios son en larga medida superiores a los costos, por lo que se deben tomar medidas en lugar de un escenario hacer nada. Además, esta tesis también imprime el primer paso para desarrollar estudios más completos y puede ayudar a llenar la brecha de conocimiento de los responsables de la formulación de políticas en lo que concierne a las opciones energéticas estratégicas con respecto al compromiso de las partes interesadas en materia de sostenibilidad. Aunque aborda las particularidades portuguesas, esta metodología puede aplicarse en otros lugares. Palabras clave: Shipping y sostenibilidad; Gas natural licuado; Combustibles marinos alternativos; Análisis de costo-beneficio; Disposición a pagar VII Shipping and Sustainability. Liquefied Natural Gas as an Alternative Marine Fuel: Evidence from Portugal VIII Paulo Jorge Pires Moreira Ph.D. Thesis in Social Sustainability and Development RESUMO O transporte marítimo é um elo vital do comércio mundial graças à sua capacidade, confiabilidade e relação custo-eficácia no transporte de grande quantidade de bens; nenhum outro modo de transporte consegue alcançar tais economias de escala. Mas este argumento subestima os custos reais. A frota marítima internacional, excluindo barcos de pesca e navios militares, produziu em 2012 cerca de 796 milhões de toneladas (Mt) de dióxido de carbono (CO2) e 816 Mt de dióxido de carbono equivalente (CO2e) de gases de efeito de estufa (GEE) combinando dióxido de carbono (CO2), metano (CH4) e óxido nitroso (N2O) correspondendo a cerca de 3,1% das emissões globais (IMO-International Maritime Organization, 2015; Rahman e Mashud, 2015) e é um dos setores de mais rápido crescimento em termos de emissões de GEE (Gilbert, Bows e Starkey, 2010; Bows-Larkin, 2014) previstas aumentar entre 102% a 193% em relação aos níveis de 2000 até 2050 (Bows-Larkin, 2014), crescendo a uma taxa mais elevada do que a taxa média de todos os outros sectores, com excepção da aviação. Como as emissões marítimas são produzidas, em grande parte, em mar aberto e por navios registados em países de bandeira de conveniência, foram excluídas dos compromissos nacionais no âmbito do Protocolo de Quioto de 1997, que cedeu o controlo à IMO o organismo da ONU responsável pelo sector1. De acordo com o Maritime Knowledge Centre da IMO, a frota mercante mundial de navios com pelo menos 100 gross tonnage (tonelagem bruta) era composta por 93.161 navios no final do ano de 2016. Espera-se que um número crescente de navios mercantes entre em operação nas próximas décadas, nomeadamente navios porta-contentores de grande capacidade, navios metaneiros e outros adstritos a actividades diversificadas como produção, armazenamento e descarga de gás natural e de petróleo (em inglês Floating Production Storage and Offloading - FPSOs). Os combustíveis marítimos tradicionais também produzem emissões de óxido de enxofre (SOx), óxidos de azoto (NOx) e micropartículas e o impacto sobre o ambiente dos poluentes primários e secundários resultantes da combustão do fuelóleo pesado (HFO) tem contribui para a acidificação, eutrofização e formação de ozono (O3) fotoquímico (Bengtsson, 2011). Um efeito particularmente pernicioso na saúde das populações expostas é a mortalidade prematura 1 Cerca de 60% da frota mundial de navios da marinha comercial estão registados e navegam sob Bandeiras de Conveniência sem qualquer vínculo entre registo nacional e proprietário o qual normalmente não é cidadão residente, o que imputaria ao país a responsabilidade pelas emissões excluindo o proprietário, o que pesou na decisão da sua exclusão de Quioto. IX Shipping and Sustainability. Liquefied Natural Gas as an Alternative Marine Fuel: Evidence from Portugal relacionada com micropartículas inaláveis associadas com o aumento do cancro de pulmão e problemas cardiorrespiratórios (Corbett et al., 2007) e, embora os efeitos nocivos mais graves sejam particularmente sentidos nas zonas costeiras e em áreas próximas das atividades portuárias, estes efeitos também ocorrem no interior dos países devido às condições predominantes dos ventos (Corbett, Fischbeck and Pandis, 1999) incluindo efeitos transfronteiriços (Nore, 2011). Em Portugal
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