Sulphur emissions by ships – Written evidence
No. Author
1 Condor Ferries
2 Prof Michael Bloor, Prof Susan Baker and Prof Helen Sampson
3 Maritime UK
4 European Cruise Council
5 Senator Alan Maclean
6 RMT
7 States of Guernsey
8 British Marine Federation
9 Stena Line Ltd
10 European Federation for Transport and Environment
11 DfT
12 Air Pollution & Climate Secretariat
13 Brittany Ferries
14 Confederation of Paper Industries (CPI)
15 Clean Air in London
16 P&O Ferries Holding Ltd
17 DFDS
18 ClientEarth
19 Carnival Corporation & plc
20 Exhaust Gas Cleaning Systems Association
21 Teekay Shipping
Written evidence from Condor Ferries (SES 01)
1. Introduction
The ferry routes that link the Channel Islands to Britain and France provide a lifeline service to the Islands and are an important contributor to the local economy in Dorset and Hampshire. The impending limits on the sulphur content of the fuel used by the ships that provide this year round link will substantially increase the cost of operating the ferries, causing consequential damage to the communities that depend on them. This memorandum set outs the concerns of the ferry operator, Condor Ferries, and advocates a deferral of the new limits so as to allow for a full assessment of their impact.
2. Condor Ferries
Condor Ferries was founded in 1964 and initially operated a passenger service between France and the Channel Islands. In 1987 the first service linking the Channel Islands with the UK was launched and since then Condor Ferries has operated a year-round service connecting the UK through Poole, Weymouth and Portsmouth, the Channel Islands through Guernsey and Jersey and the ports of St Malo and Cherbourg in France. Condor Ferries employs around 650 staff members during the summer peak. The majority of these staff lives in the UK.
Condor Ferries operates three high speed catamarans that can each carry 740 passengers and 175 vehicles. In addition it has two conventional ferries with a capacity of approximately 1,250 lane metres each. One of these conventional ships is a ‘Ropax’ vessel capable of also carrying 500 passengers and it has 40 passenger cabins providing overnight accommodation. It is the only ‘Roll-on, Roll-off’ ferry operator serving the Channel Islands and is therefore considered to be a lifeline operator. Each year Condor Ferries carries some one million passengers, 200,000 passenger vehicles and 100,000 freight vehicles. It is estimated that approximately 80% of all the goods imported into the Islands are carried on these ferries as well as exporting tonnes of local produce. Condor Ferries is therefore an integral part of the Channel Islands’ transport infrastructure and it plays a vital role in sustaining the local community as well as contributing to the visitor economy. Condor Ferries is also an active member of the communities within which it operates and supports numerous organisations, sports and charities through sponsorship and travel.
3. Impact of IMO and EU Regulations on Sulphur Emissions
From the Condor Ferries’ perspective we see the following probable outcomes:
a) Our conventional fleet will have to burn Marine Gas Oil (‘MGO’) instead of the Intermediate Fuel Oil (‘IFO’) currently used. The conventional ships use a form of IFO called LSMO380 which is compliant with the current maximum sulphur content permitted in the English Channel of 1%. MGO is a ‘distillate’ fuel and as a result has a very low level of sulphur. It currently costs around £610 per tonne which is 40% more than LSMO380. IFO is a blend of gasoil and heavy fuel oil and it is the mix of the two fuel types that dictates the sulphur content. b) Given a likely shortage of MGO in the UK once these regulations come into effect, the price of MGO will increase relative to IFO. Our fuel suppliers have not been able to provide guidance on the likely scale of the increase. c) If the price of MGO increases this will also have a knock-on effect on our high speed catamarans that burn MGO and are therefore already compliant with the new legislation. High speed vessels have to burn MGO as it has a higher energy output compared to IFO and this is required by the high performance engines to achieve the c. 34 knot operating speed. For information, the distance between the UK and the Islands strongly lends itself to the use of fast craft as the crossing time of approximately three hours is very attractive to passengers compared to some seven hours by conventional ship. d) The net effect of these changes is that our fuel bill will increase by several millions of Pounds each year. Fuel currently represents approximately 40% of Condor Ferries’ operating costs. e) This increased cost would have to be recovered from the end user as a significant reduction in sailings is not practicable given the lifeline nature of our operation. There are obviously no real alternative modes of transport for these goods. f) Given that the very great majority of goods imported and exported from the Channel Islands move by sea, this will have a negative impact on the cost of living for the local residents. Given the current economic environment this would be unwelcome and would increase the level of inflation. The unproductive extra cost of burning MGO instead of IFO will not contribute to delivering economic growth. More generally, an increase in shipping costs is likely to restrict trade within the EU and potentially damage economic activity. g) This increase in cost may also impact the number of passengers we carry and thereby the visitor economy of the South Coast of the UK and the Channel Islands. Holiday traffic is discretionary and demand is price elastic. h) Although an increase in the cost of passenger fares may result in some switching from sea to air, some elements of the market rely heavily on ferry travel, in particular those requiring large amounts of luggage (whether it be families with children or sporting and cultural groups), those with restricted mobility or certain medical conditions that makes travel by air difficult and pensioners’ tour groups. Thus increased costs would therefore fall upon those least able to alter their way of travelling. i) Condor Ferries is also investigating the potential use of sulphur scrubbing technology as an alternative for its two conventional ferries. However, there is a substantial capital cost and it remains to be seen whether the installation can practically be retro-fitted to the vessels. Even if this is possible this capital cost will likewise have to be recovered ultimately from the end user.
4. Other concerns
Condor Ferries has a number of other concerns regarding this legislation:
a) The availability of supply of MGO in Sulphur Control Areas. The question remains whether physically there will be enough local refining capacity to provide sufficient quantities of MGO in these areas. In any event, the price of MGO is expected to increase but it is unclear to date by what margin. b) Sulphur scrubbing technology has a number of issues attached to it including higher operating costs for the ships to run the equipment. The technology is also yet to be proven in a marine environment and it is therefore a higher risk strategy to pursue this route. It is also far from certain that the shipping industry will be able to overcome these issues before the 2015 deadline.
c) Ultimately the world’s supply of oil has an inherent level of sulphur in it. From a holistic position it appears that the issue of sulphur emissions is being transferred from one part of the globe to another. The other alternative to blending is hydro- treatment which is energy intensive and thereby creating additional carbon emissions. Although not relevant to the Channel Islands’ market, in other areas of Northern Europe it is expected that this legislation will result in a modal shift of freight from sea to road. This is likely to have other negative environmental impacts including carbon emissions, road congestion and noise.
5. Conclusion
a) The implementation of Marpol Annex VI regulations in 2015 reducing the permissible level of sulphur content in fuel used in Sulphur Control Areas from 1% to 0.1% will have a very significant cost impact on the operations of Condor Ferries.
b) This cost will ultimately have to be borne by primarily the residents of the Channel Islands and there is no opportunity for modal shift, even if that were desirable.
c) It remains uncertain whether there will be sufficient supply of MGO to allow shipping companies even to comply with these regulations. d) Sulphur scrubbing technology is unproven and in any event the costs of acquiring and fitting the equipment would have a similar impact to the burning of MGO.
e) It is not clear whether the regulations will ultimately have a beneficial environmental impact.
6. Request to the Transport Select Committee and UK Government
Condor Ferries requests that the UK Government use its power and influence to achieve a deferral of the implementation of the ECA regulations within Marpol Annex VI from 2015 to 2020 in order that the full impact of this legislation can be assessed. If this is not successful, Condor Ferries would seek a scheme that would help to cover the capital costs for local shipping operators to install scrubbing technology, assuming the technology can be proven.
September 2011 Written evidence from Prof Michael Bloor, Prof Susan Baker and Prof Helen Sampson (SES 02)
1. This submission is based on current research funded by the UK’s Economic & Social Research Council (grant reference: RES-062-23-2644), ‘Effectiveness of international regulation of pollution controls: the case of the governance of ship emissions’. The project began 1/9/2010 and finishes 31/12/2012. The submission is therefore in the nature of an interim, rather than a final, report.
2. The project draws on observations of ship inspections in selected UK and Swedish ports, and interviews with inspectors, regulators and shipping industry stakeholders, with the objects of both assessing the effectiveness of current enforcement of controls on ships’ SOx emissions in the North Sea and Baltic Emission Control Areas (ECAs), and of offering suggestions to regulators on the enforcement of possible future regulations on carbon emissions.
3. Hard evidence of non-compliance. The best evidence of non-compliance with the SOx regulations should, in principle, come from analyses of fuel samples taken by inspectors and other enforcement officers. Hence the alarm registered in the shipping press earlier this year when Meindert Vink of the Netherlands Shipping Inspectorate presented findings from 135 fuel samples taken in the port of Rotterdam in 20101. These showed that in the first six months of 2010 (when an ECA sulphur limit of 1.5% was in force), the non- compliance level was 7% (from 72 samples), whereas in the second six months of 2010 (when an ECA sulphur limit of 1.0% was in force) the non- compliance level had risen to 46% (from 63 samples). However, alarm may well have been misplaced. It should be borne in mind that these 135 samples (drawn from around 12,000 ship visits per annum to the port of Rotterdam) are not a random sample, but rather are intelligence-led, frequently arising out of complaints from the harbour authorities and others – thus, better intelligence alone may be sufficient to account for the seeming increase in non-compliance. The Swedish Maritime Administration has kindly made available the results of the tests they conducted on samples taken from 149 vessels in 2010 (the same year as the Rotterdam tests) and, allowing for a margin of error in sulphur content of +/- 0.05%, only 6 vessels (i.e. 4%) were found to have non-compliant heavy fuel oil2. The Swedish sampling was also intelligence-led. The only other test evidence we have found within the public domain comes from the Danish Maritime Administration in 2008, where 3 samples out of 54 were found to be of non-compliant fuel3. It may also be relevant to report that the cost of analysis of each of the Danish samples was 150 euros.
4. Other evidence. Maritime administrations also sometimes receive intelligence on analyses of samples taken for commercial purposes and we understand that these data also show no evidence of widespread non-compliance. Bunkering operations at Falmouth, which lies just at the western boundary of the ECA, has experienced a major boom from shipping seeking to bunker with compliant fuel before entering the ECA. One of the two bunkering operations in Falmouth kindly made available some of their activity data: 369 vessels bunkered there in 2006; this rose to 1304 vessels in 20084. It has been suggested that a laser technology, LIDAR, can be used to analyse the sulphur content in a ship’s exhaust plume and the Swedish Maritime Administration has experimented with mounting LIDAR equipment on a spotter plane, but this experiment was discontinued because of technical difficulties and concerns about aircrew safety. We understand that LIDAR would only have been used as a screening device: identifying potentially non-compliant vessels which would, on berthing, have been boarded for inspectors to take fuel samples for analysis. However, LIDAR equipment was mounted at the entry to the port of Gothenburg to analyse the exhaust plumes of more than 2,000 vessels and found 5% of these to be seemingly non-compliant5.
5. Likely Baltic Compliance Patterns. It is probable that compliance levels in the Baltic ECA are higher than in the North Sea ECA, not least because Sweden has been charging differential ‘fairway dues’ (charges on berthing ships to pay for ice-breaking services and coastal and navigation lights, first introduced in 1998) to those vessels which operate continuously on low-sulphur fuel and which incentivised operators to switch to low sulphur fuel prior to the establishment of the ECA. Major Swedish ports also operate differentiated port dues for vessels using continuous low sulphur fuel, but the scale of these charges is such that their influence is thought to be marginal, relative to the fairway dues. A vessel of 20,000 gross tonnage, using fuel with a sulphur content greater than 0.5% (i.e. half that permitted under the ECA regulations), making 24 port calls p.a., would pay $146,880 p.a. in fairway dues6. In addition, some Scandinavian ship operators (such as the ferry companies) and charterers (such as IKEA) value being able to demonstrate a ‘green profile’. Nevertheless, port-state control enforcement only operates on berthing ships, so vessels merely transiting through Swedish and Danish waters to and from East European ports such St Petersburg (where port-state control has in the past been demonstrated to be less effective7) are thought to have lower levels of compliance.
6. Likely North Sea/English Channel Compliance Patterns. Vessels operating continuously in the ECA are highly compliant, indeed such ships would have difficulty sourcing non-compliant high-sulphur fuel. This applies to certain industry sectors such as the North Sea and Channel ferries, and the rig supply boats and other vessels servicing the North Sea Oil industry out of Aberdeen. Ships merely transiting UK waters to and from other European ports are likely to show different compliance patterns depending on the inspection regime of their destination port (Rotterdam-bound, more compliant; St Petersburg-bound, less compliant). Ships entering the ECA bound for UK ports are thought, by industry stakeholders and regulators alike, to be largely compliant and there is some indirect evidence (see (4) above) in support of this. However, such majority compliance appears to be largely due to a culture of compliance that has grown up in recent years among ship operators trading in UK/European waters. Evidence of this ‘culture of compliance’ can be found in the very large fall in ship detentions (for serious regulatory deficiencies) in UK/European ports between 2001 and 2010: detentions fell from 1,699 vessels in 2001 (comprising 9% of all ship inspections) to 790 in 2010 (comprising 3% of all ship inspections)8. Yet this new culture of compliance appears to be threatened, in respect of the SOx regulations, firstly by the escalating price differential between compliant low-sulphur fuel and non-compliant high-sulphur fuel (with the consequent economic incentives to non-compliance), and secondly by particular problems in respect of the effective enforcement of the sulphur regulations.
7. Fuel price differentials. In 2005 Wallenius Wilhelmsen, a major global operator particularly strong in the car carrier sector, was the first such major operator to commit itself publically to continuous low-sulphur operations. In 2009, the estimated annual cost to the company of this policy was an additional $2.7 million dollars9. In early 2010 the existing low-sulphur/high-sulphur price differential suddenly increased greatly with disruption to supplies of Libyan oil (which has a naturally low sulphur content): the price differential increased from around $10 per tonne to around $80 per tonne. The imminent arrival of the North American ECA (coming into force on 1/8/2012) will further stimulate demand for low-sulphur fuel and we are advised by industry specialists that, short of a world slump, there is no prospect of a fall in that price differential in the medium term. Many ship operators are now paying out more in fuel costs than they are in crewing costs, at time when maritime freight rates remain depressed. There is therefore a strong economic incentive to operators to break with the culture of compliance, particularly if they believe competitors to be successfully evading detection.
8. Problems in effective enforcement in UK waters: (a) Although the Maritime & Coastguard Agency can charge operators for follow-up visits to detained ships, port-state control is not a revenue- generating activity and the MCA’s port-state inspection operations naturally face budgetary constraints. The MCA has not equipped its surveyors with the sampling kits used by Swedish inspectorate or with the sampling-and-testing kits used by the Dutch. Nor does the MCA have the technical capacity to detect non-compliant ships transiting UK waters but not destined for UK ports. (b) The MCA relies for detection of non-compliance on document checks, rather than on fuel sampling. Surveyors may ask to see the Bunker Fuel Delivery Note (BFDN) provided by the bunker supplier, which specifies the sulphur content of the fuel. And surveyors may ask to see the Oil Record Book which records the point at which the vessel both began and later completed its changeover from high-sulphur to low-sulphur fuel. Neither of these documents are particularly robust. The BFDN is frequently supplied by a sub-contractor, rather than a registered bunkerer and the Registration Number of the bunkerer does not appear on the delivery note. The BFDN is also frequently hand-written, as are the entries in the Oil Record Book. Both documents are thus open to potential fraud/forgery. Hard evidence of fraud is naturally hard to come by. However, fuel samples taken by other maritime administrations have sometimes shown considerable discrepancies between the sulphur level recorded in the BFDN and that found on analysis. For example, the Grande Mediterraneo (IMO no. 9138393) inspected in Wallhavm, Sweden, on 10/11/2010 was found to have Heavy Fuel Oil in the service tank that was 1.68% sulphur, while the BFDN recorded 0.98% sulphur10. (c) Although Masters are required to notify maritime administrations of their estimated times of arrival, this duty is normally delegated to the port authorities. However, some ports (particularly smaller ports) are not notifying the MCA of arrivals and so inspections are not scheduled. (d) At the time of writing this evidence, MCA surveyors have not reached an agreement with the agency about being on call at weekends. Consequently, ships making berthing Friday afternoon to Sunday evening are not currently subject to inspection. However, we understand that such an agreement is now in the offing. (e) Specifically in respect of the EU requirement to burn fuel with a maximum of 0.1% sulphur in port, because this is an EU (rather than an IMO) requirement, non-compliant vessels do not have this deficiency recorded in the Paris MoU database (Thetis) and or in industry databases like EQUASIS. Consequently, non-compliance with the EU regulations has no adverse commercial impact on the vessel’s freight rates, because ‘naming- and-shaming’ has not occurred. (f) Port-State inspections follow a discretionary methodology, allowing surveyors some latitude in the foci of the inspections and in the penalties for non-compliance. This discretionary element is welcomed by many operators, but it also leads to uncertainty about penalties which may serve to weaken compliance. While one surveyor might typically record non- compliant fuel as a ‘15’ deficiency (‘to be rectified by the next port’) his colleague in the same office might typically record it as a ‘99’ (‘an observation to the Master’). Parenthetically, it should be noted that uncertainty about penalties is not confined to the UK: the Swedish Maritime Administration’s programme of sampling and testing programme has not yet led to a single prosecution by the State Prosecutor’s Office11; and Denmark’s testing programme detected 10 violations of the sulphur regulations in 2006 and 2007, but these resulted in only one successful prosecution12. (g) Vessels with a single service tank (that is, the day tank that serves the main engine, as opposed to storage tanks) are particularly disadvantaged by the technical difficulties entailed in compliance. Such a vessel may take as much as a four-day changeover period to flush low-sulphur fuel through its service tank before sufficient high-sulphur fuel has been expelled to make the vessel compliant. Many of these vessels have insufficient space in the engine compartment to retro-fit an additional service tank.
9. Conclusion. Past OECD Reports13 have referred to the significant percentage of total vessel operating costs that could be saved by regulatory avoidance. The sums quoted there (eg. a saving of $37,000 pa by undermanning a bulk carrier by two crew) are dwarfed by the potential savings currently to be made by operating with cheap non-compliant fuel. The shipping industry is both highly competitive and is presently suffering a downturn in profits in most sectors. There is therefore a danger that the present ‘culture of compliance’ that characterises the bulk of the industry will be undermined by a minority of ‘free riders’ who, under the current inspection regime, are relatively unlikely to be detected in violation of the sulphur regulations and, if detected, are relatively unlikely to suffer commercial loss.
References
1. M. Vink (2011) ‘The Sulphur Issue’, unpublished conference presentation 7/4/2011. 2. Personal communication. 3. Minutes of the 8th meeting of the Maritime Group of the Helsinki Commission, Lubeck, 24/11/2009, p.6. 4. Personal communication. 5. Personal communication. 6. Ljungstrom, T. (2010) ‘The environmentally differentiated fairway dues system’. www.sjofartsverket.se/pages/1024/fairway/%20dues.pdf 7. Bloor M, Pentsov D, Levi M, Horlick-Jones T. (2004) ‘Problems of global governance of seafarers health & safety’. www.sirc.cf.ac.uk. 8. Paris Memorandum of Understanding on Port State Control (2010) Annual Report. www.parismou.org. 9. www.wilhelmsen.com/about/CorpSocResp/Environment/enviroinitiatives/Page s/emissions. 10. Personal communication. 11. Personal communication. 12. Minutes of the 8th meeting of the Maritime Group of the Helsinki Commission, Lubeck, 24/11/2009, p.8. 13. Organisation of Economic Cooperation and Development (1996) ‘Competitive advantages obtained by some shipowners as a result of non-observance of applicable international regulations’, Paris: OECD. Organisation of Economic Cooperation and Development (2001) ‘Short sea shipping’, Paris: OECD.
October 2011 Written evidence from Maritime UK (SES 03)
Maritime UK brings together the shipping, ports and maritime business services sectors in the UK to speak with a single voice on key strategic and practical issues of joint interest. Specifically, we are the Baltic Exchange, British Ports Association, Chamber of Shipping, Federation Council of the Institute of Chartered Shipbrokers, Maritime London, Passenger Shipping Association and UK Major Ports Group.
The UK’s maritime services are a substantial part of the British economy. Together, they contribute a total of £26.5 billion to UK GDP and almost £8bn in tax revenues. They also support around 531,000 jobs.
In July 2011, Maritime UK submitted a paper to the Transport Select Committee outlining the case for an inquiry into the impacts of the sulphur regulations on UK shipping. That paper forms Annex A of this document and provides the detailed background to this submission.
Maritime UK supports the overall provisions of MARPOL Annex VI aimed at reducing sulphur emissions from shipping for environmental and health reasons. But these are presenting severe short—term challenges for the ferry and cruise sectors. Before addressing the four areas of interest laid out in the Select Committee’s call for evidence, it may be helpful to summarise the main impacts.
• The economic impact will be massive – increasing the cost of bunker fuel by, potentially, 87% for ships operating in Emission Control Areas (ECAs). This will mean, from 2015, up to £3.6bn additional annual cost for shipping within 200 miles of the UK.
• This will include reduced shipping activity in ECAs, affecting ports and road infrastructure, and causing job losses. A recent German study concluded that ferries to the Baltic States would lose 40% of their traffic, shifting nearly 1 million containers and 600,000 trailers each year from sea to land.
• The cruise industry will lose tourism and port revenues. The ferry industry will see closure of longer routes and price increases, which will encourage a shift of passengers, who will not want to travel long distance to the shorter ferry crossings, to less environmentally air travel. Both will lose investment and jobs.
• There is no certainty that enough fuel will be available to meet the 2015 and 2020 regulatory deadlines.
THE IMPACT ON SHIPPING OF MORE STRINGENT LIMITS ON SULPHUR CONTENT IN FUEL, DUE TO REVISIONS TO ANNEX VI OF THE IMO’S MARINE POLLUTION CONVENTION (MARPOL)
1. Maritime UK fully acknowledges the need to reduce emissions of SOX from shipping for environmental and health reasons and supports the provisions of MARPOL Annex VI. Nevertheless, these regulations will create considerable
financial, logistical, societal and even environmental impacts that will impose considerable hardship, particularly on smaller companies with limited cash flow, and not only shipping companies. The regulations pertaining to low sulphur fuel in SOX Emission Control Areas (ECAs) which come into force in 2015 in the Channel, Baltic and North Sea will be particularly challenging. The designation of ECAs was supposedly based upon clear scientific evidence, but no study was ever done, either by the IMO or the EU Commission, into the broader consequences of such regulations. Given the considerable financial impact likely to be caused, the lack of a full impact assessment was extremely regrettable.
2. A number of impact assessments have been made by various EU Member States and by the Universities of Antwerp/Leuven. These broadly agree that the application of 0.1% low sulphur fuel in 2015 may result in up to a 50% modal shift from sea to land due to the significant increase in fuel price (85% increase based on today’s prices). A recent German study has suggested this modal shift may add over an extra 600,000 trailers each year on German roads alone. Some routes, of course, are less susceptible to modal shift than others, but based on these various studies it would not be unreasonable to expect a significant decline in short sea shipping in Northern and Eastern UK ports as shippers shift to either the shortest possible sea routes or to Western UK ports that lie outside the ECAs. The consequences of such a shift would be far reaching. A major concern is that goods would be shifted from sea transport to the less environmentally effective method of road transport, and in doing so the “net environmental benefit” would be lost, due to the greater concentration of emissions in centres of population of road transport on a like-for-like basis. The Shipping Minister is currently engaged in an initiative to promote growth of short sea shipping in order to take freight off the roads; clearly, that would be seriously undermined as would the steps taken to date to encourage the development of the coastal shipping sector.
3. It is likely that the impact on shipping would not be confined to the short sea sector. Any company able to mitigate the additional costs of these regulations by shifting or altering operations is likely to do so. The UK may therefore, for example, see a significant increase in ‘fly cruises’, the cruise companies thereby avoiding operating in the ECAs. This could have a profound impact on the traditional cruise ports such as Southampton, Harwich and Dover as companies make greater use of European ports lying outside ECAs such as those in the Mediterranean. Increasingly we see ports like Southampton cater for non-UK nationals joining cruises. A move away would see the significant additional tourism revenues lost.
POSSIBLE IMPLICATIONS FOR OTHER SECTORS, SUCH AS ROAD HAULAGE
4. Some of the ‘unintended consequences’ for other sectors are covered in paragraphs 2 and 3 above. Whereas road freight haulage companies might, at first glance, welcome the modal shift from sea to road, they will be less likely to welcome the greater congestion on roads, especially those feeding Western ports or those with the shortest crossings to mainland Europe, and nor will they welcome the likely rise in road diesel prices as shipping starts to compete for this slice of the fuel market. Forecourt price rises are not likely to be popular with domestic drivers either nor with farmers who are already being squeezed by recent increases in fuel prices.
5. Job losses in UK ports and associated infrastructures could be significant, especially in those ports lying within the ECAs as they see trade starting to decline. Clearly, if ‘fly cruises’ become more of a norm (paragraph 3) then the UK ports currently the home of many cruise ships will face considerable job losses, the jobs going to Mediterranean and/or other non-ECA ports. Ferries, of course, don’t have the option of relocating to outside the ECAs and so we may well witness many longer routes being discontinued and/or considerable fare increases to keep the remaining routes viable.
6. The ‘unintended’ impact on the environment could be considerable too. Shipping is by far the most low-carbon means of transport per tonne of freight. CO2 emitted in grams per tonne-kilometre is approximately 18 for shipping, 50 for heavy trucks with trailers and over 500 for air freight. Any modal shift, therefore, from sea to land will drive up carbon emissions and impact on the UK’s ability to meet its carbon targets, especially as road transport is already within the UK carbon budget whilst shipping is not in the current scope. Additionally, hydro-treating heavy fuel oil to meet the 2015 SECA requirements, could potentially add about 12 million tonnes of carbon emissions within Europe alone.
STEPS WHICH THE UK GOVERNMENT COULD TAKE TO ASSIST THE MARITIME SECTOR MEET ITS OBLIGATIONS UNDER MARPOL
7. There are a number of ways in which the Government could assist the industry to meet its obligations under MARPOL Annex VI and thereby reduce the impact on the industry and those other sectors similarly affected. Firstly, and this is covered in greater detail under the final area of interest covered by this submission (paragraphs 13 to 17), to robustly push back against the EU Commission’s proposed draft Sulphur Directive, that is currently going through the approvals process. The Directive should be fully aligned with MARPOL Annex VI, instead of which it is ‘gold plating’ the regulations in many areas which will greatly exacerbate the negative impacts as outlined in paragraphs 1 to 6 above.
8. Secondly, in terms of alternative technologies and fuels, in which lie the best hopes for a long term solution for shipping and the environment, there remain considerable challenges with which the UK Government has yet to demonstrate any leadership or willingness to engage. With very few exceptions, shipping companies globally have not invested in abatement technologies (such as scrubbers) as there is no commercial or financial advantage in doing so until the regulations come into force by which stage it may be too late, because while scrubbers have been demonstrated to work well in shore installations such as power stations, manufacturers have yet to be able to ‘marinise’ their equipments sufficiently to produce a scrubber that is reliable enough for companies to meet the stringent sulphur limits. Scrubber technology is considered by the industry to be a useful option, but much more time is needed to make it functional, reliable and able to meet the compliance requirements of 0.1% Sulphur emissions, especially on multi-engine installations such as those on board passenger ferries. More research and development is required and this can only be achieved by getting the equipment fitted in ships in sufficient numbers. The Government should be helping this to happen, especially as it is understood that funds are available for such projects but have not been released for this important work.
9. The cost of purchasing and fitting a scrubber to a vessel is considerable and indeed, for smaller ships may simply not be an option because of lack of space. Normally, for amendments to IMO conventions, ‘grandfathering’ arrangements are put in place such that they only apply to new build. This has not been the case for MARPOL Annex VI so there are vessels for which there is no option outside buying the very expensive low sulphur fuels. Government assistance is urgently needed to reduce the costs of compliance. This needs to be done soon so that manufacturers can keep pace with demand rather than all the orders coming in during the last few months of 2014. There is also concern over ‘regulatory certainty’ – ie, if a company were to invest then it needs certainty that the UK and other countries will enforce the IMO regulations as they stand and not ‘gold plate’ them. This is a particular problem with ‘wash water’ regulations and is certainly dissuading some companies from investing in these technologies. There is also a danger that if owners do not invest in scrubbers in sufficient numbers by 2015 and accept paying the premium for low sulphur fuel, then at a later stage when scrubbers become viable there will not be sufficient heavy fuel oil (HFO) available if the refiners have made the switch to low sulphur fuel. Clearly, such an outcome would undermine the most promising means of mitigation for shipping.
10. Alternative fuel is another promising means of mitigating the cost of the sulphur regulations. LNG is the most obvious contender and the one with probably the best environmental profile, for SOX, NOX, carbon and particulate matter. But, again, there are a number of issues associated with LNG that are hindering a wider take-up. Whilst not an exhaustive list, these include lack of LNG bunkering facilities in the UK, lack of port LNG infrastructure, serious regulatory issues associated with re-fuelling passenger ships, methane slippage, loss of freight stowage areas on board due to size of LNG tanks and, possibly the greatest hurdle, converting a ship to LNG is complex and very expensive so that, at present, it is only suitable for new build vessels and not a viable option for existing vessels. To date there has been little evidence of UK Government involvement in supporting the growth of LNG as a fuel for UK shipping and yet this is arguably the most promising long term prospect environmentally. The UK Government should be more supportive and, indeed, play a leading role internationally in the regulatory debate and also encourage development of a robust LNG infrastructure within the UK as well as supporting research and development to maximise the number of vessels capable of using LNG, including converting existing vessels.
11. There are also ways of mitigating the costs to shipping that are entirely regulatory by nature and so present no cost to Government. These include what are known as ‘averaging’ and ‘banking’. ‘Averaging’ is a mechanism whereby a ship owner can spread the regulatory requirements across his fleet or even within a single ship such that overall the global or ECA limits are met. This can be refined further to take into account the geographical position of the vessel(s) such that close to land ECA standards are met in full whilst further out to sea higher sulphur fuel can be used, but that at the end of a voyage the overall regulatory requirement has been met. ‘Banking’ is a scheme whereby if a company meets the regulations earlier than it needs to, then they can, in effect, offset this after the regulations come into force. This could be an attractive way of encouraging early investment in scrubbers without Government aid. Maritime UK believes that both averaging and banking meet the provisions of MARPOL Annex VI and that therefore the Government should give
them both early and full consideration. This would also encourage and accelerate the take up of new abatement technologies.
12. Finally, the UK Government, judging by past record, is highly unlikely to give State Aid to shipping companies to help reduce the cost of compliance and yet, many other Member States will do so, thus putting UK shipping at a competitive disadvantage. The cost of compliance to industry must therefore be ameliorated by other means if this competitive disadvantage is to be avoided.
EUROPEAN COMMISSION PROPOSALS TO IMPLEMENT THE REVISIONS TO MARPOL, AND THE UK GOVERNMENT’S STANCE ON THESE PROPOSALS
13. In the EU, Directive 1999/32/EC established the maxima for sulphur content in marine fuels. The Directive served as the EU legal instrument for incorporating international sulphur provisions into the EU regional legislation. Once MARPOL Annex VI came into force, the Directive was amended by Directive 2005/33/EC. The EU law, however, went beyond the international instrument and imposed additional requirements. In particular, it introduced:
• 0.1% maximum sulphur requirement for fuels used by ships at berth in all EU ports from 1 January 2010 and
• 1.5% maximum sulphur content for fuels used by all passenger ships in EU waters from 11 August 2006 (in addition to the international requirement of 1.5% maximum in ECAs prior to 2015).
In 2011 the Directive has once again been amended and, if accepted, will require that all passenger ships, operating in EU waters will be required to operate as if in ECAs, that is, being limited to 0.1% sulphur. However, to try to ameliorate fuel availability issues this regulation will be delayed by 5 years and thus come into force in 2020.There are a number of other areas where the Directive goes well beyond the scope of MARPOL Annex VI. These include setting mandatory sulphur limits for bunker suppliers (not required if scrubbers are used), no protections for ship operators in the event of non-availability of compliant fuel oil, extensive use of delegated acts within the Directive and uncertainty over their definition of passenger ships. This draft Directive is currently going through the approvals process. Maritime UK believes that the Directive should fully align itself with MARPOL Annex VI and not ‘gold plate’ these internationally agreed regulations.
14. The regulations pertaining to passenger ships is effectively generating new ECAs by stealth – ie without going through proper scrutiny and being based on clear, unequivocal scientific data as required by the IMO. Furthermore, using the IMO definition of passenger ships which allows no more than 12 passengers, this would include driver-accompanied vessels that carry both freight and passengers (for example a vessel carrying predominately trucks together with between 50 – 100 drivers). This would place those mainly freight carrying vessels at a significant disadvantage and would once again encourage a modal shift from sea to land. These ships will be subject to the IMO global limit of 0.5% in 2020 or 2025, which will deliver a major emissions reduction. Furthermore, since passenger ships represent only about 10% of fuel consumption in EU shipping, the use of 0.1% fuel would achieve an overall EU reduction of 86%, instead of 85% without this additional
requirement. This limited gain does not justify the additional costs entailed nor the potential modal back shift.
15. The European Commission’s proposal to amend the Sulphur Directive includes extensive use of ‘delegated acts’. These powers have their origin in the Lisbon treaty and experience of them is relatively limited. The scope of the delegated acts is, however, in some cases, considerable. For example, under proposed article 4a, paragraph 1a, these acts allow the Commission to decide non- ECA sulphur limits from 2020 based upon the IMO’s assessment rather than its actual decision. Maritime UK therefore asks the Select Committee to satisfy itself that the Government has fully considered the potential implications of these delegated acts and is content that their use will not change substantively the policy objective to align the European Directive with the revised Annex VI of MARPOL.
16. Maritime UK is concerned that in some areas the Commission’s proposal goes beyond its legal competence and imposes obligations on Member States to enforce that process. In the articles related to the ‘maximum sulphur content in marine fuel’ we note that it is proposed ‘Member States shall take all necessary measures to ensure that [non-compliant] marine fuels are not used in the areas of their territorial seas, exclusive economic zones and pollution control zones’. This phraseology would appear to indicate that this imposes a duty on Member States to go beyond their traditional means of enforcement as port and flag states and to inspect ships transiting any of their waters as described above. Should such an approach be adopted, this could be construed as an infringement of the freedom of navigation as enshrined under UNCLOS. It also remains unclear by what authority the Member States are to prevent passenger ships from using a particular type of fuel simply by virtue of the fact that they have come from, or are going to, another EU Member State especially if that voyage transits international waters. Under law, intra-EU voyages remain international voyages. It is also questionable whether ‘emission abatement methods for use by ships flying the flag of Member States’ should be approved by the Commission rather than by the flag state itself (proposed article 4d). Apart from questions of sovereignty, such a move could inhibit the competitiveness of all European flags including that of the UK. Clarity is also needed on whether the Commission’s remit would be restricted to an EU flagged ship operating within Europe or whether an abatement method acceptable to other flag, port and coastal states on a ship operating in, say, North America, would be unavailable to ships flying European flags.
17. Regulation 4 of MARPOL Annex VI covering equivalence, includes non- technical or operational procedures by which compliance methods used as an alternative can be adopted. This is to encourage invention and investment particularly when considering the use of abatement technology and raises the question of whether an average of sulphur emissions will be permitted within a single ship or within a fleet of ships. If the Directive is to mirror MARPOL Annex VI then it would be helpful if Regulation 4 as written there was included in the Directive.
GOVERNMENT POLICY
In the light of the above reasoning, Maritime UK suggests that the Government should take the line that:
• the EU Sulphur Directive exactly mirror MARPOL Annex VI
• resources should be urgently allocated to fund research and development in abatement technology
• the cost of compliance to industry be minimised and placing UK shipping at a competitive disadvantage be avoided at all costs;
• ‘averaging’ and ‘banking’ should be allowed in the implementation of any Sulphur standards at an early stage, to encourage take up of abatement technologies;
• the IMO study on fuel ability should be brought forward as soon as practical from its current timing of 2018, so as to inform the issues which will arise from implementation of the IMO limits for both the 2015 and 2020 regulatory deadlines;
• developing a UK LNG marine infrastructure should be supported and that associated technological and regulatory issues be addressed;
• the IMO should always carry out full impact assessments before binding decisions are taken that have significant economic implications.
ANNEX A
FIRST SUBMISSION MADE BY MARITIME UK (JULY 2011), REQUESTING INQUIRY INTO SULPHUR
SULPHUR REGULATIONS
ISSUE
The shipping industry is facing severe challenges stemming from the imminent implementation of IMO and EU regulations on Sulphur emissions. These arise from a combination of factors including the physical availability internationally of the grades of fuel the regulations depend on, the substantial costs that will fall on those sectors most likely to be affected in the early years (mainly passenger and short-sea shipping), and the unavailability of adequate technological solutions at present.
Maritime UK would suggest that this would be a good issue for investigation by the Transport Committee and would be very willing to help prepare for such an inquiry, if that were considered useful.
BACKGROUND
In 2015 the North Sea, Baltic and Channel will become a Sulphur Emissions Control Area (SECA) in which all shipping will be constrained to using fuel with 0.1% or less sulphur content. In 2020 the global sulphur limit will be reduced from 3.5% to 0.5%.
These low sulphur fuels cannot be produced by blending alone, and so the 360 million tons of heavy fuel oil that ships burn annually throughout the world will have to be hydro-treated to achieve the required low sulphur content. It is considered that there may be just enough low sulphur fuel to meet the SECA requirements in 2015 but that there certainly will not be enough in 2020 to meet the global requirement. It is also doubtful that ship borne abatement technologies (scrubbers for example) will be available in sufficient volume and with the required reliability to meet the new legislation.
Low sulphur fuels currently cost about 85% more than heavy fuel oil. Many shippers will find the resultant huge rise in shipping rates to be unaffordable and therefore, where possible, shift freight from sea to road. A recent German study has suggested this modal shift may add an extra one million lorries each year on German roads alone. Additionally, hydro-treating heavy fuel oil to meet the 2015 SECA requirements, will add about 12 million tons of carbon emissions within Europe alone.
HOW SULPHUR CONTENT IN MARINE FUELS IS REGULATED i. The level of sulphur emissions from ships operating internationally is governed by Annex VI to the IMO’s Marine Pollution (“Marpol”) Convention. ii. Marpol Annex VI came into force in May 2005. It set a 4.5% global cap on sulphur emissions by all ships. It also made provisions for specially designated Sulphur Control Areas (ECAs) where the sulphur content in fuel oil must not exceed 1,5%. The Baltic and the North Sea (incorporating the full length of the English Channel) became ECAs as from May 2005 and November 2007 respectively. iii. In the EU, it was the Directive 1999/32/EC that established the maxima for sulphur content in marine fuels. The Directive served as the EU legal instrument for incorporating international sulphur provisions into the EU regional legislation. iv. Once the Marpol Annex VI came into force, the above Directive was amended accordingly by a Directive 2005/33/EC. The EU law, however, went beyond the international instrument and imposed additional requirements. In particular, it introduced:
• 0.1% maximum sulphur requirement for fuels used by ships at berth in all EU ports from 1 January 2010.
• 1.5% maximum sulphur content for fuels used by all passenger ships in EU waters from 11 August 2006 (in addition to the international requirement of 1.5% maximum in ECAs only). v. In April 2008 the Marpol Annex VI was amended. The revised Marpol Annex VI set out more stringent limits on sulphur content in fuel:
• reduction in the global cap to 3.5% from 1 January 2012 followed by a further reduction to 0.5% from 1 January 2020 subject to a feasibility study.
• reduction in ECAs to 1% from 1 July 2010 and then a further reduction to 0, 1% from 1 January 2015 vi. In order to align international legislation with the EU regional legislation, on 29 October 2010, the European Commission has launched a public consultation for a revision of Directive 1999/32 on sulphur content in marine fuels, with a view of putting forward a legislative proposal during 2011.
RECOMMENDATION
It is recommended therefore that an inquiry look into the following specific issues surrounding the sulphur legislation: 1. The impact that these regulations will have on British shipping and the potential for a significant modal shift from sea to road. 2. The impact that these regulations will have on carbon targets. 3. The availability in the UK of sufficient low sulphur fuel to meet both the 2015 SECA and 2020 global regulations.
October 2011
Supplementary written evidence from John Garner (SES 03a)
Mr Leech asked me the following question, “What proportion of shipping throughout the world comes through the area that would be impacted by the EU directive?”. My response to him was as follows “I honestly do not know the answer to that question, but I could check and write to you”.
I asked the Chamber of Shipping whether the information was available and if so to make it available to me. The Secretariat of the Chamber have now spoken to a number of people on this including Lloyds Intelligence.
It appears that although the information is available it is held by a number of highly disparate sources and it would be necessary to engage a consultant to research and collate the information which could take several months.
Regretfully I have to advise you that the information is not available to me and I hope the committee will accept this explanation from me.
November 2011 Written evidence from the European Cruise Council (SES 04)
1. The European Cruise Council represents 30 of the leading cruise ship operators in Europe and has 32 associate members. Last year the European cruise industry contributed over €35 Billion to the economies of Europe, employing more than 300,000 people and embarked 5.2million passengers on their cruise from a European port.1 Our objective is to promote the interests of cruise ship operators within Europe, working closely with the EU Institutions on policy related to transport, environment, health, consumer affairs, tax and tourism. The European Cruise Council (ECC) and its members stand for quality shipping, upholding high environmental and safety standards for the benefit of our passengers, coastal areas, the sea and society at large.
2. The ECC notes that the Transport Committee has invited written evidence on the implementation of IMO and EU regulations on sulphur emissions by ships and is particularly interested in steps which the UK Government could take to assist the maritime sector meet its obligations under Marpol.
3. The ECC is strongly supportive of the submission made to the Committee by Maritime UK and, in particular, its recognition that there are ‘ways of mitigating the costs to shipping that are entirely regulatory by nature and so present no cost to Government.’ While the Maritime UK submission briefly mentions the concept of ‘sulphur averaging’ (see their para 11) it does not go into detail and purpose of this submission is to provide more background on this concept in case the Committee wish to pursue this line of enquiry.
Use of Averaging as an Equivalent Method
4. Annex VI includes provisions for equivalencies if they are “at least as effective” as use of fuel complying with ECA standards. We believe that environmental protection consistent with the goals of the ECA can be achieved via a more flexible regulatory approach that allows for the averaging of fuel sulphur “credits.” For example: a) Single Vessel Averaging: Cruise ships typically have multiple diesel electric engines which can be used in any combination to satisfy required propulsion and auxiliary loads and different engines can be run on different fuels with sulphur contents less than (for example, via use of gas turbine engines) or greater than the ECA requirement. Some engines such as gas turbines are inherently cleaner; some others may be fitted with aftertreatment devices (e.g. exhaust gas cleaning systems or ‘scrubbers’); while others may not depending on space and scrubber capacity constraints. Benefits of zero emissions when using shore power at berth can also be folded into the averaging calculation. Vessel operations can thus be configured to achieve average emissions equivalent to the use of ECA compliant fuel in all engines. b) Multiple Vessel Averaging: The concept of single vessel averaging can be extended to averaging over multiple vessels operating on similar itineraries, thereby further increasing the range of available options for achieving compliance.
1 See: ‘Contribution of Cruise Tourism to the Economies of Europe 2011 Edition’ at www.europeancruisecouncil.com c) Distance‐Weighted Averaging: Replacement of higher sulphur residual fuel oil with the distillate fuel needed to meet ECA limits will reduce population exposures to particulate matter from ships operating near shore. Substitution of residual fuel oil with distillate fuel when operating further out but still within the ECA zone will result in limited additional public health protection. A more flexible approach to compliance allows weighted averaging of fuel sulphur content, with the weighting factors based on distance of the ship from the greatest potential for public health exposure impacts.
Voyage Voyage Figure 1 Low Segment Segment Emissions A B Weighting Factor High Emissions Weighting Factor
Limited emission reduction benefits: ship Significant emission far from shore and reduction benefits: major population centers ship close to shore and population
Demonstrating Equivalence
5. Equivalence with the ECA requirements can be demonstrated by tracking fuel consumption rates and other operating parameters and calculating resulting emissions for a particular itinerary. Equivalence is demonstrated when weighted average emissions for vessels operating on a given set of itineraries are less than or equal to what they would have been had the vessels simply used ECA compliant fuel. Emissions weighting factors can be assigned to different segments of the itinerary when calculating averages to account for the degree of potential public health exposure from emissions occurring along those segments. For example, in the above figure, emissions occurring within Segment A would have a high weighting factor as compared to those occurring in Segment B. Dispersion modeling, based on existing government methodology, is used to assign appropriate weighting factors to each segment of the voyage. Voyage data and weighting factors are input into an emissions calculator which computes weighted average emissions for comparison to emissions produced by simply using ECA compliant fuel.
Figure 2
Emission Weighting Factors Voyage Data: ECA Fuel Emissions Standard Scenario ECA Scenario • Fuel consumption • Fuel sulfur content • Operating parameters Compare Emissions
Calculator Weighted Average Voyage Data: Emissions Alternative Scenario Alternative (by voyage segment) Scenario • Fuel consumption • Fuel sulfur content • Operating parameters
Summary
6. The UK Government was strongly supportive of including language that allowed for equivalent compliance options during the negotiation of the revised MARPOL Annex VI and this manifested itself in Regulation 4 of that Annex. While the European Commission’s proposed amendments to the Sulphur Directive largely incorporate the text of Regulation 4 there are other are a number of other articles throughout the proposal whose current wording might seriously impede the development and use of such alternative compliance options.
7. It should be recognised that alternative compliance options may not only prove a means of compliance in themselves but will encourage and hasten the development of alternative technologies (by reducing the necessary capital expenditure) and reduce demand for supplies of distillate fuel.
8. The ECC therefore asks the Transport Select Committee to ensure the Government is satisfied that the full range of compliance options envisaged under the revised MARPOL Annex VI are permitted under the proposed amendments to the EU’s Sulphur Directive.
October 2011 Written evidence from Senator Alan Maclean (SES 05)
I write in response to your invitation to submit evidence concerning this matter.
I am first and foremost supportive of and committed to reductions in sulphur emissions as agreed internationally by the IMO. The questions arise as to how this is achieved and with what effect.
The reduction to 0.1% by 2015 for all ships in the English Channel is seen by our local ferry operator as a major concern. I am told that low sulphur fuels already cost a great deal more than heavier fuel oils. There is also a supply issue which apparently will get worse as demand increases. I understand these views are echoed by others in the industry.
I have concerns that the changes being planned by the EU go further than the IMO Convention. I note and understand related concerns expressed by Maritime UK.
The new Directive maintains the current requirement that EU countries (including the UK) to enforce compliance beyond their own ports and territorial seas. Enforcement is also extended to the exclusive economic zones and pollution control zones. Jersey is not in the EU, it has its own territorial waters and its own separate register of ships yet it is geographically constrained within EU waters. Extension of enforcement beyond ports is impractical and extension beyond territorial seas should be applicable only if the State concerned or its territorial waters are in grave and imminent danger of significant pollution. This is not the case.
The practical concern for small Island communities such as Jersey is that there is no sensible alternative to shipping freight or private vehicles by sea. It is the most economic and environmentally friendly way to do things. This means that we cannot look for alternative means of transport to reduce the economic cost of adjusting to low-sulphur fuels.
The original Directive of 1999 explicitly provided derogation (at Article 4, paragraph 2) for Island communities within the EU. This could be reintroduced and in particular extended to those islands such as ourselves where our shipping cannot avoid using EU ports and passing through EU waters.
The current world economic climate is such that such environmental measures may need to be re-phased in terms of when they are introduced and in the case of short-sea shipping for Island communities it may be necessary to consider exemptions.
We are supportive of a similar stance taken by Guernsey and I should be most grateful if your committee will consider these views.
October 2011 Written evidence from RMT (SES 06)
The National Union of Rail, Maritime and Transport Workers (RMT) welcome the opportunity to briefly contribute to the Transport Committee’s inquiry into sulphur emissions from ships. RMT organises around 80,000 members across the transport industry. We are also the specialist union for seafaring ratings and represent the majority of UK seafaring ratings currently in employment. Ratings comprise at least half of seafaring personnel employed on a ship.
RMT has a long standing commitment in support of creating an environmentally sustainable transport sector and welcomed the statutory targets set out in the Climate Change Act 2008 to reduce emissions by 80% by 2050, compared to their 1990 levels.
In 2009, transport, excluding international aviation and shipping, accounted for 22% of all UK greenhouse gas emissions1.
In terms of the maritime sector, which remains for the movement of freight more environmentally friendly than road freight and aviation, the Department for Energy and Climate Change reported this year: “In 2009, emissions from UK international shipping bunkers were estimated to be 10.6 million tonnes carbon dioxide equivalent. This was 7.1 per cent lower than the 2008 figure of 11.4 million tonnes. Between 1990 and 1998 emissions from UK shipping bunkers increased by around 18 per cent. Emissions have subsequently decreased by around 2 per cent from the 1998 level. However, UK operators purchase most of their fuel outside the UK.”
Self-evidently it will be necessary for the transport industry to take determined steps to improve energy efficiency and reduce emissions whilst at the same time ensuring that jobs, skills and terms and conditions of employment are protected as climate change reduction measures are implemented. It is therefore essential that
1Department of Energy and Climate Change; UK Climate Change Sustainable Development Indicators Greenhouse Gas Emissions Final Figures discussion, consultation and negotiation with trades unions are embedded in industry climate change strategies.
In relation to sulphur emissions, the International Transport Workers Federation, to which RMT is affiliated, at their 2010 Climate Change Conference in Mexico explained “Although shipping is a very efficient form of transportation, the bunker fuels used in ship motors are highly polluting. In order for shipping to significantly reduce its greenhouse gas equivalent emissions (bunker fuels emit high levels of sulphur), low-sulphur fuels need to replace bunker fuels or expensive abatement systems need to be installed”2.
Earlier this year the European Commission proposed that by 1st January 2015 sulphur dioxide and fine particle emissions from shipping fuels should be reduced by 90% and 80% respectively. This would mean that the maximum level of sulphur allowed on vessels operating in the North Sea, Baltic Sea and Channel will be reduced by 1.5% to 0.1%.
RMT supports measures to reduce sulphur levels from shipping fuel and recognises that the European Commission proposals are in part motivated by frustration at the slow pace with which the International Maritime Organisation, the European Shippers’ Council and the Chamber of Shipping have sought to address climate change reduction measures.
Indeed, the European Shippers’ Council responded to the proposed new limits by arguing that the changes should be delayed until 2020 due to the increased cost of fuel and raising fears that there would be a modal shift away from the maritime sector in the movement of freight.
Within the framework of supporting reductions in sulphur and other greenhouse gas emissions we are concerned that in response to increased fuel bills the shipping employers will attempt to offset costs by driving down wages, weakening terms and
2 Discussion Document. Transport Workers and Climate Change: Towards, Sustainable, Low-Carbon Mobility conditions and delaying or not implementing plans to increase training opportunities for ratings.
We will therefore be seeking meetings with the Chamber of Shipping to discuss how the Commission’s proposals impact on the concerns we have raised in our brief contribution to your inquiry.
October 2011 Written evidence from the States of Guernsey (SES 07)
1. We are writing on behalf of the States of Guernsey in response to the Transport Committee’s invitation for written evidence on the implementation of IMO and EU regulation on sulphur emissions by ships.
2. This response is a joint submission on behalf of the States of Guernsey, and is made by the Commerce and Employment Department and the Public Services Department.
3. The Commerce and Employment Department has responsibility for strategic issues affecting connectivity and transport to and from the Islands, as well as a wider role to ensure the economic viability of the Island, and more specifically, the promotion, provision and regulation of air and sea links to and from the Bailiwick of Guernsey, including liaison with other jurisdictions.
4. The Public Services Department has responsibility to advise the States of Guernsey on the management of publicly owned infrastructure and the provision of public services, including the harbours and airports, and more specifically, monitoring the compliance of all vessels within Bailiwick waters with international and local laws. It also has responsibility for maritime safety, the investigation of marine accidents, provision of navigational aids and maritime safety information, and maintains the Guernsey Register of British ships. It also oversees the surveying and licensing of local passenger and commercial vessels.
5. Guernsey is a small Island community with a population of 62,431. Within the Bailiwick of Guernsey lie the smaller Islands of Alderney, Sark and Herm. Being an Island Community means that we are dependant on shipping for 98% of our supplies. Only a small percentage comes in by air (mostly mail and newspapers), with items such as food, fuel, retail products and building materials making up the majority of “essential” commodities that come to the Islands by ship.
6. The Island is also dependent on the shipping links from the Island in terms of the export of goods and produce from the Island.
7. We are concerned that any proposals to reduce sulphur emissions by ships should:
a. be achievable and sustainable; b. be based on sound environmental reasons; c. not result in significant cost increases in fares and freight charges arising from increases in the price of fuel and/or the need to introduce new technologies (such as scrubbing systems); and d. not impact on the viability of local shipping companies providing “lifeline” services for the Island;
Achievability and sustainability a) We are concerned that the proposals should only be introduced if they are achievable and sustainable. The availability of sufficient low sulphur fuel to meet both the 2015
SECA and 2020 global regulations seems to be in doubt. The use of sulphur scrubbing technology has been cited as an alternative to using low sulphur diesel. However, there is some concern that use of this technology is not fully proven in the marine environment, and that the process itself produces harmful products (sulphuric acid) that may well end up being discharged in to the sea. Converting vessels so that they are able to use the scrubbing technology would also represent a significant cost for shipping companies, and may not be a practical proposition for some vessels.
b) Sound environmental reasons Whilst being supportive of the general principle of introducing measures to reduce sulphur emissions, we are of the opinion that careful examination of related issues should take place to ensure that unintended consequences do not occur. For instance, a shift from sea to road or air transport may be more damaging to the environment in the long term, but in any case this option is not available for island communities. For the Channel Islands, one unintended consequence if ferry charges should rise may well be an increase in passengers using air travel as a cheaper alternative to sea travel. This would increase the impact of air transport on the environment. Data from Maritime UK
reveals that CO2 emitted in grams per tonne is approximately 18 for shipping and 500 for air freight.
On a more technical issue, there is also concern from marine experts that low sulphur fuel may be more susceptible to a fungal contamination known as “Diesel Bug”, which could be expensive to rectify and which could result in severe disruption to services. It is not sufficiently clear that the proposals will ultimately have a beneficial impact on the environment.
c) Significant cost increases to local ferry operators Local ferry services to Guernsey are provided by two main operators – Condor Ferries and Huelin Renouf. Condor Ferries is the only “Roll‐on, Roll‐off” ferry operator serving the Channel Islands, with Huelin Renouf handling solely freight operations. The two operators provide “lifeline” links between the Islands, the UK and France. The proposals under consideration would almost certainly result in a very significant increase in the cost of fuel oils (Maritime UK estimates the cost of bunker fuel could rise by as much as 87%). It is very likely that the greater cost of this increase would be recovered from the end user. It should be considered that a significant reduction in sailings is neither achievable, nor desirable given the fact that the sea routes provide lifeline services to the Islands. Being an Island, there are no alternative means of transporting goods to the Island (e.g. road), and air transport is likely to be precluded by cost for all but the highest value items.
A large rise in the cost of freight charges would have a significant inflationary effect on the price of goods in the Island – and therefore a negative impact on the cost of living for local residents. This is likely to hit poorer families disproportionately.
A further impact on the economy would be felt through the loss of tourist traffic to the
The Department is very much aware of the important role that local shipping companies play in providing essential services for the communities of the Channel Islands. Maintaining a year round service is an expensive commitment, with profits being dependent on summer traffic and tourist trade. If fuel prices increased significantly, then the viability of these services would be in serious doubt, which would have a significant impact on the economies of the Islands. This is a very major concern to our local ferry operator, Condor Ferries, and I believe they will be providing their comments via a separate submission.
8. Conclusion
It is clear that proposed changes in sulphur emissions would pose significant challenges for marine operators serving the Channel Islands. Shipping services between the Islands, the UK and France provide “essential” commodities and services to the Island. The economic cost of providing these services is already high, and switching to low sulphur fuels will increase demand, and could result in shortages of supply. Any rise in fuel, or potential shortages of fuel would have significant economic impacts for the Islands. We note that low sulphur fuels currently cost significantly more than heavy fuel oil, and that fuel suppliers are as yet unable to provide guidance on the scale of any price increases which might arise once the new regulations are introduced
It is our belief that the economic impact on small Island communities has not been sufficiently quantified at this stage, and that there may well be sound reasons for considering possible exemptions to the regulations where lifeline services could be threatened. The potential impact on our small Island economy cannot be overstated. We consider that more time is needed to allow a full impact assessment and feasibility study of the proposals to be conducted, and would therefore recommend a deferral of the implementation of the ECA regulations until these have been carried out.
This issue is of serious concern to the authorities in the Channel Islands (I believe that the States of Jersey will also be communicating their views on the matter), and I am grateful for the opportunity of making our views known. We would be happy to supply more information to the Committee if this is required.
October 2011
Written evidence from the British Marine Federation (SES 08)
The British Marine Federation (BMF) welcomes the opportunity to submit evidence to the inquiry of the House of Commons Transport Select Committee into the implementation of IMO and EU regulations on sulphur emissions by ships. These responses broadly reflect the on‐going view of the BMF and its members.
Section 1 – Introduction
Introduction
1.1 The BMF is the Trade Association for the UK recreational, superyacht and small commercial marine industry, representing approximately 1,500 member companies. Our industry is comprised of small and medium enterprises, with over 98% of our companies employing less than 50 people.
1.2 The overwhelming majority of the vessels built by our members are relatively small, with a length of less than 24m, but there are also a limited number of UK yards successfully building superyachts with a length greater than 24m.
1.3 Notably, the UK holds a world leading position in powerboat design and build with companies such as Sunseeker, Princess, Fairline and Sealine providing globally recognised and respected products.
1.4 In total, the UK leisure marine sector directly employs over 32,500 employees and generates revenue of almost £3 billion, with 39% of this being exported1.
1.5 The purpose of this document is to highlight the concerns that the members of the BMF have with the forthcoming MARPOL Annex VI requirements which will significantly reduce Nitrogen Oxides (NOx) emission requirements in 2016 under Regulation 13 and Sulphur Oxides (SOx) under Regulation 14.
Section 2 – International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI
Introduction
2.1 The BMF has been investigating the issues surrounding MARPOL Annex VI compliance, both NOx and SOx, through an international working group comprising boatbuilders, engine manufacturers, catalyst manufacturers, Flag Administration and Classification Societies.
1Source: UK Leisure, Superyacht and Small Commerical Marine Industry Key Performance Indicators 2009/10 (http://www.britishmarine.co.uk/upload_pub/KPIReport2010.pdf)
2.2 The expert guidance we have received indicates that the Annex VI requirements will not be achievable using engine technology alone so will require exhaust after‐treatment with the most likely solution being Selective Catalytic Reduction (SCR).
Annex VI Requirements
2.3 The size of the required catalyst within the SCR system is dependent on the sulphur content of the fuel. Highway applications can adopt relatively small volume catalysts because fuel with a maximum content of 10ppm (0.001%) is required by regulation. The sulphur content of fuel in marine applications is higher hence requiring larger units and, for certain applications, soot blowers to prevent catalyst performance deterioration.
2.4 Exhaust temperature is also a critical design parameter and, since these vessels operate at low engine loads for the majority of the time, exhaust pre‐heaters may also be required.
2.5 The catalytic reaction requires injection of a urea solution into the exhaust gas at a consumption rate of circa 5‐7% of fuel consumption.
2.6 The vessels that our members produce currently operate using fuel with a sulphur content varying from 10 to 5000ppm (0.001% to 0.5%) depending on location. The limits on sulphur content within Annex VI Regulation 14 would not therefore cause a direct supply impact. However, these vessels are operated throughout the world and the global supply of fuel shows wide variations in quality.
2.7 In certain countries the best fuel available may contain up to 0.5% sulphur, however, when entering an Emission Control Area it will not be permissible to burn this higher sulphur fuel. The vessels may therefore require dedicated fuel tanks to hold 0.1% sulphur fuel for use in this eventuality. If further research shows that this is required then a significant cost and space impact will be experienced.
Section 3 – Exemptions within Annex VI
Introduction
3.1 An important aspect of the Annex VI requirements is within Regulation 13.5.2 which provides an exemption for:
3.11 “a marine diesel engine installed on a ship with a length (L)[….] less than 24 metres when it has been specifically designed, and is used solely, for recreational purposes.”
The Importance of Definitions
3.2 This exemption is welcomed by our members, however, it does call into focus the precise definition of “recreational”. In the UK the Merchant Shipping Act includes a definition of Pleasure Vessel and the Maritime & Coastguard Agency consider any vessel that does not fall within this definition to be commercial, thus no longer recreational.
3.3 This approach means that the vessels manufactured by our members that are used for charter would need to meet the Annex VI requirements and, in theory, vessels that are destined to be Pleasure Vessels when delivered would need to meet the emission requirements while on builder’s trials.
3.4 This position is further complicated by the fact that the Recreational Craft Directive which is the European Directive defining safety standards for recreational craft contains the following definition under Article 1.3:
3.41 “recreational craft”: any boat of any type intended for sports and leisure purposes of hull length from 2.5 m to 24 m, measured according to the harmonised standard, regardless of the means of propulsion; the fact that the same boat could be used for charter or for recreational boating training shall not prevent it being covered by this Directive when it is placed on the Community market for recreational purposes”.
3.5 In addition, the United States Coastguard have another definition, namely:
3.51 “Recreational vessel means a vessel that is intended by the vessel manufacturer to be operated primarily for pleasure or leased, rented or chartered to another for the latter’s pleasure”.
3.6 These two definitions indicate that vessels that are chartered remain recreational and would hence fall within the Annex VI exemption which is in conflict with the UK position.
Section 4 ‐ Conclusions
4.1 The BMF broadly supports the goal of a reduction in exhaust emissions from shipping, however, this must be achieved with an impact that is manageable by industry.
4.2 Investigations are ongoing, but the impact with respect to space, weight, cost and back pressure on these relatively small vessels with very low operating hours seems disproportionate. This may threaten the economic viability of certain models due to the reduction in interior accommodation volume associated with the increased machinery space volume required to install after‐treatment and dedicated tanks.
4.3 It is acknowledged that after‐treatment technology will significantly develop in the coming years; however, many yachts are semi‐custom built whereby each model requires a large investment in standardisation of design, systems and tooling. In order to amortise this initial investment the models will frequently remain in production for a number of
years so yacht builders are planning today for designs that will still be in production in 2016 and beyond.
4.4 Technologies that will come into application on a yacht will have to be derived from one of the established applications such as heavy duty vehicles or larger vessel technology. Yacht engine installations will need to be “integrated systems”, i.e. a production built engine/after‐treatment unit certified as one system by the engine manufacturer. This outcome can only be achieved as a result of engine manufacturer research or of a partnership with after‐treatment equipment suppliers.
4.5 Today it is still under economic consideration whether manufacturers of marine engines and emissions reductions technologies will invest sufficiently in research and development in order to provide Tier III compliance to this niche market which will not impose an undue impact on the UK industry.
October 2011
Supplementary written evidence from the British Marine Federation (SES 08a)
As set out in the BMF’s previous written evidence submission, and during the oral evidence session on 25 October 2011, the UK recreational, superyacht and small commercial marine industry is immensely concerned about the forthcoming exhaust emission requirements contained within MARPOL Annex VI. The overwhelming majority of the vessels within this sector are relatively small, with a length of less than 24 metres, but there are also a number of UK yards successfully building yachts with a length greater than 24m, so‐called superyachts. The vessels in this sector operate using marine gas oil with a comparatively low sulphur content, ranging from 0.001% to 0.5%, so the global cap on sulphur content of fuel contained within MARPOL Annex VI Regulation 14 will not directly impact on the sector, however other requirements within the Annex and certain interpretations have the potential to significantly affect UK manufacturers.
The Regulations
Regulation 14 Sulphur oxides (SOx) and particulate matter will require that ships operating within an emission control area are to use fuel oil with a sulphur content not exceeding 0.10% m/m on and after 1 January 2015. The vessels in this sector are frequently for global operation and the availability of 0.1% sulphur throughout the world is uncertain. Scrubbing technology is impractical and costly for vessels of this size so compliance may require the fitting of dedicated tanks to hold the 0.1% sulphur fuel with the associated design, cost and space impacts this entails. The BMF believes that an approach to averaging the energy used on board to meet this Regulation would be welcome, in order to limit the potential implications.
Regulation 13 Nitrogen oxides (NOx) will require marine diesel engines of 130kW or more installed on a ship constructed on or after 1 January 2016 to have emissions below 2.0 g/kWh compared to the current level of 7.7 g/kWh. The guidance we have received from engine manufacturers indicates that these requirements will not be achievable using engine technology alone so will require exhaust after‐treatment with the most likely solution being Selective Catalytic Reduction. Catalyst manufacturers have provided indicative figures for the volume, mass and cost of the catalyst reactor. The vessels within this sector are for luxury or workboat purposes and space is fundamental for their economic viability. The engine rooms on the majority of current vessels do not have sufficient space to accommodate the additional equipment, so accommodation or working space will be impacted. The initial cost of the additional equipment has been estimated by a catalyst manufacturer to be between £25 and £45 per kW of engine power which approximates to between 1.5% and 8.5% of overall vessel price. As an example an 18.3m motoryacht produced by a UK manufacturer currently selling for circa £1,290,000 would require additional catalyst equipment at an estimated cost of between £45,000 and £80,000. These cost impacts do not include any design consequences to provide the required space or the additional tankage required. The catalytic reaction also requires injection of a urea solution into the exhaust gas at a consumption rate of circa 5‐7% of fuel consumption which will need a tank and supply system and therefore add additional impractical costs.
The Importance of Exemptions and Definitions
Within the Regulations, certain exemptions are provided for. Regulation 13.5.2 provides the following exemption which is critical to a proportion of the sector, which excepts: “a marine diesel engine installed on a ship with a length (L)[….] less than 24 metres when it has been specifically designed, and is used solely, for recreational purposes.” The term recreational purposes is, however, not defined within MARPOL and there is no unified global definition. Conflicting definitions are adopted by different countries which could lead to a disadvantageous position for UK manufacturers. Recreational craft used for charter in the UK are considered commercial so will be required to fit the exhaust after‐treatment equipment.
The Recreational Craft Directive (Directive 94/25/EC as amended by 2003/44/EC) definition of recreational craft includes charter vessels and also states that Member States shall not impose requirements that require modification to craft conforming to this Directive. In a recent note to members of the Expert Group on Recreational Craft, the European Commission reinforced this position stating “..it can be deducted that Member States cannot set rules imposing the MARPOL Convention NOx emission limits as long as such limits dictate the technical modification of those recreational crafts whose NOx emissions comply with the emission limits set in the Directive”1. The UK interpretation of the definition of recreational craft conflicts with the Recreational Craft Directive in requiring constructional changes to vessels within the scope of the Directive and we believe this approach to be in breach of European law. Importantly, the Recreational Craft Directive contains exhaust emission requirements which have been developed specifically for this sector and supported by a full impact assessment.
Conclusions and Requirements
In total, this UK marine sector directly employs over 32,500 employees and generates revenue of almost £3 billion per year, with 39% of this being exported2. The industry is comprised of small and medium enterprises, with over 98% of our companies employing less than 50 people. The vessels have very low engine operating hours when compared to commercial shipping. The annual hours for recreational craft are estimated to be 50 hours according to the ICOMIA (International Council of Marine Industry Associations) Marine Engine Committee.
The emissions to air from recreational craft are minor when compared to other sources of air pollution in Europe. According to a study produced by The European Confederation of Nautical 3 Industries in June 2009 , the contribution of NOx emissions from this sector is 0.17% of that attributed to road transport.
The sector broadly supports the goal of a reduction in exhaust emissions from shipping, however, this must be achieved with: • an impact that is manageable by industry; and • proportional to the emission contribution.
The impact with respect to space, weight, cost and back pressure on these relatively small vessels with very low operating hours is disproportionate. This may threaten the economic viability of certain models due to the reduction in interior accommodation volume or working area associated with the increased machinery space volume required to install after‐treatment equipment and dedicated tanks.
Today it is still under economic consideration by manufacturers of exhaust after‐treatment technologies whether to invest sufficiently in research and development in order to provide Tier III compliance to this niche market which will not impose an undue impact on the UK industry.
The BMF therefore urges the UK government to: • Support research and development in after‐treatment technology to limit the impact on this sector • Confirm that the UK will adhere to the requirements of the Recreational Craft Directive and not apply the MARPOL emission requirements to charter vessels under 24m • Support the concept of averaging to meet the requirements of Regulation 14
November 2011
1 Enclosure: EC Note to Members of the Expert Group on Recreational Craft 2 Source: UK Leisure, Superyacht and Small Commercial Marine Industry Key Performance Indicators 2009/10 (http://www.britishmarine.co.uk/upload_pub/KPIReport2010.pdf) 3 Source: European Confederation of Nautical Industries Nautical Activities: What Impact on the Environment June 2009 (http://www.nautismequebec.com/doc/ECNI%20Environmental%20Report%20EN_new.pdf)
Written evidence from Stena Line Ltd (SES 09)
Stena Line is one of the world’s largest ferry operators, and focuses on the transportation of passengers and freight. The operation consists of 19 routes, ownership of 35 ships and four ports serving destinations in the UK, the Republic of Ireland, the Netherlands and Scandinavia. Stena Line has almost 6000 employees, 1600 of whom are employed in the UK. The company is privately owned and part of the Stena AB group.
Stena Line has an annual UK turnover of £240 million.
Summary:
While Stena Line supports the need to improve air quality around the UK, any regulation must balance the cost of implementation against the expected benefits. We believe this is not the case with the present regulation regarding sulphur limits in ECAs from 2015.
The implementation of IMO and EU regulations on sulphur emissions will seriously harm Stena Line’s ability to provide the important infrastructure required to service the UK’s imports and exports of goods and transportation of passengers. The high cost of compliance with the requirements from 2015 will make it more expensive for lorries, trailers and passengers to travel on Stena Line’s North Sea services. We expect this to lead to modal shift, with vehicular traffic entering and leaving the UK via the shortest link (Channel Tunnel and Dover‐Calais ferries). This will generate more road traffic, causing further congestion, and passengers may opt to fly rather than travel by ferry. The erosion of our customer base could eventually lead to a reduction in the services we provide and, ultimately, to route closures resulting in the loss of infrastructure, investment and jobs.
We believe the UK Government must act to delay the implementation of the 2015 regulations to fall in line with the worldwide implementation of 0.5% planned by 2020 or 2025 at the latest. The Commission is going beyond the IMO by requiring all passenger ships, even those outside the ECA, to reduce to 0.1% from 2020. This will seriously harm the infrastructure between Great Britain and Ireland and would seriously distort the competition between RoRo and RoPAX vessels1, who fight for the same cargo, but the requirements would only affect the RoPAX vessels. The UK Government should also help the shipping industry mitigate the cost of compliance by making funds available to support the development and installation of abatement technologies and alternative fuel sources.
1. Impact on shipping
Higher operating costs for short sea shipping will result in higher prices, leading to reduced freight and passenger volumes and modal shift. Today, there are almost 20 ferry routes in the North Sea ECA, operated by Stena Line, P&O, Cobelfret and DFDS, serving the East Coast of the UK (Appendix A). These services depend on a certain volume of freight and passengers to enable them to operate. A projected increase in fuel costs of 40‐60% is expected to cause revisions to routes and ferries as we adapt to reduced demand, which will have a negative impact on society generally. Stena Line has invested in knowledge and technology. However, there is presently no viable alternative solution to offset the increase in costs resulting from running on low‐sulphur fuel from 2015.
1 RoRo = A vessel designed for goods to Roll‐On and Roll‐Off RoPAX = A RoRo vessel with passenger capacity Abatement technology is permissible under the regulation. The current solution, referred to as scrubbers, cleans sulphur from exhaust gases. This allows the ship to run on less costly fuel with a higher sulphur content. However, the marine application of the technology is still in its infancy. To date, no fully functioning scrubbers have been installed on any ship. The problem areas are unreliable operation, corrosion, retrofitting to existing vessels, handling of waste and regulatory uncertainties. While we expect these problems to be solved over time, our projections show that installing functioning scrubbers will offset only about 50% of the cost increase over running solely on low‐sulphur fuel. Suppliers’ claims for a very short payback time do not hold true in reality.
LNG as an alternative fuel might have a potential for future newbuildings, but is not economically viable for the existing fleet due to the high conversion costs. Many issues remain to be resolved before it can become a viable marine fuel source; there is a fundamental lack of infrastructure, regulation for the use on passengers ships is still progressing, regulations on bunkering are not in place and the methods are technically not resolved, especially not for ports in populated areas. and there is uncertainty about the ongoing cost for LNG. Other alternative fuels might be methanol and DME. Technologies for these fuels will take substantial time to develop.
It took the car industry 30 years to resolve the corresponding issue for new cars. It is not fair and will not work to ask the shipping industry to do it in nine years for the whole fleet. Ideally, the burden of technological development should primarily fall on new vessels being designed today and constructed in and after 2015, as is the typical IMO and EU approach on such matters.
2. Possible implications for other sectors, such as road haulage
We know from experience that the first priority for any haulier is cost, with time coming second. Optimal routes to and from the UK are recalculated daily. The introduction of the sulphur requirements will lead to an increase in the cost of transport by ferry, and it will increasingly become favourable to drive greater distances via the Channel Tunnel or to use shorter sea routes. Note that modal shift need not mean the total abandonment of one mode of transport; it is the change in total transport work (measured as ton‐miles) that constitutes the modal shift. Shifting from long sea routes to shorter sea routes constitutes modal shift as much as does shifting to the Channel Tunnel at the expense of the Dover‐Calais crossing; the overall ton‐miles by road will increase with consequential effects of more congestion on already capacity constrained roads and more emissions.
The UK is an island nation, which means it is immediately at a disadvantage in terms of transport compared with nations in mainland Europe. The additional costs arising from the implementation of the sulphur requirements will lead to an increase in the cost of transportation. In turn, this will drive inflation and hamper any export‐led recovery. It may also be worth noting that the ferry industry’s additional fuel costs will not benefit any other part of the UK, or even European, economy. The additional capacity for supplying the required fuels will be sourced predominantly in the Middle East and the Far East.
3. Steps that the UK Government could take to help the maritime sector meet its obligations under Marpol
Given that the opportunity was missed to align the 2015 regulation with the later 2020 global regulation at 0.5%, thereby achieving equal terms in European waters, we believe the first priority for the UK Government should be to postpone the introduction of 0.1% sulphur in 2015 until the global implementation of the 0.5% requirements take effect. We can expect that by that time the marine industry will have developed solutions to mitigate most of the additional cost and thereby reduce modal backshift. Second, we propose that funds be allocated to secure this technical development. Pilot installations are very expensive, not only because of their technical costs but also due to their disruption of the regular ship service. National funds are needed to support this development.
4. The European Commission’s proposals to implement the revisions to Marpol, and the UK Government’s stance on those proposals
Our recommendations are that the UK government first recognises that there will be no viable technical solution in place in 2015 to offset increased costs, and second takes an initiative to assess the impact of the proposed regulation within the UK. In any case, we see no reason to go beyond IMO for passenger ships and include the Irish Sea in 0.1% from 2020. Ultimately, it will be obvious that the 0.1% requirement for northern Europe has more negative than positive effects. The natural consequence is to postpone the reduction to 0.1% to follow the global reduction to 0.5%, by which time we can expect technology to be available to offset most of the costs.
October 2011
Appendix A
Ferry routes serving the UK’s East Coast
Written evidence from the European Federation for Transport and Environment (SES 10)
Sulphur emissions from the maritime sector
1. Emissions of sulphur oxides (SOX) cause serious environmental problems such as the acidification of soil and water and damage to biodiversity. The areas with the largest exceedances of ecosystems critical load in the year 2000 were among others the United Kingdom, the Netherlands, Germany and Poland.1 Moreover, sulphur dioxide is a powerful respiratory irritant and exposure to SO2 emissions even as short as 10 minutes may trigger respiratory and pulmonary illness.2 In reaction with other compounds in the atmosphere, SOX contributes to the formation of secondary particulate matter (PM) that causes serious health effects.
2. These particles can penetrate into very sensitive parts of the respiratory system and provoke or exacerbate respiratory disease and even death.3 In the UK the burden of disease from fine particles has recently been estimated by the Committee on the Medical Effects of Air Pollutants (COMEAP), an advisory committee of independent experts that provides advice to Government Departments and Agencies on all matters concerning the potential toxicity and effects upon health of air pollutants. A study published on 21 December 2010 by COMEAP found that man‐ made pollution by fine particles (PM2.5) led to a loss of life equivalent to 29,000 premature deaths per year, but the expert group stressed that along with other factors, air pollution was likely to have taken an average of just under two years off the lives of 200,000 people.4
3. Shipping is an important contributor of SOX emissions in Europe. Under a business‐ as‐usual scenario, i.e. if no action is taken to enforce the standards agreed in the revised MARPOL Annex VI, and if no additional emissions control areas are created, SO2 emissions from ships are expected to exceed emissions from all EU27 land‐based sources combined by 2020. The following graph shows the projections of SO2 emissions from maritime transport compared to all land‐based sources in EU27.
1 EC (2011): Impact assessment accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive 1999/32/EC as regards the sulphur content of marine fuels, p. 41 2 WHO (2005): WHO Air quality guidelines for particulate matter, ozone, nitrogen dioxide and sulfur dioxide 3 WHO (2005a): Particulate matter: how it harms health, Fact sheet EURO/04/05 4 COMEAP (2010): The Mortality Effects of Long‐Term Exposure to Particulate Air Pollution in the United Kingdom)
12000
10000
8000
6000
4000
2000
0 2000 2005 2010 2015 2020 2025 2030 EU27 Sea-baseline Source: IIASA GAINS model, November 2010
4. A recent study indicates that emissions from international maritime transport in Europe account for approximately 50,000 premature deaths in Europe annually.5 The study does not attribute a figure for fatalities from SOX emissions specifically, but the authors consider that the enforcement of stricter sulphur standards in the Baltic and North Sea Sulphur Emission Control Areas (SECAs) will lead to a significant reduction of the health damage caused by international maritime transport. They also concluded that the SECA regulation that limits the sulphur content in ship fuel to a maximum of 0.1 per cent as from 2015, is expected to significantly reduce the external costs, and that “a similar regulation of international ship traffic in the whole world would have a tremendous positive effect on human health.”6
5. The increasing share of SOX emissions from the maritime sector is due to the poor quality of the fuel used in shipping as well as to the steady growth in world shipping itself. Currently, the heavy fuel oils (residual fuels) used in international maritime transport contain on average 2,700 times more sulphur than the fuel used in the road sector where strict limits have applied for many years. In practical terms, the introduction of the IMO’s 0.1% SECA‐standard and 0.5% global sulphur standard will lead to a shift from residual to distillate fuels in the shipping sector.
6. Emissions of air pollutants from the international maritime sector are regulated by the International Maritime Organisation (IMO) in Annex VI of the convention for the prevention of pollution from ships, the so‐called MARPOL Convention. Annex VI was revised in 2008 to introduce new limit values on the maximum permissible sulphur content of marine fuels.
7. International standards on the sulphur content of marine fuels were incorporated into EU law by Directive 1999/32/EC as amended. On 15 July 2011, the European Commission proposed a further revision of this directive in order to take into account
5 CEEH (2011): Assessment of health‐cost externalities of air pollution at the national level using the EVA model system). By J. Brandt et al. CEEH Scientific Report No 3. Centre for Energy, Environment and health: www.ceeh.dk 6 CEEH (2011): op. cit. the limit values agreed when MARPOL Annex VI was amended in 2008.7 The Commission proposal also updates additional EU‐only standards for ships at berth and for passenger ships operating on a regular service which the EU included given the proximity of these emissions to land and hence their proximity to people and ecosystems.
8. This revision has already been foreseen with Member States in a Commission declaration which was adopted at the same time as the adoption of the revised ambient air quality directive. 8 In that context, the Commission noted the importance attached by the European Parliament and the Member States to Community measures for the abatement of air pollutant emissions at source.
9. The different limit values contained in IMO MARPOL Annex VI and the EU Directive 1999/32/EC as amended are summarised in the following table. Limit values in italics are the ones introduced by the Commission’s 2011 proposal and have not yet been adopted.
IMO EU
2010 2015 2020 2010 2015 2020 Non‐SECAs 4.5% 3.5% 0.5% ‐ 3.5% 0.5%
SECAs 1.0%** 0.1% 0.1% 1.5% 0.1% 0.1%
At berth* ‐ ‐ ‐ 0.1% 0.1% 0.1%
Passenger ships* ‐ ‐ ‐ 1.5% 1.5% 0.1% * specific definitions of ships at berth and passenger ships apply for these standards, please refer to Directive 1999/32/EC as amended ** from the 1st of July 2010
The impacts of sulphur regulation on the shipping sector
10. The European Maritime Safety Agency (EMSA) has prepared a comprehensive overview of the impacts of the implementation of the revised MARPOL Annex VI standards9. The report, published in December 2010, compiles and assesses the results of eight different studies that have been commissioned by EU Member States, trade associations and the European Commission.
11. The different studies clearly show that the fuel price is the most important criteria to assess the impact of the low‐sulphur requirements on the industry, as the shift from heavy‐fuel oil (HFO) to marine gasoil (MGO) will result in a significant fuel price increase. There is however no consensus on how big the price increase will be. In its impact assessment accompanying the proposal to review the Directive 1999/32/EC,
7 EC (2011a): COM (2011) 439 final, Proposal for a Directive amending Directive 1999/32/EC as regards the sulphur content of marine fuels. 8 EC (2008): Statement by the Commission, in Directive 2008/50/EC on ambient air quality and cleaner air for Europe 9 EMSA (2010): Technical Report : The 0.1% sulphur in fuel requirement as from 1 January 2015 in SECAs ‐ An assessment of available impact studies and alternative means of compliance the European Commission refers to an average fuel price increase of 65% between HFO and MGO.
12. Most studies foresee a price increase that will range from $500 to $900 per ton. The increase in fuel price will not have the same effect on the different market segments of the sector (containers, bulk, tankers, Ro‐Ro, etc.). Unsurprisingly, high consuming ships are likely to be more affected than others. In addition, the impacts will also depend on the share of fuel costs in the overall transport costs. Nonetheless, the EMSA study indicates that with a price increase below $900 per ton, short sea shipping will remain competitive towards others modes even if some traffic volumes will be lost. If the price reaches a level around or above $1,000 per ton, the effects will be more acute but many short sea routes will stay competitive. It should be noted that marine fuels are not taxed whereas for example diesel used by heavy duty vehicles in Europe is taxed on average between €400 and €600 per 1,000 litres.
13. The most important concern that has been raised in relation to the higher cost of using MGO is the risk of modal back shift (from sea to land, and in particular to road). After having reviewed all major studies available, experts from EMSA concluded that the risk of modal shift exists ‘but only within certain limited routes and under certain (high‐end) fuel price scenarios’. Moreover, most affected routes are likely to enter in competition with other shipping options with a shorter sea‐leg and a longer road and rail option in between. The implications of the introduction of the low‐sulphur standards on other sectors/transport modes are therefore considered to be limited.
14. The option to reduce fuel consumption as a means of offsetting higher fuel costs in the shipping sector has not been sufficiently addressed in the studies on the implementation of the low‐sulphur standards. Slow steaming has shown to be a very effective response for shipping lines to the economic crisis, reducing operational costs substantially and in many cases turning operating losses into profits. In practice, if ship operators combine the use of low sulphur fuels with operational measures such as slow steaming, the effect of fuel price increases on operating costs will be considerably reduced.
15. To comply with the sulphur standards, both MARPOL Annex VI and the EU Directive offer compliance alternatives to the use of low sulphur fuels, such as exhaust gas cleaning systems (SOX scrubbers) or the switching to alternative fuels such as the liquefied natural gas (LNG). The most important advantage of these alternatives is that they represent cheaper options to comply with the standards, as they are not dependent on MGO price. The Commission’s impact assessment of the proposal indicates that if scrubbers are assumed to be the preferred compliance strategy of ship owners, costs could be reduced by between 50% and 88% (as compared to switching to MGO).With these options, the risks of modal shift are virtually eliminated.
16. SOX scrubbing is a technology that has proven to be very effective with industrial plants. Tests on ships have demonstrated at least 90% SO2 removal efficiency and, in some specific cases, also a significant removal of PM pollution. The use of LNG has the advantage of reducing SO2 as well as also reducing by around 90% emissions of nitrogen oxides (NOX) and PM (among which particularly harmful black carbon particulates), Use of LNG also reduces emissions of CO2 by about 20%. The use of these alternative options will require upfront investments (e.g. retrofitting of ships), but estimates from EMSA show that they have a very short payback time (less than a year for the examples presented in the study).
17. The implementation of the revised MARPOL Annex VI provisions will considerably improve the air quality in Europe. Emissions of SO2 from marine sources will be cut by more than 90% in SECAs from 2015 and by more than 75% in the rest of the EU seas if the global sulphur cap of 0.5% is introduced on schedule in 2020. The switch to cleaner fuels will also lead to considerable reductions of PM emissions.
18. In its communication document accompanying the review of the Directive 1999/32/EC, the European Commission has estimated that the health benefits resulting from the introduction of the low‐sulphur standards will range between €15 and €34 billion per annum in 2020. In comparison, the costs of implementing the new limit values range from €2.6 (with alternative emissions abatement measures) to €11 billion (following a fuel‐based compliance option). Specifically for the SECA‐areas – the Baltic Sea and the North Sea, including the English Channel – the costs were estimated to between €0.6 and €3.7 per annum in 2015, while the health benefits alone were estimated to amount to between €8 and €16 billion.
19. Even in the less favourable cost‐benefits ratio scenarios, the implementation of the MARPOL standards will bring considerable benefits to the society. Estimates suggest that the reduced concentrations of PM alone will prevent between 16,000 and 26,000 annual premature deaths in 2020. Better air quality will also result in less respiratory and cardiac hospital admissions, amongst other benefits. Unsurprisingly, countries located near the SECAs are expected to benefit most from the new requirements. It should be noted that the economic benefits were calculated from the quantified health benefits only – environmental improvements, such as reduced acidification damage to ecosystems and less damage to buildings and materials were not monetised and therefore not included in the benefits assessment.
What should be done to ensure the rapid and harmonised transposition of the MARPOL standards on low‐sulphur?
20. Transposition of IMO standards into EU law – The MARPOL Annex VI standards that were internationally agreed and unanimously adopted by the IMO in 2008 have to be implemented by all Parties to the Annex in accordance with the terms of the Convention. The transposition of the standards into EU law provides an efficient enforcement mechanism and offers a clear regulatory framework ensuring the harmonised transposition of the limit values. A prompt adoption of the standards into the EU legislation and a clear commitment concerning the application of the 0,5% global standard in 2020 are now necessary to provide sufficient clarity to the shipping and refinery sector when it comes to future limits and compliance dates.
21. Fuel availability – The question of fuel availability is a crucial aspect to ensure compliance with the IMO standards on sulphur content of fuel, as ships can be exempted from compliance with the limit values where no compliant fuel is available en route. According to regulation 18 of MARPOL Annex VI, ‘each Party shall take all reasonable steps to promote the availability of fuel oils which comply with this Annex […]’. While the current EU directive sets a system of prohibition for using non‐ compliant fuels, there is currently no provision to ensure availability and a balanced distribution of compliant fuels. This should be corrected in the upcoming revision of the EU text. Moreover, a precedent exists in EU law for such a fuel availability provision; the Council Directive 88/210/EEC required Member States to take all the necessary measures to ensure sufficient availability of compliant fuel when unleaded petrol was introduced in Europe over 20 years ago.
22. Development of SECAs in Europe – SECAs are currently limited to the Baltic Sea, the North Sea and the English Channel. More stringent sulphur limits where introduced first for these regions primarily due to the widespread problems of acidification in northern Europe. However, SO2 emissions contribute also to several other serious health and environmental problems all over Europe. The EU should therefore enlarge the control areas to cover all EU seas, or at least to follow the North American example and designate a distance‐to‐shore SECA along the EU coastline which is not currently covered by the SECA standards (North East Atlantic, including the Irish Sea, the Mediterranean and the Black Sea). In any case, the work to achieve these extensions should not stand in the way of early agreement on the Directive.
23. Extending and enforcing the EU standards ‐ The 2005 revision of the EU sulphur in fuels Directive 1999/32/EC introduced a number of provisions that go beyond IMO requirements. This includes the more stringent limit value for passenger ships operating anywhere in Europe on regular service which was set at the level of the maximum sulphur limit used in SECAs (i.e. 1.5% in 2005). As the SECA limit value will be reduced to 0.1% in 2015, the current Commission proposal suggests aligning the passenger ships levels to the 0.1% SECA‐standard, but with a five‐year delay, i.e. only by 2020. No good reasons were cited for the 2020 delayed implementation. Because these ships typically navigate near densely populated areas, the passenger ship limit should be fully aligned with the SECA rule in 2015. Moreover, the scope of this rule should be extended to ensure that the passenger ship definition includes all cruise ships whether on a schedule or not particularly as cruise ships often operate in environmentally sensitive areas.
24. Monitoring and compliance ‐ Marine fuels have been found to contain waste substances such as used waste oils. There are also claims that bunker fuels sometimes contain other dangerous substances. The contamination of bunker fuels is a major safety concern and also another source of air pollution from sea‐going ships. Moreover, control of the sulphur content of marine fuels has revealed frequent breaches of the SECA limit value. Effective monitoring and sampling of ship fuels is thus a key factor in the reduction of air pollution. Given the multiple effects and interrelationships between different fuel quality parameters, a fuel quality standard for marine fuel oil should be developed.
Towards the full implementation of the MARPOL provisions
25. The MARPOL provisions on sulphur are only one part of the equation on air emissions from shipping; there are also provisions in Annex VI on NOX emissions from ship engines. Similar to the situation with SOX, NOX emissions from the maritime sector are expected to outweigh the emissions of all EU land‐based sources by 2020 if no action is taken. The health, environmental and climate impacts of NOX emissions are also considerable, NOX being a precursor to both PM and tropospheric ozone and also contributing to damage to ecosystems and biodiversity in Europe through eutrophication and acidification.
26. The 2011 revision to the sulphur Directive does not include the 2008 MARPOL Annex VI amendments which introduce the concept of NOX emission control areas and impose strict limits on NOX emission from new ship engines operating in these NECAS. In order to further reduce emissions form the maritime sector, the EU Member States should now aim at fully transposing the MARPOL Annex VI provisions (including the provisions on NOX emissions) and should consider the designation of all European sea areas as NOX emission control areas (NECAs), where stricter NOX standards should apply. In addition, the Commission should consider regional measures for controlling NOX emissions from the existing fleet as it will take 30 years for the MARPOL provisions to take full effect and in the meantime the harmful effects of shipping NOX will continue to grow.
October 2011
Written evidence from the Department for Transport (SES 11)
Summary
• The Government recognises the risk to the environment and to human health posed by SOx emissions from ships. Polluting atmospheric emissions from ships are regulated by Annex VI of the International Convention for the Prevention of Pollution from Ships (commonly known as MARPOL), and the UK played a prominent role in negotiating the revised Annex VI.
• The Government’s aim is to implement the revised Annex VI in a way that minimises the economic impact on the industry, whilst delivering the important environmental and health benefits.
• While concern has been expressed, particularly in parts of Scandinavia and around the Baltic, that reverse modal shift (ie from maritime back to land-based transport) might occur, the Government has not yet seen any evidence to suggest that there will be a significant impact, either in terms of excessively high costs or reverse modal shift, on the UK but welcome any evidence that affected parties might wish to provide.
• The European Commission’s proposal for a Directive is welcome insofar as it seeks to align EU law with the revised Annex VI. However, there are concerns about those parts of the proposal which deviate from the international standard.
Sulphur emissions from ships
1. Shipping is a significant and growing source of global emissions of atmospheric pollutants impacting on health, ecosystems and climate. Impacts can be local where ships are close to land but pollutants can also travel very long distances and have impacts far from the source. For example, the UK is impacted by Atlantic shipping activities. Studies have estimated that currently around 4-9% of all global anthropogenic SO2 emissions are attributed to 1 ships, with almost 70% of those emissions impacting on land . Consequently, emissions from ships can have a major impact on air quality on land.
2. Sulphur oxides (SOx) are some of the main pollutants which ships emit. SO2 is a precursor for particulate matter (PM). Following its release into the atmosphere, SO2 reacts with other pollutants and forms PM which is referred to as secondary PM. Both short-term and long-term exposure to ambient levels of PM are consistently associated with respiratory and cardiovascular illness and mortality as well as other ill-health effects. PM is carcinogenic and can be a major threat to health. Emissions of particulates are associated with increased risk of heart disease and (if particulates include carcinogens, eg from fuel or from combustion processes) of some cancers.
1 Eyring et al., 2010, Atmospheric Environment; Vol 44, p4735-4771
MARPOL Annex VI
3. Polluting atmospheric emissions from ships are regulated by Annex VI of the International Convention for the Prevention of Pollution from Ships (commonly known as MARPOL), which places limits upon SOx emissions.
4. The negotiation of the original Annex VI in the International Maritime Organization (IMO) in the 1990s was challenging. The targets contained within it were the result of political compromise, and consequently were relatively undemanding – especially compared to the limits which applied to road vehicles. In particular, the 4.5% global cap on sulphur content in fuel was perceived as being too lenient. Therefore, no sooner had Annex VI been adopted in 1997 than pressure began to mount for a substantial revision process to bring in tougher targets.
5. Once Annex VI had entered into force in May 2005, the UK and six other European states (Finland, Germany, Italy, the Netherlands, Norway and Sweden) proposed its revision. The IMO set the process in motion.
6. There was considerable division within the IMO over the form that the revision might take. The UK, in common with many other states, favoured a goal-based approach to reducing SOx and NOx emissions. Our proposal envisaged a gradual reduction in the sulphur limits for marine fuel, but allowed ships to follow the alternative compliance route of continuing to burn higher sulphur fuel while using emissions abatement equipment (such as exhaust gas cleaning systems – commonly known as scrubbers) to achieve equivalent results. Additionally this proposal recognised that the impact of sulphur and particulate emissions varies by proximity to shore and envisaged ships being required to reduce their emissions most when in designated emission control areas in order to deliver the maximum health and environmental benefits with lowest compliance costs.
7. However, there was a different proposal from the Association of Independent Tanker Owners (Intertanko), supported by some states, to force all ships to burn marine diesel oil (typically 0.5% sulphur) in the near future, with no allowance for the use of abatement technologies. While this option was superficially attractive in terms of air quality improvements, it would bring a large increase in CO2 emissions (modelling from the Netherlands indicated something in the region of 90 million tonnes of CO2). For this reason, the UK did not support this option.
8. The decisive phase of the revision of Annex VI took place at the IMO’s Marine Environment Protection Committee (MEPC) when it met on 31 March- 4 April 2008. SOx emissions was the most hotly debated subject, centring on:
• a Norway/Germany/Finland proposal, (supported by Intertanko) with co-ordinated EU support, that was intended to lead the way towards a low sulphur distillate fuel regime as soon as possible;
• the UK’s more measured solution (with varying degrees of support from Denmark, Malta, Netherlands, Spain and a number of non-EU states), for a more goal based standard, permitting alternative technologies and recognising the costs, uncertain scientific basis and uncertain practicability of the Norway/Germany/Finland proposal. This approach attracted support from the International Chamber of Shipping and other shipping representatives.
9. The final compromise on the revised Annex VI included a staged introduction of stricter sulphur limits in fuel, a review of the availability before the introduction of the most stringent limit (that would be equivalent to distillate fuel) and acceptance of approved alternative technology:
i) global sulphur cap - 4.5% prior to 1 January 2012 - 3.5% from 1 January 2012 - 0.5% from 1 January 2020, subject to a review by 2018
ii) sulphur limit in Emission Control Areas (ECAs) - 1.5% sulphur prior to 1 July 2010 - 1.0% sulphur from 1 July 2010 - 0.1% from 1 January 2015
10. The revised Annex VI introduced the concept of geographic areas known as Emission Control Areas (ECAs) for sulphur, or for nitrogen oxides, 2 3 or for both . There are currently three such ECAs , two of which are in northern Europe. From 1 January 2015, ships travelling through these areas will be required either to use fuel with a sulphur content which does not exceed 0.1% sulphur or to use an alternative compliance method which is at least as effective in terms of emissions reductions.
11. The UK was one of the original proponents of the North Sea SECA which came into force in 2007 (and which is now the North Sea SOx ECA), because the UK has consistently recognised the risk to the environment and to human health posed by SOx emissions from ships.
12. The revised Annex VI’s provisions on SOx also include:
(a) a review of the global availability of 0.5% sulphur fuel, to be completed by 2018. If the outcome of the review were to indicate that inadequate supply of such fuel would render it impossible for ships to comply with the 0.5% requirement in 2020, the revised Annex VI provides for the deferral of the effective date of the requirement to 1 January 2025.
2 The ECA concept replaced the more limited SOx Emission Control Area (SECA) concept contained in the original Annex VI. 3 The SOx ECA in the Baltic Sea, the SOx ECA in the North Sea (including the English Channel) and the North American ECA (a SOx and NOx ECA which covers most of the seas around the USA and Canada). (b) a provision concerning fuel availability. States which are Parties to Annex VI are required to promote the availability of compliant fuel. Where a ship which was not in compliance with the fuel oil standard can demonstrate that it made its best efforts to obtain compliant fuel oil but (without deviating from its intended voyage or unduly delaying its voyage) no such fuel oil was available for purchase, then a state has discretion to determine the appropriate action, which may include not taking control measures against the ship.
13. The outcome of the revision of Annex VI will significantly reduce emissions of SOx from ships (as well as nitrogen oxides and PM) and consequently improve UK air quality. With the introduction of the revised Annex VI, UK SO2 emissions from ships are expected to decrease by 84% from 355 kt in 2007 to 57 kt in 2020. Without the revised Annex VI, UK SO2 emissions are predicted to increase by 45% from 355 kt in 2007 to 518 kt in 4 2020 . As a result, between 2012 and 2020 the health benefit to the UK of the revised Annex VI is estimated at around £5 billion. There are also likely to be longer term benefits with the annual benefits after 2020 estimated at around 5 £1.1 billion . All these benefits are driven by chronic exposure to secondary PM, and exclude the range of wider health impacts, improvements in natural ecosystems and protection of the man-made environment.
14. The UK has taken the view that the revised Annex VI represents a global compromise solution as a result of many hours of difficult negotiations, and that there can be no guarantee that unpicking the agreement would be likely to generate a better outcome. Implementing the revised Annex VI will also bring the maritime sector more into line with the other transport modes which have, for several years, been using low sulphur fuels to reduce SOx emissions.
15. IMO’s MEPC formally adopted the revised Annex VI in October 2008, with substantial, broad-based support from the great majority of state, environmental non-governmental organisation and industry representatives.
Impact on shipping of more stringent limits on sulphur in fuel contained in the revised MARPOL Annex VI
16. There is some concern on the part of the ferry and short-sea shipping elements of the industry at the cost impact of the revised Annex VI’s sulphur 6 limits. In particular, the Government is aware that some studies have
4 Emission predictions for with and without revised MARPOL were calculated using the UK Integrated Assessment Model (UKIAM) http://www.imperial.ac.uk/environmentalpolicy/research/environmentalquality/iau/iam/ukiam. 5 The damage costs were put together by Defra in accordance with the best practice methodologies for valuing changes in air quality: http://archive.defra.gov.uk/environment/quality/air/airquality/panels/igcb/. 6 Studies by the German shipping and ports industry and by the Finnish and Swedish governments have tended to conclude that freight rates will increase significantly as ships indicated that reverse modal shift (ie from maritime back to land-based transport) might occur in parts of Scandinavia and around the Baltic. Nonetheless, the Government has not yet seen any evidence to suggest that this is likely to be the case in the UK.
17. In early 2009, the Department’s Maritime and Coastguard Agency (MCA) commissioned a consultancy exercise to develop a basic economic assessment of the impact of the revised Annex VI. The consultancy report, 7 completed in July 2009 , will be used in the impact assessment for the implementation of the revised Annex VI. No firm evidence has yet emerged, either in the consultancy report or elsewhere, to demonstrate that there will actually be a significant impact, either in terms of excessively high costs or reverse modal shift, on the UK. However, the Government would welcome any evidence that affected parties might be able to provide.
18. There may be availability problems for certain types of fuel within the EU. The availability of 1% sulphur fuel, which is now the standard for use inside the ECAs, can only be guaranteed at Rotterdam and Zeebrugge according to some UK shipowners that the Department has spoken to. At other ports, there is a risk that shipowners would be forced to use more expensive distillate fuel in order to comply with the proposed Directive (see paragraph 30 below). We are urging the European Commission to clarify what a ship-owner needs to do, if the only compliant fuel available is 0.1% sulphur fuel instead of 1% sulphur fuel. We are also exploring what the Commission would do to ensure suppliers do not manipulate the market by only supplying more expensive 0.1% sulphur fuel.
19. The shipping industry has suggested that it would be useful for the IMO to carry out a study of the availability of fuel oil meeting the 0.1% standard required in ECAs from 1 January 2015. (As noted in paragraph 12(a) above, the revised Annex VI already contains a commitment to review the availability of fuel oil to meet the 0.5% standard.) In 2010, several international shipping industry bodies proposed an IMO correspondence group to investigate means by which the future supply and demand of low sulphur fuels could be studied. A correspondence group was established, but when it reported to MEPC in July 2011 it recommended that the review of the global sulphur limit for 2020 should occur in 2016, after the ECA limit has been implemented.
Possible implications for other sectors
20. A reduction in sulphur deposition will result in diffuse benefits to the environment which are likely to reduce the area of land experiencing critical sulphur load exceedances by around 2.4% nationally. As exceedance is associated with impaired freshwater quality and reduced farmland and forestry yield there are likely to be limited economic benefits for these sectors.
change to cleaner, but more expensive, distillate fuel and that this will also, in some instances, result in cargo shifting from sea to road. 7 Impact assessment for the revised Annex VI of MARPOL (Entec, 2009) http://www.dft.gov.uk/mca/impact_assessment_-_revised_annex_vi_-_july_2009.pdf These benefits have not been monetised due to the very diffuse nature of any benefits and uncertainties in modelling.
21. There is expected to be a diffuse benefit to the wider economy from reductions in sulphur and particulate deposition in the built environment. This is a particular issue for historic buildings which are most vulnerable to damage from soiling, corrosion and structural damage. This benefit is estimated at 8 around £6 million/pa across the economy .
22. Modelling of human health impacts suggests that implementation of the revised Annex VI will result in a significant but diffuse benefit to the UK through the reduction of chronic illnesses (such as bronchitis and asthma) and early deaths associated with air pollution. This will have some impact on health care costs and days lost to ill health across the population.
23. In particular this is expected to reduce hospital admissions for serious cardiovascular and respiratory complaints and to provide a significant reduction in ‘life-years’ lost across the UK due to chronic illness. These 9 benefits have been monetised and are estimated at £300-620 million/pa .
Steps which the UK Government could take to assist the maritime sector meet its obligations under the revised MARPOL Annex VI
24. The shipping industry, alternative technology developers and the fuel refinery industry would all benefit from being given the confidence that the new limits will come into effect as agreed by the IMO in 2008. Our aim is to implement the new measures in a way that minimises the economic impact on the industry, whilst delivering the important environmental and health benefits.
25. Prior to entering into negotiations on the revised Annex VI at the IMO, the Department consulted the shipping sector within the UK through the relevant UK trade associations. During work to finalise the revisions, the UK delegation worked closely with industry colleagues.
26. The most prominent example of this is the revised Annex VI’s recognition of alternative compliance methods which are at least as effective, in terms of emissions reductions, as sulphur limits in fuel. It was after urging from the UK that the revised Annex VI included emissions standards that allow ships to achieve compliance using technological or fuel-based measures. This allows operators to seek lower cost compliance options rather than mandating a ‘one size fits all’ solution for all sectors of the shipping industry. The consultancy report commissioned by the MCA (see paragraph 17 above) estimated that the annualised cost of compliance for the shipping 10 industry could be significantly reduced by using an abatement technology . The Commission’s Explanatory Memorandum accompanying its proposal for
8 Entec, 2009 9 Entec, 2009 10 Entec, 2009 a Directive states that abatement technology could lower compliance costs by 50% to 88% for ship-owners, and promote innovative industry solutions.
27. Alternative compliance methods continue to be the subject of active discussion, specifically in the context of the Commission’s proposal for an amending Directive to incorporate provisions of the revised Annex VI in EU law. In these discussions, it has become evident that there are some elements of the shipping industry which are sceptical about the cost and maturity of these technologies – apparently more so than their colleagues in the marine equipment manufacturing and shipbuilding industries.
28. This scepticism risks becoming a significant obstacle to early adoption of these technologies. The shipping industry would have to meet the extra cost and risk involved in applying the new technology.
29. To encourage early adoption and compliance, the Commission has proposed increasing the funds under the Trans-European Network (TEN-T) programme to promote shore-side infrastructure. Other financial inducements are available in the Marco Polo work programme and the European Investment Bank. The Commission has also agreed that, under certain conditions, Member States can provide State Aid to compensate the shipping 11 industry for the increased cost of complying with the new requirements . The Government is considering its position.
European Commission proposals to implement the revisions to MARPOL Annex VI, and the Government’s stance on those proposals
30. The Commission has made a proposal for a Directive to amend Directive 1999/32/EC as regards the sulphur content of marine fuels. The Department has presented an Explanatory Memorandum to the Parliamentary Scrutiny Committees, and the UK maintains a Parliamentary scrutiny reservation on the Commission’s proposal as a whole. The Department is in the process of obtaining agreement to a cross-Government negotiating position on the Commission’s proposal. Accordingly, the Government’s formal stance remains to be agreed; however, our interim negotiating position, consistent with that set out in our Explanatory Memorandum, is as follows.
31. We welcome the proposed Directive’s adherence to the revised MARPOL Annex VI’s provisions for a staged introduction of stricter sulphur limits in fuel. The aims of the proposed Directive expressly include the aim of aligning the Directive with IMO rules on fuel standards and the aim of aligning the Directive with the IMO rules on emission abatement methods.
32. Encouragingly, the proposal seeks to address concerns that the new standards might lead to reverse modal shift. The Commission’s intention to
11 Pollutant emission reduction from maritime transport and the sustainable waterborne transport toolbox (Commission Staff Working Paper), Commission document SEC(2011) 1052 final, Sept 2011 monitor the impacts of the shipping sector’s compliance with the new standards is therefore welcome.
33. However, there are a number of areas where the Commission’s proposal deviates from the international regulations. Our main concerns about this proposal are:
● that it does not replicate the provision relating to non-availability of fuel which is contained in the revised MARPOL Annex VI (see paragraph 12(b) above).
● that it does not explicitly align the implementation date for the 0.5% global fuel standard in EU Member States’ waters with the date which IMO will set following its review on fuel availability.
● that it has an additional requirement for passenger vessels which operate on regular services to or from any EU port, outside of an ECA. These vessels are already subject to a 1.5% sulphur limit under the existing Directive. Under the Commission’s proposal, a new limit of 0.1% sulphur would apply from 2020. The Commission considers that this represents an additional health and environmental safeguard for vessels that typically operate near heavily populated coastal areas. We remain to be convinced, and have asked the Commission to provide further evidence that would justify the need for this requirement.
● that it would empower the Commission to specify frequency of sampling, sampling methods and the definition of a sample representative of the fuel examined. There is little evidence of widespread non-compliance with the current regime and we are concerned about the increased burden both on industry and on the MCA as regulator.
● that it includes an unnecessary requirement to undertake trials of abatement systems under the revised directive. In our view, it is not appropriate that a system approved to the IMO standards should be subject to additional EU trials.
● about the approval of alternative systems which would provide equivalent compliance methods. In the revised Annex VI, the issue of equivalency and the verification of compliance is a matter for the administration of the state Party. Empowering the EU’s Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) to exercise this function would reduce the role of the state and possibly reduce the scope for using equivalent compliance methods.
October 2011 Written evidence from the Air Pollution & Climate Secretariat (SES 12)
Sulphur emissions from the maritime sector and their impacts
1. Emissions of sulphur dioxide (SO2) cause serious environmental problems such as the acidification of soil and water and damage to biodiversity. Among the countries with the largest exceedances of forest ecosystem critical load for acidification in the year 2000 were the UK, the Netherlands, Germany and Poland.1 Moreover, the critical loads for acidification of freshwater ecosystems were exceeded in Sweden, Norway, the UK and Finland.
2. Sulphur dioxide is a powerful respiratory irritant and exposure to SO2 emissions even as short as 10 minutes may already trigger respiratory and pulmonary illness.2 In reaction with other compounds in the atmosphere, SO2 contributes to the formation of secondary particulate matter (PM) that causes serious health effects.
3. These particles can penetrate into very sensitive parts of the respiratory system and provoke or exacerbate respiratory disease and even death.3 In the UK the burden of disease from PM has recently been estimated by the Committee on the Medical Effects of Air Pollutants (COMEAP). A study published on 21 December 2010 by COMEAP found that man-made pollution by fine particles (PM2.5) led to a loss of life equivalent to 29,000 premature deaths per year, but the expert group stressed that along with other factors, air pollution was likely to have taken an average of just under two years off the lives of 200,000 people.4
4. Nearly half of Europe’s population is living in areas where EU air quality objectives are still not met, and in 2008, the EU’s air quality standards for PM were exceeded in almost 300 zones in 21 member states (out of some 900 zones in total). 5
5. The emissions from ships engaged in international trade in the seas surrounding Europe – the Baltic Sea, the North Sea, the north-eastern part of the Atlantic, the Mediterranean and the Black Sea – were estimated at 2.3 million tonnes of SO2, 3.3 million tonnes of nitrogen oxides (NOx), and 250,000 tonnes of particulate matter (PM) a year in 2000.
6. Under a business-as-usual scenario, i.e. if the standards agreed in the revised MARPOL Annex VI in 2008 are assumed not to be implemented, it is expected that shipping emissions of SO2 and NOx will increase by 40-50 per cent up to 2020, as compared to 2000. In both cases, by 2020 the emissions from international shipping around Europe are expected to equal or even surpass the total from all land-based sources in the 27 EU member states combined. It should be noted that these figures refer only to ships in international trade. They do not include emissions from shipping in countries’ internal waterways or from ships plying harbours in the same country, which are given in the domestic statistics of each country.
7. A recent study indicates that emissions from international maritime transport in Europe account for approximately 50,000 premature deaths in Europe annually.6 The study does not
1 EC (2011): Impact assessment accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive 1999/32/EC as regards the sulphur content of marine fuels 2 WHO (2005): WHO Air quality guidelines for particulate matter, ozone, nitrogen dioxide and sulfur dioxide 3 WHO (2005a): Particulate matter: how it harms health, Fact sheet EURO/04/05 4 COMEAP (2010): The Mortality Effects of Long-Term Exposure to Particulate Air Pollution in the United Kingdom) 5 EC (2011): op.cit. 6 CEEH (2011): Assessment of health-cost externalities of air pollution at the national level using the EVA model system). By J. Brandt et al. CEEH Scientific Report No 3. Centre for Energy, Environment and health: www.ceeh.dk attribute a figure for fatalities from SO2 emissions specifically, but the authors consider that the enforcement of stricter sulphur standards in the Baltic Sea and North Sea Sulphur Emission Control Areas (SECAs) will lead to a significant reduction of the health damage caused by international maritime transport. It also concluded that the SECA regulation that limits the sulphur content in ship fuel to a maximum of 0.1 per cent as from 2015, is expected to significantly reduce the external costs, and that “a similar regulation of international ship traffic in the whole world would have a tremendous positive effect on human health.”7
8. Currently, the heavy fuel oils (residual fuels) used in international maritime transport contains 2.7% sulphur on average, which is 2,700 times higher than the fuel used in the road sector where strict limits (0.001%) have applied for many years. In practical terms, the introduction of the IMO’s 0.1% SECA-standard and 0.5% global sulphur standards will lead to a shift from residual to distillate fuels in the shipping sector.
9. Emissions of air pollutants from the international maritime sector are regulated by the International Maritime Organisation (IMO) in Annex VI of the convention for the prevention of pollution from ships, the so-called MARPOL Convention. In 2008, the IMO unanimously adopted arevision of MARPOL Annex VI, to introduce new limit values on the maximum permissible sulphur content of marine fuels and strengthen NOx emission standards.
10. The 1997 IMO MARPOL Annex VI standards on the sulphur content of marine fuels entered into force in 2005 and were incorporated into EU law by Directive 1999/32/EC as amended by Directive 2005/33/EC. On 15 July 2011, the European Commission proposed a further revision of this directive in order to take into account the limit values agreed when MARPOL Annex VI was amended in 2008.8 The Commission proposal also updates additional EU-only standards for ships at berth and for passenger ships operating on a regular service which the EU included given the proximity of emissions to land and hence to people and ecosystems.
11. This revision has already been promised to Member States in a Commission declaration which was adopted at the same time as the adoption of the revised ambient air quality directive. 9 In that context, the Commission noted the importance attributed by the European Parliament and the Member States to Community measures for the abatement of air pollutant emissions at source.
12. According to the 2008 revised MARPOL Annex VI, the sulphur content of all marine fuels will be capped at 0.5% worldwide from 2020 (or possibly 2025, subject to a review in 2018). In a first step, the global cap is lowered to 3.5% as from 2012. The SECAs face stricter limits of 1.0% from July 2011 and 0.1% from January 2015.
The impacts of sulphur regulation on the shipping sector
13. The European Maritime Safety Agency (EMSA) has prepared a comprehensive overview of the impacts of the implementation of the revised MARPOL Annex VI standards10. The report, published in December 2010, compiles and assesses the results of eight different
7 CEEH (2011): op. cit. 8 EC (2011a): COM (2011) 439 final, Proposal for a Directive amending Directive 1999/32/EC as regards the sulphur content of marine fuels. 9 EC (2008): Statement by the Commission, in Directive 2008/50/EC on ambient air quality and cleaner air for Europe 10 EMSA (2010): Technical Report : The 0.1% sulphur in fuel requirement as from 1 January 2015 in SECAs - An assessment of available impact studies and alternative means of compliance studies that have been commissioned by EU Member States, trade associations and the European Commission.
14. The different studies clearly show that the fuel price is the most important criteria to assess the impact of the low-sulphur requirements on the industry, as the shift from heavy- fuel oil (HFO) to marine gasoil (MGO) will result in a significant fuel price increase. There is however no consensus on how big the price increase will be. In its impact assessment accompanying the proposal to review the Directive 1999/32/EC, the European Commission refers to an average fuel price increase of 65% between HFO and MGO.
15. Most studies foresee a price that will range from $500 to $900 per ton. The increase in fuel price will not have the same effect on the different market segments of the sector (containers, bulk, tankers, Ro-Ro, etc.). Unsurprisingly, high consuming ships are likely to be more affected than others. In addition, the impacts will also depend on the share of fuel costs in the overall transport costs. Nonetheless, the EMSA study indicates that with a price below $900 per ton, short sea shipping will remain competitive towards others modes even if some traffic volumes will be lost. If the price reaches a level around or above $1,000 per ton, the effects will be more acute but many short sea routes will stay competitive. It should be noted that marine fuels are not taxed whereas for example diesel used by heavy duty vehicles in Europe is taxed on average between €400 and €600 per 1,000 litres.
16. The most important concern that has been raised in relation to the higher cost of using MGO is the risk of so-called modal back shift (from sea to land, and in particular to road). After having reviewed all major studies available, experts from EMSA concluded that the risk of modal shift exists ‘but only within certain limited routes and under certain (high-end) fuel price scenarios’. Moreover, most affected routes are likely to enter in competition with other shipping options with a shorter sea-leg and a longer road and rail option in between. The implications of the introduction of the low-sulphur standards on other sectors/transport modes are therefore considered to be limited.
17. The option to reduce fuel consumption as a means of offsetting higher fuel costs in the shipping sector has not been sufficiently addressed in the studies on the implementation of the low-sulphur standards. Slow steaming has shown to be a very effective response for shipping lines to the economic crisis, reducing operational costs substantially and in many cases turning operating losses into profits. In practice, if ship operators combine the use of low sulphur fuels with operational measures such as slow steaming, the effect of fuel price increases on operating costs will be considerably reduced.
18. To comply with the sulphur standards, both MARPOL Annex VI and the EU Directive offer compliance alternatives to the use of low sulphur fuels, such as exhaust gas cleaning systems (scrubbers) or the switching to alternative fuels such as liquefied natural gas (LNG). An important advantage of these alternatives is that they represent cheaper options to comply with the standards. The Commission’s impact assessment on the proposal indicates that if scrubbers are assumed to be the preferred compliance strategy of ship owners, costs could be reduced by between 50% and 88% (as compared to switching to MGO).With these options, the risks of modal shift are virtually eliminated.
19. Flue gas cleaning of sulphur (scrubbing) is a technology that has proven to be very effective with industrial plants. Tests on ships have demonstrated at least 90% SO2 removal efficiency and, in some specific cases, also a significant removal of PM pollution. The use of LNG has the advantage practically eliminating SO2 emissions as well as also reducing by around 90% emissions of nitrogen oxides (NOx) and PM (among which particularly harmful black carbon particulates), Use of LNG also reduces emissions of CO2 by about 20%. The use of these alternative options will require upfront investments, but EMSA estimates that they have a very short payback time (less than a year for the examples presented in the study).
Benefits and costs of the Commission’s proposal
20. The implementation of the revised MARPOL Annex VI provisions will considerably improve the air quality in Europe. Emissions of SO2 from marine sources will be cut by more than 90% in SECAs from 2015 and by more than 75% in the rest of the European sea areas if the global sulphur cap of 0.5% is introduced on schedule in 2020. The switch to cleaner fuels will also lead to considerable reductions of PM emissions.
21. In its communication document accompanying the review of the Directive 1999/32/EC, the European Commission has estimated that the health benefits resulting from the introduction of the low-sulphur standards will range between €15 and €34 billion per annum in 2020. In comparison, the costs of implementing the new limit values range from €2.6 (with alternative emissions abatement measures) to €11 billion (following a fuel-based compliance option). Specifically for the SECA-areas – the Baltic Sea and the North Sea, including the English Channel – the costs were estimated to between €0.6 and €3.7 per annum in 2015, while the health benefits alone were estimated to amount to between €8 and €16 billion. 11
22. Even in the less favourable benefits-cost ratio scenarios, the implementation of the IMO standards will bring considerable benefits to the society. Estimates suggest that the reduced concentrations of PM alone will prevent between up to 26,000 annual premature deaths in 2020. Better air quality will also result in less respiratory and cardiac hospital admissions, amongst other benefits. Unsurprisingly, countries located near the SECAs are expected to benefit more largely from the new requirements. It should be noted that the economic benefits were calculated from the quantified health benefits only – environmental improvements, such as reduced acidification damage to ecosystems and less damage to buildings and materials were not monetised and therefore not included in the benefits assessment.
Cost-effective to reduce ship emissions
23. The costs of typical measures for reducing the emissions of SO2 from ships range from 0.5 to 4 €/kg and of NOx from 0.01 to 0.6 €/kg. 12 The measures required to further reduce emissions of the same pollutants from sources on land would generally cost even more, and in some cases much more.
24. By taking action to reduce emissions from international shipping, the EU’s health and environmental objectives could be attained at a considerably reduced cost, as compared to taking additional measures only at land-based sources. Alternatively, significantly improved health and environmental protection could be achieved at the same cost.
11 AEA Technology (2009). Cost benefit analysis to support the impact assessment accompanying the revision of Directive 1999/32/EC on the sulphur content of certain liquid fuels. Final report to the European Commission. 12 AEA Technology (2009). Op. cit. What the EU and Member States should do to ensure SO2 emission reductions from international shipping
25. Transposition of IMO standards into EU law – The MARPOL Annex VI standards that were internationally agreed and unanimously adopted by the IMO in 2008 and entered into force in 2010 have to be implemented by all Parties to the Annex in accordance with the terms of the Convention. The transposition of the standards into EU law provides an efficient enforcement mechanism and offers a clear regulatory framework ensuring the harmonised transposition of the limit values. A prompt adoption of the standards into the EU legislation and a clear commitment concerning the application of the 0.5% global standard in 2020 are now necessary to provide sufficient clarity to the shipping and refinery sector when it comes to future limits and compliance dates.
26. Fuel availability – The question of fuel availability is a crucial aspect to ensure compliance with the IMO standards on sulphur content of fuel, as ships can be exempted from compliance with the limit values where no compliant fuel is available en route. According to regulation 18 of MARPOL Annex VI, ‘each Party shall take all reasonable steps to promote the availability of fuel oils which comply with this Annex […]’. While the current EU directive sets a system of prohibition for using non-compliant fuels, there is currently no provision to ensure availability and a balanced distribution of compliant fuels. This should be corrected in the upcoming revision of the EU text. Moreover, a precedent exists in EU law for such a fuel availability provision; the Council Directive 88/210/EEC required Member States to take all the necessary measures to ensure sufficient availability of compliant fuel when unleaded petrol was introduced in Europe over 20 years ago.
27. Extension of SECAs in Europe – SECAs are currently limited to the Baltic Sea and the North Sea including the English Channel. More stringent sulphur limits where introduced first for these regions primarily due to the widespread problems of acidification in northern Europe. However, SO2 emissions contribute also to several other serious health and environmental problems all over Europe. The EU should therefore enlarge the control areas to cover all EU sea areas, or at least to follow the North American example and designate a distance-to-shore SECA along the EU coastline which is not currently covered by the SECA standards (the north-eastern Atlantic, including the Irish Sea, the Mediterranean and the Black Sea). In any case, the work to achieve these extensions should not stand in the way of early agreement on the Directive.
28. Extending and enforcing the EU standards - The 2005 revision of the EU sulphur in fuels Directive 1999/32/EC introduced a number of provisions that go beyond IMO requirements. This includes the more stringent limit value for passenger ships operating anywhere in Europe on regular service which was set at the level of the maximum sulphur limit used in SECAs (i.e. 1.5% in 2005). As the SECA limit value will be reduced to 0.1% in 2015, the current Commission proposal suggests aligning the passenger ships levels with the 0.1% SECA- standard, but with a five-year delay, i.e. only by 2020. However, no good reasons were cited for why the passenger ship limit should be delayed by five years, from 2015 to 2020. Because these ships typically navigate near densely populated areas, the passenger ship limit should be fully aligned with the SECA rule in 2015. Moreover, the scope of this rule should be extended to ensure that the passenger ship definition includes all cruise ships whether on a schedule or not, particularly as cruise ships often operate in environmentally sensitive areas.
29. Monitoring and compliance - Marine fuels have been found to contain waste substances such as used waste oils. There are also claims that bunker fuels sometimes contain other dangerous substances. The contamination of bunker fuels is a major safety concern and also another source of air pollution from sea-going ships. Moreover, control of the sulphur content of marine fuels has revealed frequent breaches of the SECA limit value. Effective monitoring and sampling of ship fuels is thus a key factor in the reduction of air pollution. Given the multiple effects and interrelationships between different fuel quality parameters, a fuel quality standard for marine fuel oil should be developed.
Towards full implementation of the MARPOL provisions, and additional measures to reduce air pollution from ships
30. The MARPOL provisions on sulphur are only one part of the equation on air emissions from shipping; there are also provisions in Annex VI on NOx emissions from ship engines. Similar to the situation with SO2, NOx emissions from the maritime sector are expected to outweigh the emissions of all EU land-based sources by 2020 if no action is taken. The health and environmental impacts of NOx emissions are also considerable, NOx being precursor to both PM and tropospheric ozone and also contributing to damage to ecosystems and biodiversity in Europe through eutrophication and acidification.
31. The 2011 revision to the sulphur directive does not include the 2008 MARPOL Annex VI amendments with regard to NOx emissions, which introduce the concept of NOx Emission Control Areas (NECAs) and impose stricter Tier III limits on NOx emission from new ship engines operating in these NECAs. In order to further reduce emissions form the maritime sector, the EU Member States should now aim at fully transposing the MARPOL Annex VI provisions (including the provisions on NOx emissions) and should consider the designation of all European sea areas as NOx emission control areas (NECAs), where stricter NOx standards should apply.
32. Due to the long life of ships (around 25-30 years) the turnover of the fleet is very slow. As the IMO’s NOx standards apply only to new ship engines, ship NOx emissions will continue to grow for another 15-20 years, unless measures are introduced to cut NOx emissions from the existing fleet of ships. Therefore, the Commission should consider regional measures for controlling NOx emissions from the existing fleet, e.g. by establishing mandatory NOx emission standards for ships entering EU ports. Moreover, economic instruments could be used to speed up the introduction of less polluting ships. Emission charges, along the lines of the Norwegian NOx tax and NOx Fund, should be introduced that are differentiated for environmental effect and apply impartially to all vessels.
October 2011 Written evidence from Brittany Ferries (SES 13)
We have pleasure in submitting the following on behalf of Brittany Ferries:
Brittany Ferries is a French company that operates 9 vessels on 5 western channel routes to France and 3 to Spain from the UK ports of Portsmouth, Poole and Plymouth. Our annual turnover is approximately £300 million and we carry approximately 2.6 million passengers and 200,000 freight vehicles each year. It is estimated that visitors to the UK account for 1.75 million bed- nights and an expenditure of £100 million.
MARPOL (the International Maritime Organisation’s Marine Pollution Convention) Annex VI came into force in May 2005 setting a global cap of 4.5% on the sulphur content of marine fuel whilst limiting it to 1.5% in certain Sulphur Emissions Control Areas (SECAs) comprising the Baltic and North Sea and the English Channel.
In 2008, the following amendments to Annex VI, specifying more stringent controls, were made: • A reduction in the global cap from 1st January 2012 to 3.5% • A further reduction to 0.5% from 1st January 2020 (subject to a feasibility study) • Within the SECAs a reduction to 1% from 1st July 2010 and then a further reduction to 0.1% from 1st January 2015.
All Brittany Ferries’ services between the UK, France and Spain fall within a SECA and are, therefore, subject to these stricter provisions of MARPOL Annex VI.
Brittany Ferries is a strong advocate of finding ways to improve the environmental performance of shipping and has invested in excess of £500 million in new ships over the past 10 years. We have embraced the progressive reduction in sulphur in our fuels, namely:
• The 2005 limit of 1.5% in SECAs as opposed to 4.5% worldwide • The 2008 limit of 1.5% for passenger ships calling into European ports • The 2011 limit of 1% in SECAs as opposed to 3.5% worldwide from 2012 • The 0.1% limit alongside when moored for over 2 hours in European ports.
Therefore, there has been an almost 80 per cent reduction of permissible sulphur content in our area of operation between 2005 and 2011 (1% vs. 4.5%). As 4.5% fuel has historically not been common in our market, the real reductions are lower; more like 1% against 2.5%. But then if you include the specific European requirement of 0.1% at berth, a net reduction of around 65 percent has been achieved in only six years.
However, we also believe that all regulations governing emissions must be sustainable with tangible environmental, social and economic benefits.
It has been demonstrated scientifically that a lowering of sulphur content to 1% has proven beneficial to society, which is why it has not been contested by us. There are, however, no studies indicating that lowering from 1.0% to 0.1% will yield any additional environmental benefits. On the other hand, we know very well that there will be massive social costs: Not only fuel costs, but also external costs from the modal back shift, such as increased levels of carbon dioxide emissions, congestion, noise pollution, accidents and infrastructural wear and tear.
THE IMPACT ON SHIPPING OF MORE STRINGENT LIMITS ON SULPHUR CONTENT IN FUEL, DUE TO REVISIONS TO ANNEX VI OF THE IMO’S MARINE POLLUTION CONVENTION (MARPOL)
1. The use of fuel with 0.1% sulphur content in 2015 will increase our fuel bill by a minimum of 60% from £65 million p.a. to £104 million p.a. This is at current prices which will inevitably increase in 2015 because of availability of suitable fuel.
2. To absorb additional costs of this magnitude passenger fares and freight rates would have to increase by 20% which will inevitably result in a fall in business.
3. Because of our longer routes, which unavoidably use more fuel, our passenger fares and freight rates are already significantly higher than those on the Dover Straits. We are, consequently, relatively more sensitive to fuel prices so these increases would make us uncompetitive, particularly as the Tunnel will not be affected by these regulations.
4. This will result, at the very least, in a reduction in frequency of services and the closure of routes and, at the worst, a cessation of business.
POSSIBLE IMPLICATIONS FOR OTHER SECTORS, SUCH AS ROAD HAULAGE
5. Employment: In the UK we employ 300 staff in the ports of Portsmouth, Poole and Plymouth and, of course, many others dependent upon us are employed by the port authorities. We estimate that as many as 1000 jobs could be lost, both in the ports and in the wider community.
6. Local economies: We estimate that our operation generates a total of £180 million in Devon, Dorset and Hampshire by purchasing fuel and stores, the cleaning of our ships, the money spent by incoming tourists, staff salaries, etc. In Portsmouth alone we pay the City Council, who own and run the port, in excess of £10 million every year which is used to support housing, welfare and the city’s infrastructure.
7. The environment: The University of Antwerp/Leuven and others have conducted studies that suggest a shift of freight traffic from sea to road by up to a 50%, particularly on ‘medium’ length routes (400-750 km). Brittany Ferries’ services between Spain and the UK are, therefore, most at risk and could cause a shift of up to 30,000 lorries on to the roads. This is very much at odds with the EU’s long-standing commitment to a modal shift from road to sea (Marco Polo, Motorways of the Sea, etc) and will have a significant detrimental effect on the environment, particularly in Kent where congestion will worsen.
8. National economy: Fuel with 0.1% sulphur content is essentially diesel so an increase in demand, with no additional refining capacity in Europe, will cause forecourt prices to rise which will directly affect leisure and business drivers, hauliers and farmers, thereby adding to inflation. It should be noted that an increase in road diesel prices due to the increased marine demand, will not in any way soften the competitive distortion stemming from the change of the marine regulation; it is the leap frog between fuel types that is the most detrimental to the marine industry. The future supply/demand imbalance, that will trigger increased diesel prices for trucks, will scarcely affect the new competitive situation; just making transport more expensive overall for the transport buyers. Moreover, as an island, the UK’s dependence on the maritime sector for vital exports and imports is necessarily greater than that of countries contained within mainland Europe. The logic is, therefore, that the adverse effects, social and economic, of too hasty a reduction in the sulphur limit to 0.1% will be more greatly felt in the UK than elsewhere, where essential goods may easily be sourced without recourse to shipping services.
STEPS WHICH THE UK GOVERNMENT COULD TAKE TO ASSIST THE MARITIME SECTOR MEET ITS OBLIGATIONS UNDER MARPOL
9. It is often said that “scrubbers” can be fitted to ships to remove the sulphur dioxide from the emissions thus enabling vessels to continue to use current heavy fuel oil and at the same time comply with MARPOL VI. However, it is not feasible to retro-fit these to most existing vessels because the equipment is bulky and heavy and would therefore sacrifice capacity. They also create stability issues, are expensive and, even though high efficiency can be demonstrated on some pilot installations, MARPOL requires 100% compliance. There is no room for any temporary disruptions. Scrubbers can, of course, be incorporated in any new ship design provided the technology becomes more reliable and the UK Government can assist in this regard by facilitating research in scrubber technology and setting standards.
10. LNG (Liquefied Natural Gas) is being mooted as the most likely alternative fuel as it has the best environmental profile. However, it is widely recognized that, as LNG is not even commonplace for new designs, the challenges of converting existing vessels are thus far insurmountable. There are still many regulatory and supply issues which are unlikely to be resolved within the next 3 years. Brittany Ferries recognises the potential that LNG offers and is presently engaged in a research and development project with the ship builder STX Europe to study the feasibility of developing this technology for future use. We believe the UK Government has a role to play in encouraging the development of a robust LNG supply infrastructure.
RECOMMENDATIONS
11. Brittany Ferries agrees with the aims of MARPOL VI and reducing sulphur levels to 0.1% but believes that it should be delayed from 2015 until the implementation of the global move to 0.5% in 2020 at the earliest.
12. Any new ships introduced after 2015 should comply with MARPOL VI.
13. The UK government should conduct a full impact assessment and review of the IMO decision. There are unintended consequences of the decision that require urgent reconsideration so that more appropriate solutions, such as those we ourselves have outlined above, can be agreed and applied.
14. In particular, the UK government should assess the cost/benefit balance between the current 1.0% regime in the SECA and the debated 0.1% regime in the SECA from 2015. The often quoted health benefits come from lowering the globally permissible levels from 4.5% to 0.5%, not from any future marginal differences in Northern Europe, since reductions of 65% have already been enforced there, with industry acceptance, between 2006 and 2011.
15. The UK government should support and work towards bringing forward the 2018 feasibility study (already mandated within the revised MARPOL Annex VI) to 2012/13 and should support the proposal that the remit of that study be expanded to include an impact assessment on the consequences of the reduction in fuel within SECAs to 0.1% from 2015.
October 2011
Written evidence from the Confederation of Paper Industries (CPI) (SES 14)
Implementation of IMO and EU regulations on sulphur emissions by ships
We write to share the views of the pulp & paper industry with regard to the revision of the sulphur content of marine fuel directive 2005/33/EC.
The Confederation of Paper Industries (CPI) is the trade association for the paper industry in the UK and has within its membership paper manufacturers, corrugated packaging manufacturers and mill- owned and independent recovered paper merchants and exporters. The sector continues to be a major manufacturer and employer, producing slightly less than 5,000,000 tonnes of paper each year in the UK, manufactured by more than 50 paper mills, with around 20,000 people directly employed by the sector.
Our Association welcomed the amendment to the sulphur directive introducing requirements for lower sulphur fuels globally through IMO (International Maritime Organisation); this is part of our commitment to contribute to a further reduction of sulphur emissions. The requirement to reduce the sulphur limits to 0.1% in the North European Sulphur Emissions Controlled Area[1] (SECA) from 2015 remains however highly controversial. We actively contributed to the consultation on the revision to the directive through the pulp & paper sector European Trade Association, CEPI
We want to emphasize once more that the introduction of more stringent requirements in the North European SECA as decided within IMO is unacceptable from an economic point of view[2] but also from an environmental point of view because of the expected modal shift back to road freight transport with the accompanying higher green-house gas emissions. The foreseen modal back shift, which was clearly identified in the recent German impact assessment study[3], would not be in line with the wider EU objectives for a greener economy and sustainable growth supported by a larger share of short sea shipping in the transport and logistics chains.
From an economic point of view the new requirements will lead to a substantial cost increase for companies based in the countries bordering the SECA which will seriously threaten the competitiveness of European companies. We kindly ask you to look carefully into the various impact assessments in order that the most cost efficient ways to improve the environmental performance of shipping while maintaining its competitiveness may be found.
The attached documents and references give more detail but specifically:
• Lowering ships emissions form 3.5% to 1 % costs 600 euros per tonne SO2 removed whilst going from 1% to 0.1% is prohibitely expensive at 10,900 euros per tonne SO2 removed • Lowering to 0.1% sulphur in SECA means using diesel which is significantly more expensive • Short sea freight rates would need to rise by 20-30% which cannot be done without losing clients • Transport buyers will avoid the cost increase by using land based alternatives • Envirnmental benfits will be marginal with increased CO2 emissions and higher sulphur emissions induced by higher imports • RoRo and RoPAX fleet affected in SECA would cost 19B Euros to replace and is not feasible until at least 2020 • It will take many years and large investments to have scrubber technology ready for mass production
[1] Baltic Sea, North Sea and English Channel area, which are boarded by 13 EU Member States. [2] Study To Review Assessments Undertaken Of The Revised MARPOL Annex VI Regulations, ENTEC, July 2010; Consequences of the IMO’s new marine fuel sulphur regulations, Swedish Maritime Administration, April 2009; Analysis of the Consequences of Low Sulphur Fuel Requirements, ITMMA and TML, January 2010; Sulphur content in ships bunker fuel in 2015- A study on the impacts of the new IMO regulations on transportation costs, The Centre for Maritime Studies, 2009. [3] Reducing the sulphur content of shipping fuels further to 0.1 % in the North Sea and Baltic Sea in 2015: Consequences for shipping in this shipping area - Institut für Seeverkehrswirtschaft and Logistik Institute of Shipping Economics and Logistics, Bremen, September 2010 • Likewise for LNG (liquified natural gas) ready for mass implementation (cannot be done on the existing fleet)
Several options have been identified by various stakeholders, such as a change of the sulphur limit to 0.5% from 2015 instead of 0.1%, the postponement of the implementation or a revocation of the Baltic Sea, North Sea and English Channel area as a SECA. The preferred and most sustainable option is 0.5% from 2015; however postponement of the implementation of the 0.1% limit beyond 2020 (instead of 2015) could be also envisaged. The proposed feasibility study supported by parties to MARPOL Annex VI might help identify the preferable option. Such a study should assess the future price development and availability of compliant fuel in existing ECA’s and the likely economic and environmental impact of the 0.1% requirement.
At the same time, technologies that lead to reduction of sulphur emissions should be further developed as a priority – together with a boost to low sulphur supply. It is essential that the Member States and the Commission support environmental technology investments for retrofitting and new building. We also want to highlight that it remains highly complex and costly to reach the requirements solely with new technologies. The costs of such abatement equipment are substantial and the related investments require time. The application of many compensatory measures raises serious questions on feasibility, cost-effectiveness and also on compliance with existing EU state-aid and competition rules. Moreover, the existing uncertainty in legislation and technical requirements will prevent companies from investing before 2015. All these issues need to be assessed properly.
More time is needed in order for European industry to realise the most cost effective ways to improve the environmental performance of shipping while maintaining its competitiveness. The Pulp & Paper Sector advocates the implementation of the 0.1% requirement between 2020 and 2025 or reconsider the maximum sulphur content in 2015 avoiding an explicit distortion of the EU single market. This would allow industry time to develop and exploit technologies that lead to reduction of sulphur emissions more cost efficiently and leads to a better environmental outcome for the total transport chain and allows for a process that gives all the stakeholders confidence in the investments they will need to make in support of commonly shared objectives and priorities.
We thank you for taking these views into consideration and remain at your disposal should you require more information.
The following attached documents and references add detail and support this view:
CEPI Communication Paper – Marine Sulphur CEPI Position Paper – Marine Sulphur
Appendix 1 - CEPI Communication Paper – Marine Sulphur
Sulphur content of marine fuel, IMO decision and revision of EU Directive on the sulphur content of marine fuels
Communication paper
1. Industry and shippers support emissions reduction objectives and progress in the environmental field. Industry welcomes the amendment introducing requirements for lower sulphur fuels globally through IMO; this is part of its commitment to contribute to a further reduction of sulphur emissions.
2. The IMO decision to impose a 0.1% sulphur limit by 2015 targets the Baltic Sea, the North Sea and the English Channel while the rest of the world will have a 3.5% limit. Shipping’s airborne emissions are regulated in Annex VI in MARPOL 73/78 (International Convention for the Prevention of Pollution from Ships). On 9 October 2008 the International Maritime Organisation adopted more restrictive limit values for sulphur in marine fuel. The new IMO regulations mean that the limit value for sulphur in the SECA (Sulphur Emissions Control Area) will be finally lowered to 0.1% by weight in 2015 and globally to 0.5% by weight in the year 2020 or, depending on fuel supply, at the latest by the year 2025. At present, the maximum permitted sulphur content in marine fuel is 4.5% by weight - 3.5% in 2012 - while within the SECA the limit value of 1.0% by weight is applicable.
3. The IMO decision on much stricter and very low limits for sulphur content in marine fuel in the SECA will however have an overall negative impact on the environment. The IMO decision means that the limit value for sulphur in the SECA is finally lowered to 0.1% by weight in 2015. It will lead to a substantial modal shift back to road freight transport because of dramatic shipping cost increases, leading to higher green-house gas emissions. Without modal shift, monetised benefits might be greater than costs for Europe as a whole. However, modal shift may reverse the situation in that total external costs may in fact increase.
4. There is evidence of a modal back shift. The introduction of more stringent requirements in the North European SECA as decided within IMO is counter-productive and unacceptable from an environmental point of view because of the expected modal shift back to road freight transport with the accompanying higher greenhouse gas emissions. Regarding Germany, the basic volume at risk of a shift to road transport in 2015 would be around 2.7 million trailers. The foreseen modal back shift would not be in line with the wider EU objectives for a greener economy and sustainable growth supported by a larger share of short sea shipping in the transport and logistics chains.
5. The IMO decision induces high cost increases that will substantially impact shippers and distort supply chains. The IMO decision - which has not been supported by any impact assessment analysis beforehand - will increase dramatically shipping costs between 30% and 45%, will distort competition, trade flows and internal market and disturb substantially supply chain management. This will affect shipping companies, as well as ports, which will lose handling volumes and therefore income and jobs.
6. Low sulphur fuel at competitive price won’t be available. A cost increase in a range of 50 to 80% - €155-310 per metric tonne of fuel - is expected for marine fuel. The 0.1% target can only be achieved through the use of petroleum distillates, and no longer by the use of the traditional heavy fuel oil. The production of distillates is much more complex and expensive. An increased demand will make the price of these fuels surge, well beyond heavy fuel oil prices. Total compliance costs assuming fuel switching only have been estimated to be between €3.0 and 3.6 billion in 2015. Availability of low sulphur fuels at competitive price should be secured as a priority.
7. The IMO decision concerns more countries / industry sectors than people usually think. The companies based in 13 countries - Finland, Sweden, Norway, Baltic States, Poland, Germany, Denmark, the Netherlands, Belgium, United Kingdom and France - will be directly affected. All industry sectors using maritime transport in the SECA will be impacted. Through the supply chains, the whole EU economy will have to bear the additional costs.
8. The IMO decision will further distort the competition with companies operating outside the EU. The IMO decision will increase dramatically shipping costs and will distort competition – within the EU but also with extra-European competitors.
9. Several alternative options exist to address the problem of sulphur emissions. Several options have been identified by various stakeholders, such as a change of the sulphur limit to 0.5% from 2015 instead of 0.1%, the postponement of the implementation or a revocation of the Baltic Sea, North Sea and English Channel area as a SECA. The proposed feasibility study supported by parties to MARPOL Annex VI might help identify the preferable option from a competitiveness and sustainability point of view. Such a study should assess the future price development and availability of compliant fuel in existing ECA’s and the likely economic and environmental impact of the 0,1% requirement.
10. The extension of the IMO decision to the whole Europe would not solve the problem, on the contrary. Extending the low sulphur fuel area to the whole Europe would be a non-sense as European seas cannot be compared with each other. The extension of the SECA would inevitably lead to a more dramatic scarcity of low sulphur fuels and much higher prices. The harmonisation of the sulphur content level should only be considered in the long- term.
11. The availability of technical solutions within a short to medium term to help shippers coping with this stricter limit is questionable. The use of abatements technologies to deliver at least the same environmental performance as low sulphur fuels should be allowed on a long-term basis. There are however a number of uncertainties related to the availability and reliability of such technologies which are expected to limit any significant take up by 2015.
12. The investments required to equip the ships and to increase 0.1% sulphur fuel availability are substantial and need long-term planning, provided that there is no uncertainty in terms of legislation. The costs of such abatement equipment are substantial and the related investments require time. The existing uncertainty in legislation and technical requirements will prevent companies from investing before 2015.
13. The IMO decision has to be amended and a coordinated approach between the EU Member States is required to do it. The EU Member States acting within the IMO should first co-ordinate their action within the Union resulting in the member states acting in concert in the IMO.
14. The EU Commission has to show some flexibility when revising the EU Directive on the sulphur content of marine fuels. Within the EU, a proposal is being drawn up to align the applicable EU legislation - the marine fuel sulphur directive (2005/33/EC1) - in the environmental area with the IMO decision concerning lower sulphur content in marine fuels. The EU Commission should postpone the review of the directive in order to allow IMO members to debate and review the requirements as of 2015 in view of the impact assessments indicating negative environmental consequences and distortion of competition within the EU and with third countries. The revision of the EU marine fuel directive should be considered with some form of flexibility with the aim to lower sulphur emissions from shipping but in a way which is sustainable. This would allow for a process that gives all the stakeholders confidence in the investments they will need to make in support of commonly shared objectives and priorities.
15. Alleviatory measures and solutions to minimise the compliance costs need to be identified, analysed and their developments supported. Technologies that lead to reduction of sulphur emissions should be further developed as a priority – together with a boost to low sulphur supply. The procedure to approve new technologies should be clarified and speeded up by the EU Commission. Environmental technology investments for retrofitting and new building should be supported. It remains however very complex to reach the requirements solely with new technologies: the application of many compensatory measures raises serious questions on feasibility, cost- effectiveness and also on compliance with existing EU state-aid and competition rules. All these issues need to be assessed properly and without losing time.
For more detailed information: - Sulphur content in ships bunker fuel in 2015- A study on the impacts of the new IMO regulations on transportation costs, The Centre for Maritime Studies, 2009; - Consequences of the IMO’s new marine fuel sulphur regulations, Swedish Maritime Administration, April 2009; - Analysis of the Consequences of Low Sulphur Fuel Requirements, ITMMA and TML, January 2010; - Study To Review Assessments Undertaken Of The Revised MARPOL Annex VI Regulations, ENTEC, July 2010; - Reducing the sulphur content of shipping fuels further to 0.1 % in the North Sea and Baltic Sea in 2015: Consequences for shipping in this shipping area - Institut für Seeverkehrswirtschaft and Logistik Institute of Shipping Economics and Logistics, Bremen, September 2010.
17 March 2011
For more information, please contact: Bernard Lombard, Trade & Competitiveness Director, CEPI – [email protected]
1 This is the revised version of the original Directive 1999/32/EC. Appendix 2 - CEPI Position Paper – Marine Sulphur
Marine Fuel Lowering sea transport emissions requires pragmatism and flexibility
The European paper industry welcomes the International Maritime Organisation (IMO) efforts to address the problem of air pollution from maritime transport at global level by lowering sulphur emissions.
It is however of the opinion that the introduction of more stringent requirements in terms of sulphur limit for marine fuels in the North European SECA (Sulphur Emission Control Area) within so tight a time schedule is not only unacceptable from an economic point of view but even counterproductive from an environmental point of view.
The IMO decision has not been actually supported by any ex-ante sustainability impact assessment analysis and any consultation of the stakeholders, including industry and shippers, beforehand. The paper industry, like most of the economic sectors in Europe, will be significantly affected and particularly the mills based in the 13 countries bordering the SECA: Finland, Sweden, Norway, the Baltic States, Poland, Germany, Denmark, the Netherlands, Belgium, and to some extent United Kingdom and France.
From an economic point of view, this decision will lead to a substantial cost increase for companies who are established in the affected EU countries, but also, will put them at a competitive disadvantage versus companies located in third countries like the US, Brazil or China. Shipping costs are actually expected to increase in a range of 20 to 45 %, further to a 50 to 80% price increase of marine fuel2. As far as the paper industry is concerned, it will lead to a price increase of the products of up to 10 €/tonne. These rules will, as trade barriers do, disturb substantially supply chain management and trade flows.
Simultaneously, the environmental benefit induced by the higher maritime transport costs will be extremely limited or even negative because of the expected modal shift 3 back to road and the higher greenhouse gas emissions.
CEPI is therefore calling for a thorough impact assessment of the IMO decision. Further to this assessment, an alternative solution aiming at achieving emissions cuts, while limiting market distortions to a minimum and avoiding a modal back shift has to be identified at IMO level. A coordinated approach between the EU Member States and with the EU institutions is required. Several options have been identified by various stakeholders, such as a change of the sulphur limit to 0.5% from 2015 instead of 0.1%, the postponement of the implementation or a revocation of the Baltic Sea, North Sea and English Channel area as a SECA. The preferred and most sustainable option is 0.5% from 2015; however postponement of the implementation of the 0.1% limit beyond 2020 (instead of 2015) could be also envisaged. For the paper industry, the availability of low sulphur fuel at competitive price is crucial.
2 ENTEC “Study To Review Assessments Undertaken Of The Revised MARPOL Annex VI Regulations”, July 2010. It compiles the findings of all the main impact assessment studies carried out to date. 3 Institute of Shipping Economics and Logistics’ study “Die Weitere Reduzierung des Schwefelgehalts in Schiffsbrennstoffen auf 0,1% in Nord- und Ostsee im Jahr 2015: folgen für die Schifffahrt in diesem fahrtgebiet“, September 2010.
At EU level, the revision of the marine fuel sulphur directive (2005/33/EC4) should be carried out with pragmatism and flexibility, especially in terms of timing. It should aim at lower sulphur emissions but once again in a sustainable and cost-efficient way for industry and shippers. It should lead neither to modal back shift and higher greenhouse gas emissions, nor to further competition distortion within the EU Single Market or vis-à-vis non- EU countries.
Efforts to increase low sulphur fuel supply and develop cleaner technologies should be considered as a top priority if the sulphur emissions from maritime transport are to be reduced significantly in the near future. Combined with solutions to minimise any compliance costs, it is the only way to deliver real environmental benefit at an affordable cost.
Background information
Shipping’s airborne emissions are regulated in MARPOL 73/78 Annex VI (International Convention for the Prevention of Pollution from Ships). In April 2008, the IMO adopted more restrictive limit values for sulphur in marine fuel, which were confirmed on 9th October 2008. The new regulations mean that the limit value for sulphur in the Baltic Sea, the North Sea and the English Channel (so called Sulphur Emission Control Area [SECA]) is lowered to 0.1% by weight in 2015. IMO also adopted a global limit of 0.5% in the year 2020 or, depending on fuel supply, at the latest by 2025. At present, there is no level playing field as the maximum permitted sulphur content in marine fuel is 4.5% worldwide while within the SECA the limit value of 1.0% is applicable, down from 1.5% since 1st of July 2010.
An overview of availability of low-sulphur fuel on the international market shall, nevertheless, be carried out in 2018. If it is then demonstrated that the supply of the fuel is too limited, the limit of 0.5% by weight will be deferred to 2025.
Within the EU, a proposal is being drawn up to align the applicable EU legislation in the environmental area with e.g. the decision concerning lower sulphur content in marine fuels that was adopted within the IMO in October 2008.
November 2010
The European pulp and paper industry key figures:
It is composed of 700 companies and 1,000 mills It has a turnover of 71 billion Euros and a value added of 15 billion Euros It employs some 230,000 people directly and provides indirect employment to 1.8 million people It produces some 89 million tonnes of paper and 12 million tonnes of market pulp It represents 25% of the world production It exports 15 million tonnes of paper, around 17% of its production Some 72% of the paper and board consumed is recycled It is part of the Forest-Based Industries, which has a turnover of 375 billion euros, i.e. 6.5% of the European manufacturing industry’s turnover
4 This is the revised version of the original Directive 1999/32/EC. Written evidence from Clean Air in London (CAL) (SES 15)
1. The Transport Committee has invited written evidence on the implementation of the International Maritime Organisation (IMO) and European Union (EU) regulations on sulphur emissions by ships with a view to holding an evidence session in October. Further details can be seen at:
http://www.parliament.uk/business/committees/committees-a-z/commons-select/transport- committee/news/sulpher-new-inquiry/
2. Clean Air in London (CAL) is pleased to respond to this call for evidence. CAL is a not for profit organisation with a mission that includes campaigning to achieve urgently and sustainably at least World Health Organisation (WHO) guidelines for air quality throughout London.
3. CAL is independent of any government funding, has cross-party support and many supporters, both individuals in London and organisations. CAL provides a channel for both public concern and expert opinion on air pollution in London. This document provides both general and expert comments in response to the consultation. Further details can be seen at:
http://www.cleanairinlondon.org/
4. EU governments – including the UK Government – called for emission reductions at source when the ambient air quality and cleaner air for Europe directive was adopted. This is actually documented in an Annex to the air quality directive. This can be downloaded from the link below (see second last page). It would be hypocritical of the UK government to say ‘we cannot do anything locally because it is all background pollution’ and at the same time oppose one of the very directives that could help to bring down background pollution. Similarly, it would show the Mayor of London of London in his ‘true colours’ if he is not making similar protestations to those of CAL given his oft repeated excuse that London’s air pollution problems are caused in significant part by background and/or ‘transboundary’ air pollution.
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:152:0001:0044:EN:PDF
Mayor of London claims shipping makes a ‘critical contribution’ to breaches of air quality laws
5. London has the worst air pollution in the UK and some of the worst in Europe. The Mayor of London stated on page 21 of his Air Quality Strategy dated December 2010:
“Sources such as aviation, rail, shipping and industrial sites do not constitute a significant portion of London-wide emissions to air, but they can make a critical contribution to local air pollution hotspots.” [CAL emphasis]
6. If the Mayor is correct, this means that shipping in one of four sources of air pollution in London that could be responsible for triggering – where road traffic is already a problem (e.g. Marylebone Road) – unlimited lump sum and daily fines for breaches of EU air quality laws.
7. CAL considers that the Mayor is likely to be understating rather that overstating the impact on London of harmful emissions from shipping and Thames River-traffic.
8. Harmful emissions from shipping are on the rise – while land-based emissions slowly reduce – even though ship-based mitigation measures are relatively cheap compared to other measures.
9. Please refer to Volumes 1 and 2 of Defra’s Air Quality Strategy published in 2007. The diagram in paragraph 124 on page 43 of Volume 1 identified shipping measures as having huge net present value benefits (with the lower end of the range still significantly positive) compared to any other mitigation measures other than Euro engine emissions standards (which showed negative net
present value at the lower end of the range). Further detail is included in Volume 2: page 180 shows annual net present value results of shipping measures through the IMO of £245m to £576m and 576,000 to 1,100,000 life years saved (2010 – 2109); and page 207 refers to the Air Quality Expert Group’s main recommendations including “Given the significant influence of transport emissions, measures which reduced the use of road vehicles, shipping and aircraft would be highly beneficial”.
Volume 1
http://www.defra.gov.uk/publications/files/pb12654-air-quality-strategy-vol1-070712.pdf
Volume 2
http://archive.defra.gov.uk/environment/quality/air/airquality/strategy/documents/air- qualitystrategy-vol2.pdf
Health impacts of air pollution in London
10. Using the same language used for alcoholism, obesity and smoking, the best estimate is that 4,267 deaths in London in 2008 were attributable to long-term exposure to anthropogenic and non- anthropogenic fine particles (PM2.5) at an average loss of life for these people of 11.5 years.
11. Following the clarifications in COMEAP’s (Committee on the Medical Effects of Air Pollutants) ground breaking and excellent recent (2010) report on how to express the mortality effects of air pollution, CAL proposes new phrasing to improve the communication of public health risks in general and air pollution in particular. In essence, the estimate of 4,267 deaths in London in 2008 attributable to long-term exposure to PM2.5 at an average loss of life of 11.5 years is calculated after eliminating the effect of dozens of other possible risk factors (e.g. educational status as a surrogate for income and smoking) to produce a pure number assuming air pollution is the sole cause of those deaths.
12. The estimate of 4,267 extra or excess deaths is a good one for comparing the effects of air pollution with the effects of other causes such as alcohol, active or passive smoking, obesity, diet etc which are including air pollution, almost certainly air pollution played some part in shortening the life of a much larger number of individuals in London. It is not possible to estimate that number reliably but given that much of the impact of air pollution on mortality is linked to cardiovascular deaths, it is more reasonable to consider that air pollution may have contributed to all 15,800 deaths due to cardiovascular causes in London [in 2009] (i.e. one in three of all deaths) at an average additional loss of life for these people of some three years (at typical ages for cardiovascular deaths e.g. 15% of which are before age 65).
13. Nitrogen dioxide (NO2) is not just a molecule as the Government would like us to believe. World Health Organisation (WHO) guidelines and UK and European legal standards have always addressed exposures and health effects of individual pollutants or indicators (such as PM10 mass, an indicator of a complex pollution mixture with multiple sources). Achieving guideline concentrations for individual pollutants, such as NO2, may therefore bring health benefits that exceed those anticipated on the basis of estimates of a single pollutant’s toxicity. London has the highest annual mean concentrations of NO2 of any capital city in the EU27. NO2 limit values and deadlines must be complied with in full.
14. Scientific research published since the Environmental Audit Committee’s last inquiry into air quality has shown that those living near roads travelled by 10,000 or more vehicles per day on average could be responsible for some 15-30 per cent of all new cases of asthma in children; and of COPD (chronic obstructive pulmonary disease) and CHD (coronary heart disease) in
adults 65 years of age and older. The same study further estimated that, on average for all 10 cities studied, 15-30 per cent of exacerbations of asthma in children, acute worsening of COPD and acute CHD problems are attributable to air pollution. This burden is substantially larger than previous estimates of exacerbations of chronic diseases, since it has been ignored so far that air pollution may cause the underlying disease as well. Related research indicates that associations of asthma with traffic-related pollution from nearby sources at schools were independent of estimated effects of exposures at homes. CAL has found 1,148 schools in London within 150 metres of such roads and a total of 2,270 within 400 metres.
15. Action must be taken urgently to protect those near living or attending school near the busiest roads. The Government must launch within weeks a massive campaign to build public understanding of the dangers of air pollution with advice on how people can protect themselves (i.e. adaptation) and reduce air pollution for themselves and others (i.e. mitigation).
16. We need the Government and Mayor Johnson to play their part in tackling an invisible public health crisis with as many early deaths attributable to air pollution in London in 2008 as we thought occurred during the Great Smog in 1952 (i.e. 4,267 compared to 4,075). This action must ensure full compliance with air quality laws throughout the UK.
Legal situation
17. The MARPOL Annex VI standards were internationally agreed and unanimously adopted by the IMO in 2008. By law they have to be implemented by all parties to the Annex in accordance with the terms of the Convention. The transposition of the standards into EU law would provide an efficient enforcement mechanism and offers a clear regulatory framework ensuring harmonised transposition of the limit values. A prompt adoption of the standards into EU legislation and a clear commitment concerning the application of the 0.5% global standard in 2020 are now necessary to provide sufficient clarity to the shipping and refinery sector when it comes to future limits and compliance dates.
Recommendations
18. Key action to reduce shipping emissions needs to include the UK supporting:
i. the IMO’s 2008 adopted revised MARPOL Annex VI i.e. 0.1% sulphur in Sulphur Emission Control Areas (SECAs) from 2015; and 0.5% sulphur globally form 2020;
ii. the European Commission’s proposal on the revision of sulphur-in-fuels directive i.e. same standards as above plus a 0.1% passenger ship standard from 2020;
iii. improvements in the European Commission proposal e.g. a passenger ship standard to apply from 2015 and be extended to cover also cruise ships and an extension of SECAs to cover all EU sea areas etc.;
iv. shore-side electricity (already in several European and American ports e.g. Port of Gothenburg);
v. London ports joining – if they have not already done so – good initiatives, such as the Clean North Sea Shipping (CNSS) project and the Clean Shipping Index (CSI); and
vi. the designation of all European sea areas as NOx (i.e. oxides of nitrogen) emission control areas (NECAs) where stricter NOx emission standards would apply. This should extend to the European Commission considering regional measures for controlling NOx emissions from the existing fleet as it will take 30 years for the MARPOL provisions to
take full effect and in the meantime the harmful effects of shipping NOx will continue to grow.
19. In CAL’s view, the first priority should be support for the European Commission’s proposal on the revision of the sulphur-in-fuels directive, in particular the 0.1% sulphur limit in SECAs as of 2015 and the 0.5% sulphur limit in 2020.
20. In this regard, CAL urges you to note statements by the Commission in 2008 when the air quality directive was adopted. In essence it said that emission reduction at source is important and that the Commission will adopt a number of laws that should help cities and ‘non-attainment areas’ in meeting the standards.
21. Here are some excerpts from the text of the European Commission’s declaration:
i. “The Commission takes note of the text adopted by the Council and the European Parliament for the Directive on ambient air quality and cleaner air for Europe. In particular, the Commission notes the importance attributed by the European Parliament and the Member States in Article 22(4) and recital 16 to Community measures for the abatement of air pollutant emissions at source.”
ii. “— in 2008 the Commission foresees new legislative proposals that would: — address the sulphur content of fuels including marine fuels,”
iii. “— The Commission also continues to push for substantial emissions reductions from ships at the International Maritime Organisation and it is committed to bringing forward proposals for Community measures should the IMO fail to deliver sufficiently ambitious proposals as foreseen in 2008.”
This can all be found in the official journal of the European Union on the last two pages of the original version of the air quality directive, which is behind this link:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:152:0001:0044:EN:PDF
Close
22. Clean Air in London would welcome the opportunity to give oral evidence to The Transport Committee on the situation in London regarding air pollution at ‘hotspots’ and the health impact of air pollution.
October 2011
Written evidence from P&O Ferries Holdings Ltd (SES 16)
P&O Ferries Holdings Ltd is the UK’s largest ferry operator with a fleet of 25 passenger and freight ro-ro vessels, the widest choice of routes and the most frequent service to the Continent and Ireland for tourist and freight passengers. The company has an annual turnover of £600 million, employs up to 4,000 staff and carries approximately 9 million passengers each year.
P&O Ferries operates services between Dover-Calais, Hull-Zeebrugge and Hull- Rotterdam. The company also offers freight only sailings between Tilbury- Zeebrugge, Teesport-Zeebrugge and Teesport-Rotterdam. Across the Irish Sea, the company operates services between Liverpool-Dublin, Larne-Cairnryan and Larne- Troon.
P&O Ferries is a Terminal operator of Port Services at Hull, Dover, Liverpool, and owns the ports of Cairnryan and Larne. Additionally, P&O Ferries is a Terminal operator on the Continent at Rotterdam, Zeebrugge, Calais and Dublin.
P&O Ferries supports the majority of provisions of MARPOL Annex VI aimed at reducing sulphur emissions from shipping for environmental and health reasons. However, there are significant challenges for short sea shipping and ferry operators. I summarise the main concerns below :
• The economic impact will be massive – increasing the cost of bunker fuel by, probably 70%-87% for ships operating in Emission Control Areas (ECAs). The change of fuel from a sulphur content of 2.7% on Dover-Calais in 2004 to the sulphur content of 1% in 2011 has been an iterative process which has cost a premia of approx USD 60 per tonne on heavy fuel oil. However, the proposed change from 1.0% to 0.1% sulphur content in marine fuel in 2015 is a step change requiring a move from residual heavy fuel oil and burn much lighter distillate marine gas oil. This will be a cost premia of +70%, cUSD 420 per tonne. This will mean, from 2015, up to £3.6bn additional annual cost for shipping within 200 miles of the UK.
• Social Impact due to reduced shipping activity in ECAs, affecting both the ports and shipping sectors causing job losses.
• Environmental Impact due to the closure of longer ferry routes and price increases in those remaining ferry routes, which will encourage a shift to less environmentally friendly road travel. This “modal backshift” from sea to road will create “environmental pinch points” in port approaches of short sea ferry routes and in approaches to the shortest fixed link eg Channel Tunnel.
• Fuel Availability Impact due to the uncertainty about there being sufficient low sulphur fuel to meet the 2015 and proposed 2020 regulatory deadlines.
• Distortion of Competition Impact. The European Commission proposal in the revised EU Sulphur Directive of 2011 introduces 0.1% sulphur content in marine fuel from 2020 for passenger ships in non ECA waters sailing between EU ports. This is an extra layer of legislation over and above Marpol Annex VI and should
be resisted by the UK Government. The competition between cargo vessels of less than 12 passengers versus passenger ships, by differentiation more than 12 passengers, will mean the passenger ships take the +70% extra cost whereas cargo ships are permitted to burn 3.5% sulphur content in fuel until 2020 (2025). This cost differential in ECA waters on the UK East coast versus non ECA waters on the UK West coast will have a huge impact and distort traffic flows to and from UK ports because of the massive imbalance of costs.
THE IMPACT ON SHIPPING OF MORE STRINGENT LIMITS ON SULPHUR CONTENT IN FUEL, DUE TO REVISIONS TO ANNEX VI OF THE IMO’S MARINE POLLUTION CONVENTION (MARPOL)
1. P & O Ferries fully acknowledges the need to reduce emissions of Sulphur Oxide (SOX) from shipping for environmental and health reasons and supports the provisions of MARPOL Annex VI, with one notable exception.
Within these regulations pertaining to low sulphur fuel in Emission Control Areas (ECAs), there is a requirement to introduce the use of 0.1% Sulphur Content in Marine Fuels from 1st January 2015 for all ships operating within ECAs. P&O Ferries cannot support the introduction of 0.1% Sulphur content in marine fuels from 1st January 2015 in ECAs.
2. There are only two ECAs in place in Europe, covering the Baltic Sea and the North Sea/English Channel indicated in the map attached at Annex 1. ECAS were put in place with the agreement of the Member States whose shores bound the Baltic and North Sea/English Channel area when environmental criteria were met. Unfortunately, there was no impact assessment carried out by IMO or the Member States within the Baltic and North Sea/English Channel ECAs to assess the consequences of creating these ECAs. Shipowners and their Associations brought this to the attention of IMO and the Member States whose shores bound the ECAs. Impact assessments were carried out by the Member States of Sweden, Finland, and by the Shipowner Associations of UK, Germany and the European Community.1 The over-riding concern is that the application as from 2015 of the 0.1% sulphur content fuel in the ECAs will cause a modal shift from sea to land transportation, which in turn will result in a sharp increase in external impacts such as congestion, noise, accidents and in negative environmental/health consequences. These impact assessments and studies made by or for Member States and by the Universities of Antwerp/Leuven come to the conclusion that the application of the 0.1 % in 2015 will result in up to 50% modal shift from transport by sea to transport by road on some routes.
3. The impact on short sea shipping and passenger/cargo ferries operating in the Baltic and North Sea ECAs will be significant. The longer routes within ECAs will come under severe economic cost pressures once the 0.1% Sulphur requirement is introduced in 2015. Short Sea Shipping and ferry operators will need to consider passing these extra costs on to their customers through
1 Source : Websites of Member States Sweden, Finland and Shipowner Associations of UK, Germany and European Community Shipowners Association (ECSA).
increased prices or, if this cannot be achieved, in reducing the frequency of their services and closing non economic routes. The resulting job losses from the shipping sector will put more pressure on the European communities involved in such shipping activities. Within the UK, short sea and ferry services on the longer North Sea Routes from Rosyth, Newcastle, Teesport, Hull and Harwich are particularly exposed to these job losses. Many of these areas are already suffering from high unemployment due to the ongoing recession over the last three years, and further job losses will hit these communities hard.
POSSIBLE IMPLICATIONS FOR OTHER SECTORS, SUCH AS ROAD HAULAGE
4. There are a range of ‘unintended consequences’ which affect other sectors such as the road haulage sector. This sector works with very small margins of 1–2% profit, if any at all, and will not be able to sustain the short sea shipping and ferry operators raising their prices to cross into the Baltic Sea or the North Sea/English Channel ECA. Faced with higher rates for shipment, the haulage industry will travel longer distances over land to reach short sea crossings such as Dover – Calais or the Channel Tunnel.
5. Another sector which will feel the implications are the ports, such as Rosyth, Newcastle, Teesport, Hull, Killingholme, Harwich, London, Newhaven, Portsmouth, Southampton, Poole and Plymouth, which serve short sea shipping and passenger/freight services in ECAS. Faced with a reduction of the frequency of shipping services or the closure of short sea shipping and ferry routes in their ports, there will be further job losses in the ports sector.
6. A further implication for the communities close to short sea routes, due to the closure of these longer routes within ECAs, will be an adverse local environmental impact. This will be due to the shift of freight from sea to the less environmentally efficient road transport. This “modal backshift” from sea to road will create “environmental pinch points” in port approaches of short sea ferry routes and in approaches to the shortest fixed link eg Channel Tunnel.
STEPS WHICH THE UK GOVERNMENT COULD TAKE TO ASSIST THE MARITIME SECTOR MEET ITS OBLIGATIONS UNDER MARPOL
7. There are a number of ways in which the Government could assist the Maritime Sector to meet its obligations under MARPOL Annex VI and thereby reduce the impact on the industry and those other sectors similarly affected. There are three options which the maritime sector can utilise to meet these obligations which are listed below :
• Use fuel with a sulphur content which complies with Marpol Annex VI such as 0.1% sulphur fuel in ECAs from 2015.
• Use fuel with a sulphur content which is above that specified by Marpol Annex VI such as 2.4% sulphur, in combination with abatement technology such as scrubbers fitted within the ship, so that the sulphur emissions to air comply with the sulphur requirements of 0.1% for ECAs in 2015.
• Use an alternative fuel such as Liquefied Natural Gas (LNG) which meets the 0.1% sulphur content requirements in ECAs from 2015.
8. Fuel Availability. Firstly, it is not clear that there will be sufficient fuel available to meet the sulphur requirements within MARPOL Annex VI which are as follows:
• 3.5% Sulphur fuel globally in 2012
• 0.1% Sulphur Fuel within ECAs in 2015 and
• 0.5% Sulphur fuel globally in 2020 or alternatively in 2025.
The heavy fuel oil produced in the majority of Arabian countries has a sulphur content in excess of the global level of 3.5% sulphur.which will be reduced from 4.5% sulphur in 2012. This means low sulphur fuel of, say, 0.1% will need to be blended with the heavy fuel oil so that the 3.5% sulphur requirement will be met. This means there will be less 0.1% sulphur fuel available in 2015 to meet the sulphur requirements in ECAs.2 There is a provision within Marpol Annex VI to carry out a feasibility study in 2018 to assess whether there will be sufficient fuel oil available, which should be brought forward to 2012 or 2013.
The recent conflict in Libya resulted in the production of oil in Libya being reduced by 1 million barrels per day in March 2011. This interruption to a small proportion of approx 2% of the world’s supply of oil was sufficient to strengthen the price of oil globally which rose to circa USD 120 per barrel.
Various cost estimates place the premia for 0.1% sulphur fuel above the current 1.0% sulphur fuel in ECAs of between 70–87% extra cost. Assuming a 70% cost differential, the vessel operating costs in the North Sea sector will increase by approx 27%, and in the Short Sea sector will increase by approx 23% for P&O Ferries. The total increase in vessel operating costs in both of these sectors will, for P&O Ferries in total, be circa £60 million per annum. This will change routes which today are marginal, to be heavily loss making routes. This is completely unsustainable, with job losses inevitable.
9. Alternative Technology. Secondly, in terms of alternative technologies the use of Scrubbers is considered by the maritime sector to be a useful option, but much more time is needed to make it fully reliable, capable of continuous operation without crew intervention, and able to meet the compliance requirements of 0.1% Sulphur emissions within ECAs. There is a particular, technical challenge on multi-engine installations such as those fitted on board passenger ferries when up to eight separate scrubbers may be needed to fit to propulsion machinery of four main engines and the generating machinery of four generators.
2 Source : Colin Bird of Purvin & Gertz, International Energy Consultants at Interferry Conference, Barcelona, 5th October 2011.
Only a handful of Shipping Companies namely DFDS, Carnival and P&O Ferries have fitted scrubbers to their vessels to pioneer full scale trials prior to the date when scrubbers will be economically viable, namely the 2015 deadline. DFDS fitted one large scrubber of 20 megawatts to TOR FICARIA in 2009, Carnival fitted one single scrubber to a cruise ship, SCHIEDAM. My own company, P&O Ferries, fitted the full machinery plant of four main engines and four generators with a total of eight sea water scrubbers on board our Ro-Ro Passenger Ferry PRIDE OF KENT in 2003, during an extensive ship conversion programme. The scrubbers fitted were from a Canadian company. Unfortunately, the main engine scrubbers were not successful and were de-commissioned. The best scrubbing efficiency which could be achieved on the four generators was 55% sulphur reduction. The design criteria was 98% sulphur reduction so that by using 2.7% sulphur fuel which was permissible, and the normal sulphur level in heavy fuel oil on Dover – Calais in 2004, and putting the exhaust gases through the scrubbers, the emissions to air at the funnel top would be <0.1% sulphur content.
Disappointed by this lack of success, P&O Ferries then fitted a BP/Krystallon sea water scrubber to a one megawatt generator on board PRIDE OF KENT in 2005. This scrubber has been a test-bed and prototype installation on board our marine platform. The main purpose was to co-operate with the scrubber manufacturer to give them a real live test so that this innovative technology could be developed further. It has not been used for compliance as P&O Ferries have always used the appropriate level of sulphur fuel during such tests. This generator now has up to 30,000 running hours during this development and testing period of six years.
The results from this scrubber have been very significant in developing the philosophy of how to deal with the waste streams from scrubbers. These are namely the emissions to air which are continuously monitored at the funnel top, the wash water discharge back to sea monitored at ship’s side and the solid waste which is decanted and then put ashore in to a sludge tanker. Unfortunately, further assessment and development is required to make this scrubber fully reliable, capable of continuous operation without crew intervention, and able to meet the compliance requirements of 0.1% Sulphur emissions within ECAs.
10. The cost of purchasing and fitting a scrubber to a vessel is considerable and indeed, for smaller or older ships may simply not be an option because they are very heavy and need a lot of space. Additionally, in order to maintain stability, some ships would have to sacrifice cargo payload space. Normally, for amendments to IMO conventions, ‘grandfathering’ arrangements are put in place such that they only apply to new build vessels and not to existing ships which may have difficulties to achieve compliance. This has not been the case for MARPOL Annex VI resulting in some vessels having no other option than to buy the very expensive low sulphur fuels, assuming it is available, which is by no means clear.
11. Alternative fuels. The use of alternative fuels is another promising means of mitigating the cost of the sulphur regulations. LNG is the most obvious contender and the one with probably the best environmental profile, for SOX, NOX, carbon and particulate matter. However, there are a number of issues associated with LNG that are hindering a wider take-up. Whilst not an exhaustive list, these include lack of LNG bunkering facilities in the UK, lack of port LNG infrastructure, serious regulatory issues associated with re-fuelling passenger ships, methane slippage, and loss of freight stowage areas on board due to size of LNG tanks. Retrofit of LNG to existing vessels is not a sustainable solution and we conclude LNG is only suitable for new build vessels and not a viable option for existing vessels. The passenger ferry industry needs transitional arrangements such as deferred timing and/or economic relief for existing vesels. We have estimated that to convert a multi engined passenger ferry to LNG would cost circa GBP 20 million and require the vessel to be out of service for 3–6 months. This is not an acceptable solution.
We recognise that new vessels can and should incorporate innovation and new technology to spearhead the move to new technology. In this regard we are open to discuss a differentiation of the approach to be taken for new vessels as opposed to existing vessels. This type of phased approach is typical of the IMO approach.
EUROPEAN COMMISSION PROPOSALS TO IMPLEMENT THE REVISIONS TO MARPOL, AND THE UK GOVERNMENT’S STANCE ON THESE PROPOSALS
12. The Directive 1999/32/EC, amended by Directive 2005/33/EC limited the sulphur content in marine fuels and incorporated the revisions to Marpol Annex VI. The EU Directives went beyond the international instrument and imposed additional requirements in EU waters. In particular, they introduced :
• 1.5% maximum sulphur content for fuels used by all ships in the Baltic ECA from 11 August 2006 and the North Sea/English Channel ECA from 11 August 2007.
• 1.5% maximum sulphur content for fuels used by all passenger vessels on regular services between EU ports from 11 August 2006, in non-ECA waters.
• 0.1% maximum sulphur requirement for fuels used by ships at berth in all EU ports from 1 January 2010.
The Directive has been amended in 2011 and, if accepted, will require that all passenger ships, operating in Non-ECA EU waters will be required to use fuel with a sulphur content of 0.1% in 2020. The UK Government’s stance should be to not allow such “gold plating” which is additional to and in excess of the MARPOL regulations.
13. The EU proposed revisions to the Directive that apply to passenger ships in EU Non ECA waters, namely 0.1% in 2020, should not be supported by the UK Government. This proposal basically forces passenger ships in EU Non ECA waters to use the same fuel of 0.1% Sulphur content as passenger ships sailing
in EU ECA waters without having to meet the environmental scientific criteria required by ECAs.
14. Additionally, these revisions to the Directive would distort competition between Ro-Ro ships carrying < 12 passengers and Ro–Pax ships carrying > 12 passengers which are competing in the same market. This extra layer of EU legislation will undermine the business model of passenger ferries due to the differentiation of cargo ships of less than 12 passengers versus passenger ships with more than 12 passengers. Obviously the unaccompanied freight rate on the cargo ships will be much lower than on the passenger ships, causing hauliers to shift their business to the cargo ship model. This will lead to reduction of frequency of services and potentially the closure of some routes with higher costs for the passengers who will then be having to pay for the majority of the cargo space on board the few remaining passenger ships. The overall reduction in Non ECA EU waters will be well above 80% by 2020 (2025). This limited gain does not justify the additional costs entailed nor the potential modal back shift.
RECOMMENDATIONS:
1. The UK Government should exercise its right as a Member State to ensure IMO always carries out a full impact assessment, taking account of the social and economic consequences as well as the environmental impact prior to the introduction of new regulations,
2. The UK Government should insist IMO bring forward the fuel feasibility study within Marpol Annex VI planned for 2018 to 2012/2013.
3. The UK Government should ensure the European Commission do not introduce any additional requirements or “gold plating” into EU regulations.
4. The UK Government should discuss with Industry the opportunity to incorporate innovation and new technology into newbuild vessels and explore a differentiation of the approach to be taken for new vessels as opposed to existing vessels regarding compliance with sulphur limits.
5. The UK Government should insist IMO and the European Commission defer the timing of the introduction of the 0.1% Sulphur Limit in ECAs until the introduction of the global 0.5% sulphur limit in 2020, (2025).
6. The UK Government should insist the European Commission defer the timing of the introduction of the proposed revision of the Directive on the Sulphur Content of Marine Fuels until the introduction of the global 0.5% sulphur limit in 2020, (2025) and change the proposed 0.1% Sulphur Limit to 0.5% in Non ECA waters for passenger ships sailing between EU ports.
7. The UK Government should take action as a Member State to persuade the European Commission to drop the proposals that introduce “gold plating” through an additional layer of EU legislation which distorts competition between cargo ships carrying less than 12 passengers and passenger ships carrying more than 12 passengers in non ECA waters within the EU.
8. The UK Government should ensure the Department for Transport and the Maritime and Coastguard Agency work proactively in co-operation with the shipping industry and allocate funds and resources to actively engage in the research and development of abatement technology and LNG infrastructure.
SOx – Fuel Oils (emission) Sulphur Content Limits for ALL SHIPS
5 Globally GLOBAL limit Baltic SECA - SECAOx mission ontrol rea 4,5 19.5.2006 + North Sea + English Channel SECA SOx ECAs 4 EU ports and Inland waterways California 3,5 1.1.2012
3 Review 2018 2,5 Low-sulphur
Sulphur-% California fuels 2 EU: 11.8.07 MGO MARPOL: 22.11.07 30.6.2009 MARPOL: 19.5.2006 1,5 EU: 11.8.2006 N. Am. Scrubber, 1.8.2012 SECAs LNG 1 1.7.2010 California MDO 0,5 1.1.2020 30.6.2009 Greek 1.1.2015 ports EU Ports and Inlad 0.1 %: 1.1.2010 0.1 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
First commercial scrubber installation
mv Pride of Kent Ecosilencer Installation
The SECA Boundaries
Mongstad Bergen South of 62 N
East of 4 W 57.44.08 N Baltic North Sea Sea
Falmouth
East of 5 W
3
Written evidence from DFDS (SES 17)
DFDS hereby endorse the submission from the 4th of October 2011 by Maritime UK regarding the inquiry into sulphur emissions by ships.
October 2011 Written evidence from ClientEarth (SES 18)
Background
1. ClientEarth is a not-for-profit environmental law organisation. We work to protect the environment through advocacy, litigation and research. We have been working on air quality issues, in particular implementation and enforcement of the ambient air quality directive (Directive 2008/50/EC) in the UK, for over two years. ClientEarth is currently engaged in judicial review proceedings against the Secretary of State for Environment, Food and Rural Affairs for breaches of that directive.
2. ClientEarth welcomes the Commission’s proposal for a revision of Directive 1999/32/EC on the Sulphur content of Marine Fuel. We support in particular the introduction of the following standards, which are necessary to ensure alignment with standards laid down in the International Convention for the Prevention of Pollution from Ships (MARPOL):
a) A sulphur limit of 0.5% by 2020 in all waters; b) A sulphur limit of 0.1% (current 1.5%) in the Baltic Sea, the North Sea and the English Channel by 2015; c) Stricter sulphur limits for passenger ships.
3. However, the proposal does not go far enough, particularly in ensuring reductions of
emissions of nitrogen dioxide (NOx) from the shipping sector.
Contribution of shipping to poor air urban air quality
4. Sulphur dioxide pollution from ships reacts in the atmosphere to form secondary particulate matter (PM). This can be transported long distances and contribute to poor air quality in urban areas on land.
5. Directive 2008/50/EC imposes legally binding limits on levels of harmful air pollutants in ambient air. The UK, like many other EU member states, has had difficulties in
complying with the limits for particulate matter (PM10) and nitrogen dioxide (NO2). Exceedances of limit values in urban areas in the UK are often blamed on transboundary pollution transported to the UK from Europe. For example, in March and April 2011 London and the South East of England experienced pollution episodes during which
there were widespread exceedances of the daily PM10 limit value. Statements made by the Mayor of London attributed these problems to pollution blown to the UK from the
continent on an easterly wind, claiming that up to 80% of measured PM10 during those episodes was from non-local sources. According to Defra source apportionment
estimates, approximately 25% of monitored PM10 at the Marylebone Road monitoring station in 2009 was from secondary aerosol and primary long-range transport.1
1 Defra, “Update to the Air Quality Plan for the Daily Mean PM10 Limit Value for Greater London Agglomeration Zone, UK: June 2011” page 7:
Legal implications
6. Defra and the Mayor of London currently project that the daily limit value will be complied with in London in 2011. However, it is acknowledged that this projection of compliance is very marginal. The UK is currently subject to infringement action by the European Commission due to repeated breaches of the daily limit value in Greater London. This infringement action is currently on hold, but the Commission has made clear that if the daily limit value is exceeded in 2011 it will resume action against the UK and fast-track the case to the Court of Justice of the European Union (CJEU). The CJEU ultimately has the power to issue unlimited lump sum and daily fines.
7. Failure to take all measures to address transboundary sources of PM10 could lead to further exceedances of the daily limit value in London and consequently escalated infringement action by the Commission. This would cause considerable political embarrassment and ultimately serious financial loss in the event that fines were imposed by the CJEU. It would also leave the Secretary of State vulnerable to further domestic legal action by concerned individuals and groups within the UK.
Oxides of nitrogen
8. In addition to sulphur dioxide, MARPOL Annex VI contains provisions on reducing
emissions of oxides of nitrogen (NOx) from ships. NOx emissions from the shipping sector are expected to overtake emissions from all EU land-based sources by 2020 if no action is taken. However, the Commission proposal does not include the 2008 MARPOL
Annex VI amendments relating to NOx emissions. There is currently no EU legislation
which directly controls NOx emissions from ships.
9. NOx pollution has serious negative impacts on human health and the environment. NOx is a precursor to tropospheric ozone and secondary particulate matter, both of which are
harmful to human health. One form of NOx is nitrogen dioxide (NO2), which is an oxidative gas which irritates the eyes and airways, exacerbates asthmatic symptoms and is associated with short-term increases in mortality. Directive 2008/50/EC therefore
imposes limit values for ambient levels of NO2. NO2 is a particular problem for the UK and London. Currently 40 of the 43 air quality zones in the UK are in breach of limit
values for NO2. London is thought to have the worst NO2 pollution of any EU capital city.
10. The Parliament and Council should ask the Commission to come forward with measures
to address NOx from both new and existing ships as soon as possible, including
http://www.defra.gov.uk/consult/files/pm-update.pdf
mandatory Tier III standards for new ships and economic instruments, such as emission charges, for existing ships.
October 2011 Written evidence from Carnival Corporation & plc (SES 19)
1. Carnival Corporation & plc is a global cruise company and one of the largest vacation companies in the world. Our portfolio of leading cruise brands includes Carnival Cruise Lines, Holland America Line, Princess Cruises and Seabourn in North America; P&O Cruises and Cunard Line in the United Kingdom; AIDA in Germany; Costa Cruises in Southern Europe; Iberocruceros in Spain; and P&O Cruises in Australia.
2. Headquartered in Miami, Florida, U.S.A. and London, England, Carnival operates a fleet of 101 ships, with another 10 ships scheduled for delivery between now and March 2016. With approximately 200,000 guests beds and 70,000 shipboard employees, there are more than 270,000 people sailing aboard the Carnival fleet at any given time. Last year Carnival carried over 9 million passengers. Carnival’s stock is dually listed on both the New York Stock Exchange and on the London Stock Exchange under symbol CCL. Carnival is the only company in the world to be included in both the S&P 500 index in the United States and the FTSE 100 index in the United Kingdom.
3. Noting that the Transport Committee has invited written evidence on the implementation of IMO and EU regulations on sulphur emissions by ships I would like to advise you that Carnival fully supports the points made by the Maritime UK submission, and would add the following additional supporting comments:
The impact on shipping of more stringent limits on sulphur content in fuel, due to revisions to Annex VI of the IMO’s Marine Pollution Convention (Marpol)
4. The overall impact on Carnival of using 0.1% low sulphur fuel inside the four existing emission control areas (ECAs)1 in 2015 has been estimated to equate to an increased annual cost of between $185 and $205 million based upon Jan 2011 costs and itineraries. Approximately 10% of our total fuel is currently used in the North Sea and Baltic ECAs. If we are to assume that the earlier date of 2020 is agreed for the lowering of the global sulphur cap to 0.5% then we can expect the per annum impact to be significantly higher thereafter. We are currently reviewing our operations to look at ways to mitigate these impacts. This includes the fitting of scrubbers, alternative fuels, relocating vessels from 2015 and other means.
5. We fully endorse the comments made in paragraphs 8 and 9 of the maritime UK submission related to scrubbers. With a single installation (where there is the room and stability margin) costing somewhere between $13 and $20 million per ship and with annual running costs between $150,000 to $900,000 depending upon the type of scrubber the issue of regulatory certainty is one that needs to be resolved urgently.
Possible Implications for other sectors
6. With regards to paragraph 3 of the Maritime UK submission in addition to the possible reduction in tourism revenues if cruise ships were to move away from UK ports there would
1 Baltic Sea, North Sea & English Channel, US & Canada, US Virgin Islands of course be a significant effect on local suppliers as well as the ports. Studies carried out by the ECC2 have shown that in 2010 direct spending by the cruise industry in the UK was in the order of Euro 2.6 billion – a 6.7% increase over 2009. When looking at this on a port basis, a recent study by Associated British Ports and Marine South East entitled the Economic Impact of the Port of Southampton indicates that the average economic impact of each call to the Port of Southampton by a cruise ship is in the order of £2.5 million. In 2011 there will have been 361 cruise calls in Southampton, with some 390 plus planned for 2012.
7. It should also be noted that most of the other large European cruise embarkation ports are outside of any ECA and that specifically those with more turnround traffic than Southampton (e.g. Barcelona) are all in the Mediterranean
Steps which the UK Government could take to assist the maritime sector meet its obligations under Marpol.
8. The comments contained in paragraph 11 of the Maritime UK submissions and the supplemental information from the European Cruise Council related to sulphur averaging is fully endorsed and supported. Carnival is actively involved in the work that is being undertaken by the ECC and its sister organisation the Cruise lines International Association (CLIA) in this regard.
European Commission proposals to implement the revisions to Marpol, and the UK Government’s stance on these proposals
9. We believe that the best place to regulate shipping is at the IMO and not regionally as this allows for a level playing field for all, and that the UK should insist that the EU Sulphur Directive exactly mirrors Marpol Annex VI. It must be remembered that the revisions to Marpol Annex VI were supported by all stakeholders – including governments – only after long and hard negotiations and as a comprehensive package of measures. The Commission’s proposals significantly weaken this package by an unhappy mixture of ‘gold plating’ and non‐ inclusion of important protections to shipowners to the extent that the proposed European regulations are significantly more onerous and costly.
10. Carnival Corporation and PLC therefore asks the Select Committee to ascertain whether the government’s commitment to global (i.e. IMO) rules for the international shipping industry is ongoing and, if so, to identify not only how these international rules can be imposed at least cost but also to ensure that the subsequent EU ‘alignment’ process remains just that. October 2011
2 See: ‘Contribution of Cruise Tourism to the Economies of Europe 2011 Edition’ at www.europeancruisecouncil.com
Written evidence from the Exhaust Gas Cleaning Systems Association (EGCSA) (SES 20)
The Exhaust Gas Cleaning Systems Association was formed in 2007 to represent the marine exhaust emissions solutions industry, by providing information on technological solutions, marine emissions compliance options and to assist and support the development of rules and standards.
The current director of the EGCSA, Don Gregory, is a former sustainability and fuel technology director at BP. He was involved in setting the BP strategy for addressing emissions to air from the use of marine fuels and has been involved in the first commercial exhaust gas cleaning system installation on a P&O ferry and in the formation of SEAaT (Shipping Emissions and Trading) which has promoted the concept of emissions trading and technology solutions to reducing emissions.
The EGCSA currently represents 95% of the SOx exhaust gas treatment industry with eight members (European and North American companies). EGCSA members currently have exhaust gas cleaning systems installed an operational on 8 vessels and have orders for installations on a further 10 vessels.
The technology is mature and effective. The technology is capable of reducing emissions to lower levels than currently regulated or achievable by use of low sulphur diesel fuel.
EGCSA members are ready and capable of delivering the shipping industry demand. However the shipping industry senior leadership has been reluctant to face up to the impending regulations for emission control areas (ECA) due to enter into force on 1st January 2015. The position senior leadership in the Marine industry has taken so far, is to avoid or delay any strategic planning and or attempt to delay entry into force with various claims of modal shift, increased cost of fuel, lack of impact assessment etc. The fact is that the process of advocating the reduction of emissions of SO2 from shipping began in the early 1990s at IMO. The papers arguing for lower emissions were submitted by Scandinavian countries. Later the EU has adopted a position based upon their thematic programme to reduce emissions and improve air quality. MARPOL Annex VI was approved in 1997 and subsequently ratified and entered into force in 2005. Upon ratification MARPOL Annex VI immediately underwent a review over a period of about three years. The amendments to MARPOL Annex VI were supported by EU countries and the Commission. Ratification of the amendments to MARPOL Annex VI was unanimously accepted by all parties to the MARPOL 73/78 treaty. The time to object to the tacit approval process has now passed and the Amended MARPOL Annex VI has entered into force.
Maritime UK (MUK) At no point has MUK consulted with EGCSA. EGCSA is an organisation that is based in the UK.
EGCSA notes MUK position and has the following comments
• New regulations must be sustainable; i.e. reconcile environmental, social and economic demands. Data presented by the Commission and by EU nations at IMO and by the USA all claim health costs that far outweigh the financial cost of reducing emissions. • New regulations must take their base in science and impact assessments must be made. EGCSA would not disagree with the principles expounded by MUK. However EGCSA have not seen any impact assessment reports from MUK. A major ferry port (Dover) has benefited from ECA requirements (low sulphur fuel use in port and across the channel) and there is little doubt that further benefits would pertain from reducing emissions (sulphur oxides) further. • Shifting freight from sea to road is counter to avowed UK and EU government policy. There is no evidence that a significant shift in short sea shipping would occur with vessels becoming redundant and laid up as a result of new emissions regulations. Short sea shipping comprises many trades and goods transport, many of which simply would not conveniently shift to land based transport modes. • The UK government should conduct a full review and impact assessment of the implications of the IMO decision. The parts of the decision that will lead to unintentional consequences must be reconsidered so that more appropriate solutions can be applied. EGCSA does not agree that this would be a good use of UK Government resources. We would advocate that the UK Government seeks to support investment by ship- owners in technology to reduce emissions. Any indication of the possibility of the delay to implementation of emissions regulations will provide a further reason for ship-owners to not immediately commence planning for compliance. • The UK government should support a bringing forward of the 2018 feasibility study (already mandated within the revised Marpol Annex VI) to 2012/13 and for that study to be expanded to include an assessment of the impacts of the reduction of Sulphur in fuel to 0.1% within ECA’s from 2015. This is a repeat of the previous bullet point and if adopted by UK Government will create uncertainty and an opportunity for ship-owners to avoid planning for compliance. EGCSA does not dispute the cost of compliance by use of diesel fuel to meet the 0.1%S limit will be high. However it should be noted that Marine fuel prices have risen fivefold from 2000 to present-day, indicating how energy costs have increased due to other factors and have been absorbed into the operating costs currently faced by ship-owners or charterers. Ship-owners have avoided making strategic plans for compliance. It is EGCSA’s impression that this is due to the belief that the regulations will not be implemented or the result of inadequate information at senior ship- owner management level regarding the implications of new regulations and the options for compliance. Although EGCSA members have been attempting to introduce their technology on board ship for over three years they have been frustrated by the unwillingness of ship-owners to take up the technology. Comments by MUK such as “unproven”, “suitability for all vessels” and “not expected that a feasible technical solution will be available from 2015” are simply incorrect and misleading. They perpetuate a myth which has no foundation and which provides ship-owners with a reason to not take action in the short period (approximately 38 months) prior to the entry into force of low-sulphur regulations in ECAs. The UK has a history of using exhaust gas cleaning technology starting with Battersea Power Station on the Thames and more recently with the installation of flue gas desulphurization on the Longannet power station on the Firth of Forth in Scotland. It should be noted that he technology solution has the ability to provide a cleaner emission than currently regulated. Units have been tested and are capable of removing ultrafine particles that continue to be present even when using expensive low sulphur diesel fuel. These ultra-fine particles are associated with significant human health issues. There is no doubt that short sea shipping is a high cost activity. In some cases it struggles to be competitive with overland transport. This is often due to infrastructure and operational costs, such as high port overheads rather than simply higher energy costs. The arguments belying a modal shift are rather artificial, unsubstantiated, and at best will in effect certain portions of certain types of transport mode and certainly not the majority of short sea shipping activity. The EGCSA kindly requests the indulgence of the Parliamentary select committee on transport to have the opportunity to inform the committee of the real benefits that pertain from the adoption and implementation of marine exhaust gas cleaning technology. These include a significantly lower cost of compliance with paybacks on investment in technology being achieved within just a few months of installation and the cumulative benefits of such technology to meet currently regulated emissions requirements whilst also capable of meeting future as yet unregulated emissions requirements such as a limit on ultrafine particles and a significant climate change agent known as black carbon (shipping contributes about 5% of anthropogenic black carbon emissions. October 2011
Written evidence from Teekay Shipping (SES 21)
Teekay welcomes this opportunity to present written evidence on the on the implementation of IMO and EU regulations on sulphur emissions by ships.
Teekay Corporation provides a comprehensive set of marine services to the world’s leading oil and gas companies, helping them seamlessly link their upstream energy production to their downstream processing operations. With a fleet of 152 vessels, offices in 16 countries and approximately 6,400 seagoing and shore-based employees, Teekay transports approximately 10 percent of the world’s seaborne oil and its reputation for safety, quality and innovation has earned it a position with its customers as The Marine Midstream Company.
A summary of our main points:
• The International Maritime Organization is the appropriate body to lead regulations and rules for international shipping. The UK Government should continue to support the IMO and the shipping industry by aligning with IMO regulations. • The Government should assess the potential for unintended modal shift encouraged by future low sulphur regulations. • To support compliance with MARPOL Annex VI sulphur reductions, the Government should conduct a review of fuel availability prior to 2015 and encourage the refining industry to ensure adequate supplies of low sulphur fuel. • Governments should continue to promote sulphur reductions in global residual bunker fuel supplies. • The market for exhaust gas cleaning systems (scrubbers) requires further development and is an important option for vessels to meet future low sulphur limits. • Governments should be promoting cold ironing options since this reduces emissions near populated areas where emissions have the greatest health impacts.
1. Roughly 90% of world trade is carried by the international shipping industry. To continue providing this service, the shipping industry depends on a regulatory framework that is clear and common across all port nations. The best means to achieve this is through the continued work of the International Maritime Organization to bring all member states together to adopt common standards and regulations for international shipping.
2. The sulphur reductions agreed to under MARPOL Annex VI provide certainty of future reductions in sulphur limits and associated sulphur oxide air emissions while providing common international regulations and compliance mechanisms. The UK Government should continue to support and align their regulations with the IMO and MARPOL Annex VI. To do otherwise undermines the IMO and reduces the ability of the international shipping industry to plan for and comply with stricter sulphur limits.
3. Complying with future MARPOL Annex VI sulphur limits will increase the costs of shipping. At this time, the only feasible compliance options are the operation on low sulphur fuels (low sulphur gas oil, diesel oil, or LNG) or the installation of exhaust gas scrubbers, both of which will increase operating and/or capital costs. Because of this increase cost, the cost-effectiveness of shipping may decline relative to land-based transport options. The UK Government should assess the potential for modal shift to avoid unintentionally shifting trade toward less energy efficient land transportation systems. This modal shift is unlikely to affect long-haul transport, but may occur in short- sea and domestic marine trade. Relevant research on the potential for modal shift is summarized in submissions MEPC 62/4/17 and MEPC 62/4/19 to the 62nd session of the Marine Environmental Protection Committee of the International Maritime Organization.
4. MARPOL Annex VI requires ships to use fuels with 1% sulphur content as of 2010 and 0.1% or less as of 2015 while operating in Emissions Control Areas. While supplies of 1% compliant fuel have been adequate, the requirement for 0.1% sulphur fuel along with the expected growth of Emissions Control Areas creates a significant fuel availability concern in 2015. The supply of sufficient quantities of low sulphur fuel is critical if the shipping industry is to meet Annex VI sulphur limits. Without adequate supplies of fuel, reduction requirements cannot be met. Therefore, the UK Government should conduct a review of fuel availability before 2015. The Government should also support and encourage the refining industry to make necessary investments to produce larger quantities of low sulphur fuel.
5. Meeting the current 1% fuel sulphur limit in Emissions Control Areas can be achieved by burning low sulphur residual (heavy) fuel oil. However, ships are occasionally being supplied with low sulphur marine gas (LSMGO) oil or diesel oil instead due to regional unavailability of heavy fuel oil with 1% sulphur or less. This is environmentally counter- productive as LSMGO requires more energy to produce, has lower density and thus requires more fuel consumed onboard, and has an emissions profile with higher fine particulate matter emission compared to heavy fuel oil. In general, the Government must influence the oil industry to produce residual fuel with lower sulphur content. This will reduce global average bunker fuel sulphur content and reduce global marine sulphur oxide emissions.
6. Given concerns of fuel availability starting in 2015, the shipping industry needs to have alternatives if the industry is to meet Annex VI requirements. This includes the option of using exhaust gas cleaning systems. Unfortunately, the market for exhaust gas scrubbers is under-developed, with only a few full scale pilot installations in existence within the entire industry. The Government should therefore be supporting the development and testing of exhaust gas cleaning technology through support for pilot installations and technology development.
7. The UK Government should also have a more active role in promoting “cold ironing”, especially in large ports in or near high population density areas. Cold ironing is effective at reducing emissions in and near ports where there is the greatest impact on human health. However, there are very few ports worldwide with cold ironing facilities, and none that serve large tanker vessels. The Government should investigate strategies to promote and require ports to establish cold ironing infrastructures.
October 2011