IMO Low-Sulfur Fuel Mandate Triggers Mixed Reaction
The International Maritime Organization’s proposals to reduce sulfur levels in marine fuels to a maximum of 0.5 percent m/m (mass/mass) by 2020 may prove to be controversial, having met with various responses from major shipping organisations and other bodies. The decision to implement the proposals by 2020 was taken by IMO, the regulatory authority for international shipping, during its Marine Environment Protection Committee (MEPC 70) meeting, which was held in London, UK in October 2016, and represents a significant reduction from the 3.5 percent m/m global limit currently in place. IMO said its decision demonstrated its clear commitment to ensure that shipping meets its environmental obligations, the Organization’s Secretary-General, Kitack Lim, said that it reflected IMO’s determination to ensure that international shipping remains the most environmentally sound mode of transportation: “The reductions in sulfur oxide emissions resulting from the lower global sulfur cap are expected to have a significant beneficial impact on the environment and on human health, particularly on that of people living in port cities and coastal communities beyond the existing emission control areas,” he said. Further work to ensure effective implementation of the 2020 global sulfur cap will continue in IMO’s Sub-Committee on Pollution Prevention and Response.
BIMCO: “Serious Concerns”
The Baltic and International Maritime Council (BIMCO), however, one of the world’s largest international shipping associations, has voiced serious concerns about some of the conclusions of the official study on which the decision of the IMO Committee to set the implementation date of the 0.5 percent global sulfur cap was made. The Council stated that the official IMO study that assessed the relevant availability of fuel oil failed to fully address IMO’s terms of reference in several critical areas, including fuel oil quality, a shortage of sulfur removal capacity in oil refineries, and a failure to model the disruption that an overnight introduction of the global cap would cause. BIMCO believes that a significant amount of the fuel oil that the IMO study concludes will be available for marine use is unsafe to store and unsafe to use on board ships, and in addition says that the means to address the shortage of refinery capacity for sulfur removal has yet to determined. It therefore concludes that it is not possible to be certain that the global refining industry will have the capacity to produce enough marine fuel by 2020. BIMCO is also concerned that the supply of fuel to other sectors of the global economy could face major disruption if these issues are not addressed beforehand. It has funded, with others, an independent supplementary study carried out by EnSys and Navigistics to assess the availability of marine fuel, the conclusion of which being that it is unlikely that there will be sufficient low-sulfur fuel available for marine purposes in 2020 if an uninterrupted supply of fuel to all other sectors of the global economy is to be maintained. Lars Robert Pedersen, Deputy Secretary General of BIMCO, stated: “It is clear that the IMO study is flawed, meaning it is not possible to determine from the study that there would be sufficient fuel available in 2020. On that basis, our opinion is that it was irresponsible for IMO to make the decision to go for 2020 at MEPC 70. There is clearly a need for additional analysis to ensure the supply chain for global trade is not seriously disrupted and developing nations are not hit hard by a lack of affordable energy.
“This is not about the cost of low-sulfur fuel for ships – that has long been known,” Pedersen continued. “We know that the shipping industry will buy the fuel they need. But if it is in short supply, the cost will rise not just for shipping but for all users of the fuel. This will price those in poorer conomies out of the market. “It’s a complex issue – but the difficulties in ensuring sufficient refinery capacity and the disruption caused by an overnight introduction have to be thoroughly taken into account.”
The Current Position
Regulations governing sulfur oxide emissions from ships are included in Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Convention). The Annex sets progressively stricter regulations in order to control emissions from ships, including sulfur oxides (SOx) and nitrous oxides (NOx), which present major risks to both the environment and human health.
The date of 2020 was agreed by the Convention participants in amendments adopted in 2008. When those amendments were adopted, it was also agreed that a review should be undertaken by 2018 in order to assess whether sufficient compliant fuel oil would be available to meet the 2020 date. If not, the date could be deferred to 2025. The review, which concluded that sufficient compliant fuel oil would be available to meet fuel oil requirements, was completed in 2016 and submitted to MEPC 70, thus forming the basis of IMO’s decision to reduce the cap to 0.5 percent by 2020, a significant reduction on the current maximum sulfur content limit of 3.5 percent, which has been in effect since January 1, 2012. The interpretation of “fuel oil used on board” includes fuel used in main and auxiliary engines and boilers, however exemptions are provided for situations involving the safety of the ship or saving life at sea, or if a ship or its equipment is damaged.
Ships can meet the requirement either by using low-sulfur fuel oil or by using gas as a fuel, which, when ignited, emits negligible amounts of sulfur oxides, an option being adopted by an increasing number of ships. This has been recognized in the development by IMO of its International Code for Ships using Gases and other Low Flashpoint Fuels (the IGF Code), which was adopted in 2015. Another alternative fuel is methanol, which is being used on some short sea services.
Ships may also meet the SOx emission requirements by using approved equivalent methods, such as exhaust gas cleaning systems or ‘scrubbers’, which ‘clean’ the emissions before they are released into the atmosphere. In this case, the equivalent arrangement must be approved by the ship’s administration (the flag state).
The new global cap will not change the limits in SOx Emission Control Areas (ECAs) established by IMO, which has been 0.1 percent m/m since January 1, 2015. The ECAs established under MARPOL Annex VI for SOx are: the Baltic Sea area; the North Sea area; the North American area (covering designated coastal areas off the US and Canada); and the US Caribbean Sea area (around Puerto Rico and the US Virgin Islands).
Support for IMO
Contrary to BIMCO’s reaction, the IMO proposals have been welcomed by the European Community Shipowners’ Associations, its Secretary General, Patrick Verhoeven, commenting: “These important decisions demonstrate the global leadership of IMO on regulation of ship emissions. The mandatory GHG data collection system will make it possible to define what will be the contribution of international shipping to the climate goals set by COP21 in Paris last year. The adoption of an initial strategy to meet the Paris targets is already planned for 2018 and an agreement on targets and measures, including an implementation plan, will come about in 2023 once real-time data have been analyzed. It is important that IMO member states agreed that work on emission reductions and further measures will already start now, in parallel to the process of data collection and analysis. This way we do not lose time.
“It is good news that IMO took a decision on the global deadline as shipowners need certainty. Year 2020 is tomorrow however, so we have to speed up work on implementation. In particular, we have to ensure that there is quality fuel available everywhere in the world and that adequate enforcement measures are in place to ensure a global level playing field”, he added.
“Today’s decision on the roadmap for developing a comprehensive IMO strategy on reduction of GHG emissions is a logical follow-up to technical and operational measures taken earlier such as the Energy Efficiency Design Index (EEDI) and Ship Energy Efficiency Management Plan (SEEMP) adopted in 2011 to ensure that ships will be more CO2 efficient in the future,” he concluded.
Multi-industry coalition SEA\LNG also welcomed the proposals, saying it “applauded” the action taken by the IMO at the MPEC 70 meeting and that “certainty of the regulatory regime going forward is important for the maritime industry.”
The organization’s Chairman, Peter Keller, stated: “In light of MEPC 70’s approval of the global sulfur cap in 2020, there is now new impetus to resolve the structural and commercial obstacles hindering the widespread adoption of LNG as marine fuel. We expect increased and significant investments across the shipping value chain as a result of this decision and the certainty it provides. LNG is an economic, clean and safe marine fuel with increasing global availability, offering shipowners a real opportunity to improve the environmental performance of the industry.”
SEA\LNG also stated that for those with concerns about the availability of low-sulfur fuel, the LNG sector is well prepared and will be able to meet the future emissions limits required by IMO.