Time of reckoning for shipping as IMO sets road map to control emissions
Last week, the International Maritime Organization (IMO), the shipping industry’s global regulator, took two significant steps—one, to cut the sulphur content of fuel oil used by ships and, second, to introduce a new data collection system on fuel oil used by ships—in a clear road map to help shipping meet its environment obligations as it looks to align the industry with the global climate change goals.
Shipping’s current share of the world’s carbon dioxide (CO2) emissions is a reflection of an industry that transports almost 10 billion tonnes of cargo a year. It may be out of sight, but cargo shipping (about 70,000 ships) keeps the world economy running.
About 90% of global trade is moved by cargo ships, which are collectively responsible for about 2.2% of the world's total green house gas (GHG) emissions.
Beginning 1 January 2020, ships must use fuel oil on board with a sulphur content of no more than 0.5% m/m (mass/mass), a steep cut from the current global sulphur cap of 3.5% m/m, which has been in force since 1 January 2012. Ships can meet the requirement by using low-sulphur fuel oil.
“The reductions in sulphur oxide emissions resulting from the lower global sulphur cap are expected to have a significant beneficial impact on the environment and on human health, particularly that of people living in port cities and coastal communities, beyond the existing emission control areas,” IMO secretary general Kitack Lim said after the agency’s marine environment protection committee (MEPC) took the decision at a 24-28 October meeting in London.
In 2008, IMO set progressive stricter regulations to control emissions from ships, including sulphur oxides (SOx) and nitrous oxides (NOx).
At that time, IMO agreed a review would be done by 2018 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, completed in 2016, concluded that sufficient compliant fuel oil would be available to meet the new sulphur content limit.
The new IMO rule poses significant challenges to global oil refiners and on the economics of shipping—compliant fuel is expected to cost between 50% and 100% more than the residual fuel that most ships currently burn.
The additional cost of compliant low sulphur fuels, perhaps as much as US$50-100 billion a year globally, will give further impetus to efforts by shipowners to minimize fuel consumption. The International Chamber of Shipping (ICS), the global trade lobby for shipowners, says there is much to do between now and 2020 to ensure sufficient quantities of compliant marine fuel of the right quality will indeed be available, and that this radical switch over to cleaner fuels will be implemented smoothly, in a harmonized manner, without distorting shipping markets or having negative impacts on the movement of world trade.
The clear decision by IMO on implementation in 2020 should make it easier for shipowners to consider alternative compliance options such as fitting exhaust gas-cleaning systems or so-called scrubbers or using low sulphur fuels such as liquefied natural gas (LNG). However, overall uncertainty about future oil and gas prices—aside from the uncertainty about likely differentials between low sulphur and residual fuel in 2020—mean such decisions will not be easy.
“This major regulatory change should ensure fuel, by far, will continue to be the shipowner’s largest operating cost, providing a serious further incentive to continue reducing CO2 emissions,” ICS secretary general Peter Hinchliffe said.
On the other side, the new mandatory data collection system agreed by IMO at the London meet is intended to be the first in a three-step approach in which an analysis of the data collected would provide the basis for an objective, transparent and inclusive policy debate in MEPC. The data collected would allow a decision to be made on whether any further measures are needed to enhance energy efficiency and address GHG emissions from global shipping. Under the new requirements, ships of 5,000 gross tonnage and above must collect consumption data for each type of fuel oil they use. These ships account for approximately 85% of CO2 emissions from international shipping.
MEPC also approved a road map (2017 through to 2023) for developing a “comprehensive IMO strategy on reduction of GHG emissions from ships”, which foresees an initial CO2 reduction commitments to be agreed by 2018.
It includes a list of activities such as IMO GHG studies with relevant timelines and provides for an alignment of those new activities with the ongoing work by MEPC on the three-step approach to ship energy efficiency improvements. This alignment provides a way forward to the adoption of a revised strategy in 2023 to include short-, medium- and long-term further measures. Under the road map, and to provide long-term vision for the shipping sector, MEPC has to address a number of important questions, such as what role the global shipping sector should play in supporting the goals of the Paris agreement on climate change.
In 2011, IMO became the first global body to adopt mandatory energy-efficiency measures for an entire industry sector with a suite of technical and operational requirements for new and existing vessels that came into force in 2013. By 2025, all new ships built will be 30% more energy efficient than those built in 2014.
The data system will foster the development of a mechanism by IMO for ensuring CO2 reduction commitments are met. The global shipping industry reduced its total CO2 emissions by more than 10% between 2007 and 2012, and projections for future growth in maritime trade demand are being revised down, compared with those used in the most recent 2014 IMO GHG emissions study. The IMO road map is a significant step forward because it has the agreement of developing nations that are understandably concerned about the possible impact on the cost of maritime trade.
P. Manoj looks at trends in the shipping industry.