(1) Background: Trade and the Environment
The biggest issues of our day, and understandably so, are climate change and the environment and the two are of course intertwined. Until recently, the bulk of regulation applied to land-based operations but that has been changing. A study in Science in 1997 found that ship’s engines are amongst the world’s highest polluting combusting sources per tonne of fuel consumed. Although this was a controversial finding, it was against this background, and in response to a general increasing global concern about the affects of air pollution, that the IMO convened an International Conference on Air Pollution from ships, in
Annex VI came into force on 19 May 2005 – that being 12 months after the date on which not less than 15 states, the combined merchant fleets of which constituted not less than 50% of the world’s merchant shipping, became parties to it.
As at late last year, there were 47 countries (including the
Matters don’t stop there: there are regional initiatives (European Union) and State initiatives (e.g. California) which either have or are on the verge of setting rather tighter limits than those to be found in MARPOL Annex VI.
To put matters in perspective, over 90% of world trade moves by sea. The cost of fuel was some US$130 per tonne in 2002, increasing to about US$244 per tonne in 2005 and peaking at US$357 per tonne in the summer of 2006. According to a recent press report, one owner estimates that fuel costs have now risen to something like 4 times his crewing costs and can account for in excess of 50% of total ship operating costs. What is quite certain is that meeting the requirements for low sulphur fuel oil will push prices yet higher and therefore have an impact upon all of us, in terms of increased freight costs.
(2) The Regulations
As stated, MARPOL Annex VI came into force on 19 May 2005.
Annex VI sets a global cap of 4.5% on the sulphur content of fuel oil and provides for special “SOx Emission Control Areas” (SECA’s) to be designated with more stringent control on sulphur emissions. In these areas, the sulphur content of fuel used on board ships must not exceed 1.5%. Alternatively, ships must fit an exhaust gas cleaning system (scrubber) or use any other technological method to limit sulphur emissions.
The
(3) Amendments to MARPOL Annex VI
The Independent Tanker Industry Association, INTERTANKO, does not feel that MARPOL Annex VI goes far enough in regulating sulphur emissions and has put forward its own proposal. An article in Bunker World (February 2007) put it thus:-
“The pressure is for the IMO to prove it can provide emissions reductions. If it fails, there could be a plethora of regional and local regulations, which is the last thing the global shipping industry wants. In this context, the Independent Tanker Industry Association INTERTANKO has proposed that shipping abandon fuel oil bunkers in favour of distillates with a 1% sulphur cap. It suggests the switch could be made by 2010”.
The same article goes on to suggest that there is considerable support for INTERTANKO’s proposal, with IMO Secretary-General Efthimios Mitropoulos saying that the proposal “May be as significant a change as when ships first changed from coal to oil”.
The latest development was achieved at the 57th meeting of the Marine Environment Protection Committee of the IMO which took place at the IMO between 31 March and 4 April 2008. Unanimous agreement was reached on more stringent standards on the sulphur content in ships’ fuel. As a first matter, “Sulphur Emission Control Area” has been replaced by “Emission Control Area” (ECA) as the regulations will now apply to both SOx and NOx.
In terms of SOx emissions the key elements of the agreement are these:-
2010 - ECA limit for sulphur content in fuel oils reduced to 1.0%
2012 - Global limit reduced to 3.5%
2015 - ECA limit reduced to 0.1%
2020 - Global limit to 0.5% but a review in 2018 (with the authority to delay implementation) will determine if this is achievable.
2050 - Global limit to 0.5% irrespective of the result of the 2018 review.
As the BIMCO report on this matter states:-
“The ambitious timetable presents a considerable challenge for the industry and one which could result in significant additional fuel costs”.
The next MEPC meeting is scheduled for October 2008 and it is anticipated that this meeting will formally adopt the amended Annex VI for entry into force by 1 March 2010.
Winds of change!