by EIRIK NYHUS, ABB
In 2013, ships will continue to operate in turbulent waters churned by complex regulations born of historic events. Well known examples include the Titanic, which led ultimately to the International Convention for the Safety of Life at Sea (SOLAS), the Exxon Valdez oil spill, which resulted in Oil Pollution Act (OPA 90), and the 9/11 attacks, which resulted in the International Ship and Port Facility Security Code (ISPS Code). Environmental regulations, however, have lagged behind those of other industries. This is changing.
The increased focus on environmental issues combined with the growing realization of the pollution burden of ships, has led to an upsurge of new regulations, both short and long term.
The key environmental issues are emissions and ballast water.
Regulations concerning emissions are currently focused on the following substances: sulfur oxides (SOx), nitrous oxides (NOx), particles (PM) and greenhouse gases (in particular CO2 ). The local environmental effects of these are generally well-known and include acidification and eutrophication (the ecosystem’s response to the addition of artificial or natural substances), with both having potentially severe impact on the ecosystem and negative health effects on exposed populations.
The impact is generally well understood and has, in some parts of the world (eg, EU, United States), led to strict regulation of emissions from land-based sources by port states. Internationally, the International Maritime Organization (IMO), through the International Convention for the Prevention of Pollution from Ships (MARPOL), regulates emissions. This provides both general maximum global emission levels and significantly more stringent levels applying to designated sea areas, known as Emission Control Areas (ECAs).
Prior to 2015, operators will have to make the choice of either installing technically complicated- and most likely expensive- exhaust gas cleaning systems (scrubbers), or switching to low-sulfur fuel for all ships operating in an ECA. Realistically, low sulfur fuel options will be either expensive distillates or liquefied natural gas (LNG), the latter being a practical option only for newbuilds. Starting in 2016, newbuilds operating in an ECA will face an added layer of complexity with the NOx requirements due to possible technical integration issues between SOx and NOx solutions. Finally, in 2020 or 2025 (pending an IMO decision in 2018) the 0.5 percent S global cap will enter into force, changing the economics of the decisions made in the preceding years.
Making the right technology choice is a complicated issue with inherent uncertainties that include: – Refinery distillate production volumes, availability and price locally and globally – LNG fuel price versus heavy fuel oil and distillates – Technology maturity, availability and price – Shipyards’ retrofit capacities – General technology risks – Likelihood of further ECAs – Trading patterns and anticipated time in ECAs.
Complicating the problem for decision makers are new local and regional regulatory initiatives, in addition to IMO requirements. One key example is the latest revision of EU legislation that may require ECA-style requirements in all European waters. Needless to say, this can significantly alter operators’ plans for the future.
Uncertainties notwithstanding, the international regulatory deadlines are clear and key strategic decisions need to be made. The only certainty is that all solutions are going to be costly and there is no “one size fits all” fix available.
Another important challenge to both mariners and regulators is ballast water. Ballast water discharge is currently the dominant global transfer mechanism in the introduction of alien species to new environments. Organisms carried in ballast water can cause dramatic shifts in food webs, leading to problems as varied as disease and accelerated rates of species extinction. The cost estimate of these invasions currently exceeds $100 billion each year in the United States alone.
In response, the IMO adopted the Ballast Water Management Convention, a set of regulations seeking to severely limit the number of organisms in ballast by making ballast water cleaning mandatory for all ships. If ratified, most ships in international trade will be required to have ballast water cleaning systems installed by the end of 2019.
While the market is saturated with approved systems, uncertainty remains because few have had extensive operational experience in a diversity of operating areas. This is important because system performance depends on water quality, so trading patterns may be crucial to the effectiveness of individual systems.
Complicating the matter are the individual US states which may impose ballast water cleaning standards above and beyond national and IMO standards. Several states have stated intentions to do so, but some industry leaders are hoping that American politics will result in unified US requirements that are aligned with the IMO requirements.
With systems still in their technological infancy, conventions yet to be ratified, regulatory uncertainty in the United States, and a multi-million dollar per ship price, industry uptake has been slow. But, with ratification deadlines fast approaching, several thousand ships may need significant upgrades in a very short span of time and the question on everyones mind is clear. Is the industry ready? Time will tell whether suppliers, yards and engineering support companies will meet demand when the floodgate of orders open.
Scientists generally agree that greenhouse gases are a primary cause of atmospheric warming and the international community has worked for more than 20 years to regulate the problem but, due to the complexity of allocating ownership of CO2 emissions, shipping (along with aviation) was not covered by the key pillar of these efforts, the Kyoto Protocol.
In the past decade, the IMO has committed itself to addressing CO2 emissions. This commitment was further stimulated by the European Council’s promise to develop regional CO2 control mechanisms if international regulations were not imposed by January 2012. Painstaking negotiations at the IMO led to the adoption of the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) in 2011, taking effect in January 2013.
While the EEDI and SEEMP’s increasingly strict regulations are effectively stimulating new energy efficient ideas in newbuild design and operations, Market Based Measures (MBM) negotiations at the IMO remain stifled by political differences among member nations.
In the absence of IMO progress, the EU will propose regional mechanisms for the reduction of CO2. While specific details remain unclear, three general principles are expected to be included:
1) Universal coverage of all vessels trading in Europe
2) Broadening the scope of regional requirements to effect international standards
3) A willingness to shelve EU plans if the IMO delivers
The likely implementation date of the EU’s plan will be 2017 or 2018 barring an IMO agreement.
This uncertainty makes current technical and operational decisions difficult. Addressing SOx, NOx, ballast water, CO2 and other energy efficiency requirements remains a balancing act and care must be taken so that any one technology solution does not constrain future needs. This balancing act is made more challenging by increasing fuel prices, high investment costs, potential lack of financing, and the likelihood of soft charter rates.
What is clear is that effectively navigating the treacherous waters of environmental policy will be a key commercial differentiator among shipping companies and those with the best analytic capabilities, strategic vision and implementation strategy will outperform companies that continue to do business “the way it used to be done.”
This article was written by EIRIK NYHUS, originally appeared in ABB Generations magazine and has been edited by gCaptain staff.