Meeting marine fuel sulfur targets could up carbon emissions

UKSTudyMARCH 11, 2013 — A report by AMEC Environment & Infrastructure UK Limited and commissioned by the U.K. Chamber of Shipping indicates that hitting 2015 sulfur emission targets could increase carbon emissions and cause the loss of 2,000 jobs.

Although the U.K. Chamber and the shipping operators agree that there is a need to reduce sulfur emissions from shipping for both environmental and health reasons, the speed with which reduction targets must be met has been causing operators concern for some time.

The report, commissioned by the U.K. Chamber on behalf of several North Sea and Western Channel shipping operators, provides evidence on the impact of reducing sulfur from ships' emissions before the current deadline of 2015.

The report shows that among the key impacts of hitting the 2015 sulfur reduction targets would be:

  • much more freight moved by road, rather than sea – increasing carbon emissions and causing more road congestion
  • up to 2,000 jobs put at risk in maritime engineering, navigation, catering, customer services, and other areas
  • an increase of 2.8 p per liter for the cost of road diesel
  • significant increases (up to 29 percent in some cases) in the cost of passenger and container route ticket prices.

The U.K. Chamber says the root of problem lies in the cost – financial and environmental – of low-sulfur fuel. Ships have three options:

  • use low sulfur fuel - which would cost at least $300 per tonne more than the current heavy fuel oil
  • fit a sulfur "scrubber" to their ships – the report states that this technology to reduce sulfur from heavy fuel oil on board the ship itself is not yet sufficiently proven for ship owners to fit them with confidence before the 2015 targets
  • use Liquefied Natural Gas (LNG) as fuel – which the report sees as feasible for newbuild ships but not appropriate for most of the existing U.K. fleet.

For those that cannot yet use LNG, or are not willing to invest in as-yet unproven scrubber technology, the impact of the low sulfur fuel cost is huge. To cope with the major increase, operators of sea routes around the U.K. would need to increase ticket prices – by up to 20 percent for passengers and up to 29 percent for freight.

This will threaten the viability of some routes, forcing them to reduce or even shut down altogether. In turn, this would threaten more than 2,000 jobs – related to those routes – in the U.K. and Europe in maritime engineering, navigation, catering, customer services, cleaning and administration.

The impact of closing sea routes would be felt throughout the manufacturing sectors too, as the cost of moving goods will increase - making the U.K/ a less competitive and more expensive place to base internationally owned businesses.

Increased ticket prices for sea passage in turn could lead to a significant shift in the way freight is transported – a move to shorter sea passage and increased transport by road. Shipping is the lowest carbon form of mass transport, so a shift to greater road freight also has an environmental cost in terms of increased carbon emissions.

Similarly, both the refining process needed to create low sulfur fuel and the power needed to run on board sulfur scrubbers have their own cost in terms of carbon emissions.

David Balston, Director of Safety and Environment at the U.K. Chamber of Shipping, said:

"We fully support the need to reduce sulfur emissions from ships – but we are particularly concerned that many routes will become non viable and for those vessels operating on them we seek transitional arrangements, including very tight time limited exemptions to allow technology to catch up and provide a realistic alternative.

"We must protect our maritime jobs and the environment – this report shows these regulations do neither.

"The wider impact is hard to quantify – but these regulations will make the U.K. less competitive, making us a less attractive country for international investors - at the worst possible time for the U.K. economy."

The entire report can be downloaded HERE

Want more? Subscribe now!

News from NASDAQ