Measures to minimize atmospheric pollution will be made tougher for shipping worldwide in 2020. The question is, just who is going to pay for the global total estimated at a minimum of three trillion yen?
The shipping industry has a major problem on their hands when it comes to complying with atmospheric pollution regulations. The International Convention for the Prevention of Pollution from Ships (MARPOL) includes regulations on a variety of emissions involved in atmospheric pollution, including sulfur oxides (SOx). Regulations will be made much stricter in 2020, and in principle all ships will be required to reduce the maximum sulfur concentration in fuel oil from the current level of 3.5% to only 0.5%. The change reflects the fact that exhaust SOx concentration is proportional to fuel oil sulfur concentration.
Specifically, there are three possibilities: switching to a low-sulfur fuel oil, installing scrubbers on vessels to remove SOx from the exhaust, and switching to a sulfur-free fuel such as liquified natural gas (LNG).
Fuel oil prices surge on tight supply
The first approach, switching to low-sulfur fuel, is the most practical. If scrubbers are installed, it would be possible to continue using existing heavy fuel oil, but scrubbers are quite large and would reduce available cargo space, as well as being difficult to use on smaller vessels. Some sources in the industry also point out that “Global scrubber production can’t keep up with demand” (Danish shipping major Maersk) and “Scrubbers cost about 7 million dollars per ship” (German transportation major Hapag-Lloyd).
Existing vessels, unfortunately, cannot be converted to handle LNG or other alternate fuels, making the third option difficult. LNG-fueled ships would have to be newly built, and Hapag-Lloyd points out that a new LNG vessel would cost at least 25 million dollars more than a similar ship using conventional fuel. Of the 110,000 ships in service worldwide, only 209 freighters are expected to be using LNG by the beginning of 2020. Port infrastructure needed to supply such vessels with LNG is also inadequate at present.
British survey company IHS Markit forecasts that 90% or more of ships will be using low-sulfur fuel by the start of 2020 globally, and that is expected to lead to tighter supply and higher prices. The International Maritime Organization (IMO) responsible for monitoring MARPOL compliance estimates that the new regulations will result in some 30 billion dollars of additional cost annually.
The maritime shipping industry plans to spread the pain throughout the entire supply chain, including customers and consumers. Noriko Miyamoto, managing corporate officer at Nippon Yusen KK, comments “No single shipping company can handle the cost, not even the entire Japanese shipping industry. It will have to be distributed throughout the whole supply chain.”
The World Health Organization (WHO) estimates that some 7 million people died from air pollution-related causes worldwide in 2016. Tragedy of that scale is sure to drive serious discussion on who should shoulder the new MARPOL expenses.
- Switch to low-sulfur fuel ⇒ Additional 3 trillion dollars in fuel cost worldwide
- Install exhaust scrubbers ⇒ High cost, reduced cargo space
- Switch to LNG or other fuel ⇒ High cost, difficulty in retrofitting