Shipping’s GHG Emissions Back in the Public Eye as IMO Discusses Reduction Efforts

Date: 2017 March 22
Source: www.maasmondmaritime.com
Lee Adamson, Head of Media and Communications at IMO, this week spoke on IMO actions on shipping emissions.

Shipping’s implied mandate to reduce its greenhouse gas (GHG) emissions was back in the public eye this week, with Lee Adamson, Head of Media and Communications at the International Maritime Organization (IMO), discussing the matter in a new interview with CNN.
In the interview, Adamson highlighted a number of IMO measures for reducing shipping’s emissions, including the adoption of a mandatory data collection system for vessel fuel consumption, the 0.50 percent sulfur cap for bunkers set for 2020, as well as efforts toward design solutions for reducing ships’ carbon footprint.
Further, Adamson stressed that shipping must play a significant role in any viable global strategy for sustainable development.
While news of such IMO efforts will not come as new information to regular Ship & Bunker readers, the interview itself highlights that public attention on the role and responsibility of IMO to address shipping’s emissions is coming increasingly into the public eye.
Indeed, several industry players and experts have previously stressed that pressure is currently on shipping industry regulators to develop policies to address the sector’s carbon footprint.
As a case in point, Olaf Merk, Administrator for Ports and Shipping at International Transport Forum (ITF), speaking at the forum’s summit last year, said: “the IMO and shipping nations really have to show something considerable this year. If not, I think they will be held up to ridicule by a lot of these environmental NGOs and maybe the population at large.”

Green finance for dirty ships

Date: 11 March 2017
Source: http://www.economist.com/news/finance-and-economics/21718519-new-ways-foot-hefty-bill-making-old-ships-less-polluting-green-finance?platform=hootsuite
SHIPPING may seem like a clean form of transport. Carrying more than 90% of the world’s trade, ocean-going vessels produce just 3% of its greenhouse-gas emissions. But the industry is dirtier than that makes it sound. By burning heavy fuel oil, just 15 of the biggest ships emit more oxides of nitrogen and sulphur—gases much worse for global warming than carbon dioxide—than all the world’s cars put together. So it is no surprise that shipowners are being forced to clean up their act. But in an industry awash in overcapacity and debt, few have access to the finance they need to improve their vessels. Innovative thinking is trying to change that.

A new report from the Carbon War Room (CWR), an international NGO, and UMAS, a consultancy, highlights the threat that new environmental regulations pose to the industry. The International Maritime Organisation, the UN’s regulatory agency for shipping, has agreed to cap emissions of sulphur from 2020. Last month the European Parliament voted to include shipping in the EU’s emissions-trading scheme from 2021. Without any retrofitting of ships to meet the new rules, many firms may be forced out of business. That also imperils banks across the world, which have lent $400bn secured on smoke-spewing ships.

Tens of billions of dollars are needed to pay for upgrades to meet the new rules, according to James Mitchell at CWR. But the industry can hardly pay even its existing debts. Freight rates have collapsed owing to a slowdown in world trade since the financial crisis and to enormous overcapacity. An earnings index compiled by Clarksons, a research firm, covering the main vessel types (bulk carriers, container ships, tankers and gas transporters), touched a 25-year low in 2016. Banks do not want to throw good money after bad.

Even those that are expanding their ship-lending have seen less demand than they expected for retrofit loans. ABN AMRO, a Dutch bank, and a market leader in this business, has made less than $500m in green loans over the past five years, says Gust Biesbroeck, its head of transportation finance. The problem, he adds, is one of incentives. Ship owners, who would normally borrow for such upgrades, do not benefit from lower fuel bills. It is the firms chartering the vessels that enjoy the savings. But their contracts are not long enough to make it worthwhile to invest in green upgrades. The average retrofit has a payback time of three years, whereas 80% of ship charters are for two years or less.

Hence the interest in new green-lending structures. One, called “Save as you Sail”, comes from the Sustainable Shipping Initiative, another NGO. The idea is to share the fuel savings between the shipowner and the charterer over a longer contract, giving both an incentive to make the upgrades. Such schemes used to be thwarted by the difficulty of measuring exact fuel consumption on ships. New technologies allow more accurate readings.

Finance providers are keen to get involved. Last June the European Investment Bank announced €250m ($282m) in funding for such retrofits; it hopes other banks will follow suit with billions more. In future, the idea might be extended to greening aircraft and trains. For now these businesses do not suffer a shortage of finance. But a downturn is a matter of “when not if”, says Michel Dembinski at MUFG, a bank. Green finance could rescue many other industries sailing into a storm.

Transition to the 0.50% Global Sulphur Cap

Date: 23 June 2016
Source: http://www.marinelink.com/news/transition-sulphur-global411635.aspx

The Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) is expected to decide on the timing of the global 0.50% sulphur cap for marine fuels in October this year, based on the result of a low sulphur fuel availability study required under MARPOL Annex VI.

Regardless of whether the global 0.50% sulphur limit takes effect in 2020 or 2025, the change from the current 3.50% to a 0.50% sulphur limit is a seismic shift on an unprecedented scale in the history of refining and shipping. It seems unrealistic to expect to successfully achieve this shift overnight.
Implementation of the global 0.50% sulphur limit in 2020 outside designated emission control areas (ECAs) where the fuel sulphur limit is 0.10% would likely be more challenging than 2025 from an overall supply/demand balance standpoint . A delay to 2025 would nevertheless bring a number of transitional challenges that cannot be ignored.
Issues with an abrupt global switch from 3.50% to 0.50% sulphur bunkers:
Shifting global bunker supply from residual fuel to 0.50% sulphur fuels, which are expected to be principally distillates, cannot happen overnight.
Market disruption likely to inflate distillate prices in marine fuels market and beyond.
Weak initial compliance may set unhealthy precedent and create uneven playing field.
The shift is not a ‘flick of a switch’ process for ships.
HFO supply infrastructure may disappear and undermine adoption of abatement technology.
There are numerous challenges for global shipping associated with an overnight shift from fuels with up to 3.50% sulphur to maximum 0.50% sulphur that would likely lead to a period of significant disruption and market distortion. IBIA believes it would best serve global shipping if the IMO signatories to Annex VI were willing to consider strategies to mitigate these disruptions, while still achieving the desired environmental benefits in a realistic but nevertheless ambitious timeframe.
Options may include the following that may be considered on their own, or in combination:
Introduce the 0.50% limit only in EEZs initially, possibly region by region
Gradual introduction of the cap by ship type
Allow exemptions for ships committed to emission compliance retrofits
Confirm the issuance and acceptance of fuel oil not availability notices (FONARs) permitted under Annex VI
Allow a period of adaption and monitoring before requiring and enforcing compliance
Gradual reduction in the sulphur limit
Amend the regulation to allow effective global enforcement.

Eagle LNG Submits Formal U.S. Application for LNG Facility

Date: 1 Feb 2017
Source: 
http://shipandbunker.com/news/am/750235-eagle-lng-submits-formal-us-application-for-lng-facility?utm_source=dlvr.it&utm_medium=twitter

Eagle LNG Partners (Eagle LNG) has announced that it has filed a formal application with the U.S. Federal Energy Regulatory Commission (FERC) for authorisation to build and operate its planned natural gas liquefaction and export facilities on the St. Johns River in Jacksonville, Florida.

Eagle LNG says the Project is well positioned to support the maritime industry’s fuel demand, specifically in relation to the 2020 global 0.50 percent sulfur cap on bunkers.

“This Project will help the maritime industry meet this major transition to stricter emissions levels by producing high-quality LNG for use in marine bunkering,” said the company.

The proposed project is noted to include three liquefaction trains capable of producing up to 1.65 million gallons of LNG per day, or about 1 million tonnes each year.

This Project will help the maritime industry meet this major transition to stricter emissions levels

Eagle LNG

“The dramatic growth of natural gas supply in the United States has created abundant and affordable natural gas reserves that make LNG a competitively priced fuel alternative to diesel and heavy fuel oil. In addition, natural gas fuel has significant environmental benefits, reducing air pollution and carbon emissions,” said Dick Brown, CEO of Eagle LNG.

“If Eagle LNG receives permission from FERC to begin construction by the first quarter of 2018, we anticipate completion of the Project in 2019.”

In May, Eagle LNG announced that it had begun construction on its “state-of-the-art” LNG plant in West Jacksonville, Florida, which was said to be slated to be ready to supply LNG bunkers to Crowley Maritime Corporation (Crowely) vessels by early 2017.

In October, Eagle LNG joined SEA\LNG, a cross-industry coalition intended accelerate the adoption of LNG as marine fuel.

Carnival appeals Australian fine for breaking sulphur regs

Source: https://www.imarest.org/themarineprofessional/item/2433-carnival-appeals-australian-fine-for-breaking-sulphur-regs
Date: 27 May 2016

Australian authorities have fined cruise ship operator Carnival $15,000 (~£7,500) after one of its P&O Cruises ships, the Pacific Jewel, breached new low sulphur fuel regulations in Sydney Harbour. The operator disagreed with decision and is appealing the finding.

The New South Wales Environment Protection Authority (EPA) issued the penalty after a fuel sample taken by the ship’s crew and provided to EPA officers on 26 February had a sulphur level of 0.293%, nearly three times the 0.1% sulphur limit.

The fine is the first to be issued under the new regulations which came into force from 1 October 2015 and require cruise ships berthed in Sydney Harbour to use low sulphur fuel within one hour of berthing until one hour before departure.

EPA acting director Greg Sheehy said that the EPA had also issued an official caution to the ship’s master. He added that Carnival PLC had advised the EPA that its P&O Cruises Australia ships will start their changeover from high sulphur fuel earlier to address the problem.

“The EPA has taken a further three samples from the Pacific Jewel since the 26 February and all have complied,” he said.

Since the 1 October 2015 the EPA has inspected over 140 cruise ships, taken 78 fuel samples from engine fuel lines, inspected log books and changeover records, and also observed stack emissions.

“Figures before the regulation came into force showed that cruise ships produce around 40% of total fine particle emissions from shipping in Sydney Harbour. Therefore it’s vital that cruise ship operators adhere to the new regulation to protect Sydney’s air quality and the health of the community,” Sheehy said.

“The EPA is running an extensive compliance campaign to ensure cruise ships are complying and the inspections will continue,” he said.

The EPA has issued three official cautions to cruise ship operators, including one to Carnival for a non-compliance by one of its other P&O Cruises ships.

“We are also investigating the results of samples from some other ships which may require regulatory action,” Sheehy said.

Carnival disagreed with the NSW EPA’s penalty notice. It has called on the EPA to review the penalty notice on the basis that it failed to take into account available technical information that would have confirmed the ship had completed the changeover to low sulphur fuel within the prescribed time period.

The company maintains that Pacific Jewel’s transfer to low sulphur fuel was conducted in compliance with the new regulatory regime for Sydney Harbour and the fuel transfer was fully documented on board the ship.

The single fuel sample submitted to the EPA for testing “did not properly reflect Pacific Jewel’s successful transition to low sulfur fuel on the day in question and this has resulted in a wrong outcome,” it added. “The EPA had also not taken into account a number of other significant technical indicators that would have confirmed the ship was using low sulphur fuel.”

Carnival Australia said there needed to be confidence in the process and it was particularly concerned about the time taken for the EPA to analyse fuel samples, which in Pacific Jewel’s case had amounted to some 20 days.

In the light of this delay and in line with its commitment to regulatory compliance, Carnival Australia was now having ship fuel samples tested independently to ensure timely confirmation of the company’s adherence to the low sulphur fuel requirement.

Distillate shortage fears unfound

Date: May 18, 2016

Link: https://www.imarest.org/themarineprofessional/item/2407-distillate-shortage-fears-unfound

Fears of a distillate shortage and lack of marine fuels compatible with stricter sulphur emissions limit following the introduction of IMO’s global sulphur cap have been labelled as ‘misguided’ by a maritime consultancy.

The cap, which could come into force in either 2020 or 2045, is expected to significantly increase the demand for more expensive distillate and distillate-based products, as it effectively brings to an end the market dominance of conventional HFO as a bunker product (except for vessels fitted with exhaust gas cleaning).

“The widespread concerns about there being enough distillate may be misguided,” said Adrian Tolson, senior partner at 20|20 Marine Energy. “There is evidence to suggest the contrary, based on the refinery upgrades taking place in the Middle East and India, as well as an anticipated increase in the uptake of scrubbers as the price differential between distillates and HFO becomes even greater,” Tolson added.

The Hydrocarbon Processing Market Data Report 2016 states the Middle East will add approximately 1.5 million barrels per day of new refining capacity by 2020. Additionally, in March, India’s largest state-owned refiner Indian Oil Corp announced it had set aside $26 billion for a five to seven year investment programme to expand and upgrade its existing refineries.

“In terms of exhaust gas cleaning systems, the price of distillates will inevitably increase from today’s levels following the implementation of the global sulphur cap. This is based on an anticipated rise in crude prices over the next five years, as well as a run on demand for distillate products,” 20|20 Marine Energy states. At the same time, as refiners look to create a market for HFO, a by-product which can only realistically be used within shipping, its price will decline even further from the current lows, making investment in scrubbing technology a more viable compliance solution with short payback periods.

IMO Remains Optimistic Despite Trump Win

Date: November 15th, 2016

Link: http://maritime-executive.com/article/imo-remains-optimistic-despite-trump-win

Global efforts to cut greenhouse gas emissions will continue even after the election of climate change skeptic Donald Trump to the U.S. presidency and momentum is growing to cut ship pollution, the United Nations’ shipping agency chief said.

Trump has called global warming a hoax and has promised to quit the 2015 Paris climate agreement.

Kitack Lim, Secretary-General of the IMO, said in an interview this week: “I believe the main policy of the Paris agreement will be maintained … I am rather optimistic.”

U.N. Secretary-General Ban Ki-moon said on Tuesday action on climate change had become unstoppable.

Ban, at a meeting of 200 nations in Morocco to work out ways to implement the Paris agreement, expressed hopes that U.S. president-elect Trump would drop plans to quit a global accord aimed at weaning the world off fossil fuels.

The shipping industry, like aviation, was excluded from any target cuts under the Paris deal, which set a goal of restricting the rise in global average temperature to less than two degrees Celsius.

But last month, the U.N.’s aviation agency ICAO approved an accord to curb aviation pollution which will set voluntary targets from 2021 to 2026 and become mandatory from 2027 for states with larger aviation industries.

U.N. climate chief Patricia Espinosa said she hoped IMO parties could follow ICAO’s example towards transformational change.

Shipping now makes up around 2.2 percent of world emissions of carbon dioxide (CO2) and that share is forecast to rise dramatically if nothing is done to slow it.

The IMO says shipping is more complex than aviation as there are multiple sectors within the industry, including oil tankers and container ships.

“It is not appropriate just to compare shipping and aviation – they have their own operational features,” Lim said.

But he said the IMO had made progress and adopted regulations, which came into force in 2013, where ships built after 2025 must be at least 30 percent more energy efficient. Lim said more than 1,900 vessels had already been built to meet the standards.

In October, the IMO’s Marine Environment Protection Committee agreed that ships must record and report their fuel oil consumption, an accord that will come into force in early 2018 with data collection set to start in 2019.

The committee also set global rules to limit sulfur emissions from ships which will come in from 2020. And it established a “road map” towards the adoption of final CO2 reduction commitments in 2023.

Environmental campaigners see this approach as too slow. But Lim said the IMO’s action on sulfur emissions last month showed it can deliver.

“It is not important whether we say we can make it in two or three years,” Lim said. “What is more important is that we can establish a concrete plan which is not too far from now and how to implement that.”