From 1 January 2020 the new sulphur regulations came into force affecting sea transportation globally. These regulations compel both vessels and the owners thereof to ensure that their vessels burn fuel with a sulphur content of no more than 0,5%. This is down from the previous content amount of 3,5%. These regulations are aimed primarily at reducing air pollution, protecting the health of humans and the environment.
These regulations have placed an enormous burden on the maritime industry to ensure compliance and in response the International Maritime Organisation (IMO) has issued a set of guidelines to facilitate and assist the maritime industry in realising these new regulations pertaining to sulphur content in fuel.
On the one hand shipping is considered the driving force of the global economy and approximately 90% of trade takes place by sea. On the other hand, it is one of the planet’s most environmentally damaging industries. One of the biggest contributions to environmental pollution comes from sulphur emissions of vessels at sea.
Vessels emit large quantities of pollution into the air, which has been on the rise and presents an existential threat to human and environmental health. This seems to be the case specifically along shipping routes. Sulphur oxide (SOx) is emitted from the vessel’s combustion engine and combines with nitrogen dioxide (NOx) in the atmosphere, which leads to acid rain. This leads to respiratory and cardiovascular diseases in addition to harming the environment by poisoning forests and oceans.
The International Convention for the Prevention of Pollution from Ships (MARPOL) is ‘the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. … [A] protocol was adopted to amend the [MARPOL] Convention and a new Annex VI was added which [came] into force on 19 May 2005’ (www.imo.org, accessed 27-8-2020). It set limits on SOx and NOx emissions from ships; prohibits deliberate emissions of ozone depleting substances and designated emission control areas; and it sets more stringent standards for SOx, NOx and similar matter. Emission control areas are specific areas in which the IMO has set more stringent standards concerning SOx, NOx and particular matter.
Annex VI of the MARPOL Convention contains the regulations for the prevention of air pollution from ships. Regulation 14 deals with SOx and contains the sulphur content limitation of any fuel oil used on board ships. According to Ivana Surian the cap has been amended twice since 2005 with the most recent amendment coming into effect on 1 January 2020 placing a cap on sulphur content of bunker oil to 0,5% (www.lexisnexis.co.za, accessed 27-8-2020). Regulation 14(1) now reads ‘the sulphur content of fuel oil used or carried for use on board a ship shall not exceed 0.50% m/m’. Essentially this means that all ships will be required to burn fuel with a sulphur content of no more than 0,5%. The latest amendment has also altered the position of vessels operating within emission control areas and has reduced the sulphur content of fuel for these areas to 0,1%. Regulation 14(4) now reads ‘while a ship is operating within an emission control area, the sulphur content of fuel oil used on board that ship shall not exceed 0.10% m/m’ (www.imo.org, 27-8-2020).
According to the website Transport and Environment, the IMO MARPOL Annex VI has also prioritised the reducing of NOx emissions, ‘with NOx emissions from new ships to be cut by 16 – 22% as from 2011 and by 80% (only in [NOx Emission Control Areas] (NECAs)) from 2016/2021 compared to 2000 levels’. Whereas the ship fuel sulphur cap applies to the entire fleet, the NOx cap only applies to new ships and ‘the strictest limit, called Tier III, currently only applies to new ships sailing in designated areas around North America from 2016’ (www.transportenvironment.org, 27-8-2020). There have been attempts from as early as 2007 to have NOx included in the Baltic Sea, North Sea and English Channel NECAs, but delays in studies and the adoption by countries have hampered this. After considerable negotiations a compromise was reached whereby the start date of each new NECA will in future be decided on an individual basis. The stricter Tier III NOx standards will apply to new ships built after 2021 only while sailing in the North Sea, Baltic Sea and English Channel.
‘Since the IMO Tier III NOx regulation only applies to new ships … when sailing in NECAs, additional measures are needed in Europe to address NOx emissions from the existing fleet’ (www.transportenvironment.org, 27-8-2020). A levy on NOx emissions with revenues aimed at funding the implementation of NOx abatement technologies is suggested to be the most favourable option to achieve emission reductions of up to 70%.
There are measures available to significantly protect air quality from ships. These measures include:
Vessels are not allowed to carry non-compliant fuel oil unless they have been fitted with a scrubber or equivalent as provided in terms of reg 4 of Annex VI to MARPOL, which provides that ‘equivalents’ may be fitted onto vessels as long as they are effective in reducing sulphur emissions as the required low sulphur fuel.
The compliance and enforcement of the new regulations pertaining to sulphur will require co-operation by various governments and national authorities of member states that have ratified the MARPOL Convention and acceded to Annex VI. In response, the MARPOL Convention ‘has developed a set of guidelines for port state control which can be found under Resolution MEPC.321(74)’ (www.lexisnexis.co.za, accessed 27-8-2020). This puts pressure on states to achieve a balance between compliance with the new sulphur regulations by vessels entering their coastal waters and avoiding unnecessary delays or detention of vessels.
Where there is non-compliance with the sulphur regulations the port state must take fuel samples and report the non-compliance to the flag state of the vessel. The port state may prevent the non-complying vessel from continuing on its voyage until the proper steps have been taken to ensure compliance. Sanctions may be imposed by a state party on the non-compliance vessel after taking into account all relevant circumstances and evidence available.
Taking all of this into consideration the following questions need to be asked:
Once the sulphur regulation limits are globally achieved regulators will then go after carbon emissions. However, are there many effective ways to drastically cut carbon emissions as of 2020? Many ship-owners express doubt in this regard. Moreover, is further regulation the best route to go? I submit that time after time it has been seen that more regulations do not necessarily yield the results we expected.
Another important consideration is that for decades the maritime sector operated as a waste disposal system for the oil industry. While refineries improved at producing better quality fuel for cars the lower quality bits of the barrel ended up being used as fuel for ships. The debate continues as to who is responsible for cleaning up the global maritime industry. Is it the fuel producers, the ship-owners who use the fuel, the corporations and individuals who use vessels to transport their goods or the buyers of these goods?
Then there is the question of regional responsibility. The sulphur regulations are only taking effect 12 years after an agreement on draft regulations was reached and decades after the worst effects of these emissions were realised. Some companies such as BP and Royal Dutch Shell have improved their refineries to align with legislative change and some predict their refining earnings may double during the course of 2020. Producers of lighter crudes such as the United States and Nigeria will benefit too. Certain shipping groups are expected to incur higher fuel costs. Maersk estimates that the sulphur regulations will result in a $ 2 billion rise in annual fuel costs as it makes the switch from high sulphur fuel oil to marine gas oil, which is approximately 50% more expensive. Maersk has also committed to retrofitting some ships with scrubbers amid concerns there may be a shortage of the higher specification marine gas oil (www.dw.com, accessed 11-9-2020).
According to energy consultancy Wood Mackenzie, there are scrubbers for more than 2 000 ships on order. Essentially, the majority are either choosing to or are being forced to switch to the higher end marine gas oil. This could have adverse implications as pressure mounts on suppliers of low sulphur fuels with higher demands resulting in reduction of availability for trucks and aeroplanes, which will cause prices to spike. However, the IMO says there are more than adequate supplies of low-sulphur products.
Compliance will be the biggest hurdle to ensure the aims of the regulations are met. Goldman Sachs estimates that compliance will be around 80% in 2020 but gradually rising to 95% by 2024 (see https://avantismarine.com, accessed 7-9-2020). One must keep in mind that many ports will not have the capabilities to adequately test the content of sulphur in the vessels fuel.
However, there are concerns that despite the millions that will be spent in fiat money (government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it (www.investopedia.com, accessed 11-9-2020)) on new fuels and retrofitting vessels with scrubbers and other measures mentioned above to achieve the sulphur cap as per the regulations it will do very little overall in reducing the shipping sector’s carbon footprint. Presently there is a high demand for scrubbers but questions still remain regarding their longevity. Some ports such as Singapore and the United Arab Emirates have banned this type of cleaning system.
In the private sector, ship-owners are looking at ways to reduce air pollution and emissions. Some have looked at slow-steaming, which will have the positive effect of decreasing capacity in a market where freight rates have been dropped. Companies such as Maersk are investing billions into cleaner technology development.
In May 2019 at a meeting of the IMO’s Marine Environment Protection Committee in London it was agreed to consider slow-steaming as a short term measure to speed up energy efficiency requirements for new container and cruise ships. These measures could reduce approximately 2% of CO2 emissions between 2022 and 2050, according to the International Council on Clean Transportation.
There are also mixed opinions concerning switching to low sulphur fuel. It is argued by persons like Hiroki Sato, Managing Executive Officer at JERA, that this move will not be enough. It is argued that despite the increased cost the move will only reduce CO2 levels by approximately 20%. Some advocates of clean shipping are saying companies need to be building new vessels to meet the IMO’s 2050 target.
At the time of writing this article, South Africa promised to pass new legislation in line with the new 0,5% sulphur regulation. What is clear is that the maritime industry’s carbon footprint must be drastically reduced and the IMO 2020 has prioritised the maritime industry becoming an environmentally sustainable and green industry. The result of these new regulations pertaining to sulphur content are still to be seen. However, the problem will need to be addressed in a sensible way that does not completely hamstring the industry.
Nicholaas Kade Smuts LLB (Unisa) LLM Shipping Law (UCT) is a legal practitioner in Cape Town.
This article was first published in De Rebus in 2020 (Oct) DR 22.