Enforcement - the way to cleaner shipping and a fair business

Kaare Press-Kristensen

Senior advisor on air quality

The Danish Ecological Council

Kaare@ecocouncil.dk

Illustrative numbers

Sulphur-regulation: 1% (NS+BS, since 2010).

Maersk Line had 9,690 port calls (NS+BS, 2012).

During these Maersk Line had 57 port inspections.

Number of inspections controlling sulphur:

Saving by non-compliance: 200,000 $ from 2015 (English channel to Gdansk and back).

Will everybody be in compliance next year ?

0

Two business options

Business option 1:

We can be in compliance and try to pass on the extra 200,000 $ fuel costs to the cargo owners.

Will we have success ?

Yes, if everybody else is in compliance !

Business option 2:

We can violate the regulation and outmatch ships being in compliance. Will we have success ?

Yes, if there is no efficient enforcement !

Let’s realize business option 1

Efficient enforcement is the way to cleaner shipping and a fair business - allowing ship-owners to pass on extra fuel (or scrubber) costs to cargo owners.

Efficient enforcement consists of efficient control and sanctions preventing non-compliance.

But we still haven’t seen an efficient enforcement strategy on an international level ... and 2015 is just around the corner !

Control: Online data

Measuring devices for SO2/CO2 are mandatory for all ships with scrubbers (to prove the efficiency).

Price: 40-50,000 $ - online measuring data.

Devices are sealed to avoid manipulation.

It would be very efficient control to require online SO2/CO2 measurements for all ships in SECA ... and on a global level after 2020.

Sanctions: 15 days in port

Ships violating the regulation should be taken to nearest port and detained there for 15 days.

Insurances do not cover delay costs if the delay is caused by violation of the sulphur regulation. So delay costs will be on top of port fees etc.

These sanctions (and online measurements as efficient control) would realize business option 1 ensuring cleaner shipping and a fair business.

And we are not alone …

“The Danish Shipowner’s Association fully supports a strict enforcement making everybody obey the

decided regulation and introducing a hard punishment for free-riders. On-line emission measurements and

detaining free-riders in nearest ports could be efficient enforcement tools.”

Jan Fritz Hansen, Vice President, The Danish Shipowners’ Association

Efficient enforcement is the way to cleaner shipping and a fair business allowing ship-owners to pass on all extra fuel (or scrubber) costs to cargo owners.

Efficient enforcement consists of efficient control and sanctions preventing non-compliance:

- Efficient control should be online measurements.

- Sanctions should be 15 days in nearest port.

Or in other words … Let’s maintain shipping as a fair business and reduce the environmental impact.

Conclusions

Will regulation sink all ships ?

If 0.1% S fuel, SCR and filters would double shipping costs.

What would be the price increase on wine from New Zealand ?

The price today is 10 $. The shipping costs is 0.1 $. If the price on shipping doubles the wine will cost 10.1 $.

Will I buy less wine ?

Is the regulation too strict ?

New trucks in EU have SCR & particulate filters !

Are reductions profitable ?

Yes: If health costs (externalities) > removal costs

Externalities($ per kg)

SO2 NOX PM2.5

Northern hemisphere 15 11.5 24.5

North Sea and Baltic Sea 24 14.5 47

What are the removal costs ?

http://www.ceeh.dk/CEEH_Reports/Report_3/CEEH_Scientific_Report3.pdf

Cost-benefit calculations

Northern hemisphere:

Externalities (health costs) SO2: 15 $ per kg

Removal costs (Replacing 2.7% S with 0.5% S):

(600 $ - 455 $) / 44 kg SO2 = 3.5 $ per kg

North Sea and Baltic Sea:

Externalities (health costs) SO2: 24 $ per kg

Removal costs (Replacing 1% S with 0.1% S):

(720 $ - 480 $) / 18 kg SO2 = 13.5 $/kg

Prices from bunkerworld.com, Rotterdam

The polluter pays principle

Using 1 ton bunker fuel in the Northern hemisphere emits about 54 kg SO2, 70 kg NOX and 1.5 kg PM2.5.

Total externalities without CO2: 1,650 $/ton.

Present price on bunker fuel: 455 $/ton.

If shipping companies paid for health damage from air pollution then the price of bunker fuel would be 4-5 times higher than today + CO2 pollution.

What would happen if shipping had to pay ?

Air pollution from shipping

What happens in a ship engine ?

1) Hydrocarbons (bunker fuel) are oxidized.

2) Sulphur in the bunker fuel is oxidized.

3) Free nitrogen in the air is oxidized.

Formation of four key air pollutants

1) Hydrocarbons CO2 and particles: BC/PM2.5

2) Sulphur SO2

3) Free nitrogen NOX

(Ultrafine particles, CO, PAHs, NMVOC etc.).

Adverse effects

CO2 BC/PM2.5 SO2 NOX

Direct health effects X (X) (X)

Indirect health effects X X

Acidification (land) X X

Acidification (sea) X (X) (X)

Eutrophication (sea) (X)

Global warming X X

Is the pollution significant ?

2011 data (ton) PM2.5 SO2 NOX

Northern hemisphere 250,000 1,870,000 3,355,000

North Sea and Baltic Sea 20,000 205,000 955,000

Seas around Denmark 4,000 41,000 173,000

Danish sources (land) 25,000 10,000 130,000

Shipping emits around 1 billion ton CO2 annually i.e. about 3% of the global emission.

http://www.ceeh.dk/CEEH_Reports/Report_3/CEEH_Scientific_Report3.pdf

Are the effects significant ?

2011 dataShipping on the

Northern hemisphereShipping in the North

Sea and Baltic Sea

DK Europe DK Europe

Years of lost living 5,300 490,000 4,000 150,000

Airway diseases 327,500 27,500,000 257,600 8,425,000

Sick days (B-days) 500,000 43,700,000 400,000 13,400,000

Shipping causes the same health effects in DK as the sum of all land based emissions in DK.

http://www.ceeh.dk/CEEH_Reports/Report_3/CEEH_Scientific_Report3.pdf

Are the health costs significant ?

Europe (billion $)

Total (billion $)Health costs related to air

pollution from shipping:SO2 NOX PM2.5

Northern hemisphere 28.5 38 6.5 73

North Sea and Baltic Sea 5 13.5 1 19.5

http://www.ceeh.dk/CEEH_Reports/Report_3/CEEH_Scientific_Report3.pdf

Many technical possibilities

SO2: Bunker fuel with lower S, scrubbers and LNG.

NOX: SCR, EGR, LNG and engine optimization.

PM2.5: Bunker fuel with lower S, LNG, scrubbers and particulate filters.

CO2 (SO2, NOX and PM2.5):

Fuel savings by slow steaming, larger ships, optimal design, better engines, WHR, hybrid sailing etc.

No efficient NOx regulation …

NOx causes 50% (Northern hemisphere) and 70% (North Sea and Baltic Sea) of the total health effects !

How about Sirena Seaways

Going from Esbjerg to UK since 1875.

Now the route has been stopped …

Was this route stopped due to the new sulphur regulation as claimed by some interests ?

Or was it the drop in passengers from 300,000 to 80,000 per year … as a result of many low price flights and the stop of tax-free sale …