The International Maritime Organization aims to reduce ship emissions by 2020 and 2050, causing shipping companies to weigh antipollution technologies.
Two actions by the United Nations’ International Maritime Organization (IMO) will profoundly affect shipping companies and their customers in the years and decades to come.
The first action is a much stricter limit on sulfur oxide (SOx) emissions from ship exhaust that takes effect on Jan. 1, 2020.
Ship operators can comply with the new IMO regulation by using exhaust cleaning systems called scrubbers to remove sulfur, a path few have adopted, or by burning a cleaner fuel with less sulfur.
The change is expected to cause a spike in fuel costs that carriers will pass onto shippers.
Soren Skou, CEO of A.P. Moller-Maersk, said during a speech at Singapore Maritime Week in April that the IMO action could increase annual fuel costs for the shipping industry by $50 billion to $60 billion and $10 billion for the container sector alone.
The second action came this April when the IMO’s Marine Environmental Protection Committee (MEPC) adopted a strategy to reduce greenhouse gas emissions to at least 50 percent of 2008 levels by 2050.
James Mitchell, a manager with the Rocky Mountain Institute’s shipping team, formerly known as the Carbon War Room, said 2008 was picked because it’s when ship emissions peaked. That is around the time that many carriers, in response to higher fuel prices, began slowing down their ships, thereby reducing fuel consumption.
In addition to their different timelines, the two actions have very different goals.
The sulfur oxides and particulate matter in engine exhaust are “harmful to human health, causing respiratory symptoms and lung disease,” the IMO said. It cited a 2016 study submitted to MEPC in 2016 by Finland that estimated not reducing the SOx limit for ships by 2020 would contribute to more than 570,000 additional premature deaths worldwide between 2020 and 2025.
The ban on higher sulfur fuel will “have tangible health benefits, particularly for populations living close to ports and major shipping routes,” the IMO said. The organization also noted the environmental benefits of removing SOx, since in the atmosphere it can “lead to acid rain, which can harm crops, forests and aquatic species and contribute to the acidification of the oceans.”
The IMO’s effort to reduce greenhouse gas emissions by shipping is driven by the desire for the industry to do its part to combat global warming. It parallels the much broader 2015 Paris Agreement of the U.N.’s Framework Convention on Climate Change (UNFCCC).
Looming Deadline. A large portion of the global maritime fleet uses bunker fuel, a residue of crude oil distillation, to power its engines. The sulfur contained in this fuel is released among ship’s emissions when burned.
The IMO first acted to address air pollution from ocean shipping in 1997 when it adopted Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL).
Through several revisions, Annex VI has lowered the permissible levels of emissions from ships of SOx, fine particulate matter (PM), nitrogen oxides (NOx), ozone depleting substances and volatile organic compounds, as well as controlled shipboard incinerators.
Annex VI underwent a major revision in October, resulting in “significant reductions of NOx, SOx and PM emissions around the world with extensive benefits to both human health and the environment,” said the World Shipping Council, the major trade organization for the container liner industry, which has supported the stronger standards.
Since then, Annex VI has been strengthened a number of times, both globally and by creating several more restrictive “emission control areas” (ECAs), including along the coasts of the United States and Canada and in the Caribbean, Baltic Sea and North Sea.
Currently, ships can use fuel with a sulfur content as high as 3.5 percent (as measured on a mass-on-mass basis or 35,000 parts per million) worldwide, and 0.1 percent (1,000 ppm) in the ECAs, or use scrubbers to reduce sulfur in their exhaust.
Under the rules that take effect Jan. 1, 2020, the global sulfur content limit will fall from 3.5 percent to 0.5 percent (5,000 ppm) with the stricter rules remaining in place for the ECAs.
Surabhi Sahu, bunker fuel editor at S&P Global Platts, said during a webinar last month that the vast majority of shipping companies are expected to meet the IMO requirement by using distillate fuel or blends of heavy fuel oil.
Maersk’s Skou said he favors use of cleaner fuels over the short term versus trying to equip ships with scrubbers or having to use liquefied natural gas (LNG) for fuel even though the current price difference between high-sulfur fuel oil and low-sulfur fuel is about $200 per metric ton. With the shipping industry using about 280 million metric tons of fuel, that amounts to an extra $56 billion.
If carriers resort to using distillate fuel, Esther Ng, oil editor at Platts, said the premium could be even higher — $300 per metric ton more than high-sulfur residual fuel. The International Chamber of Shipping said low-sulfur fuels typically cost about 50 percent more than residual fuel and if in 2020 oil prices remain at about $70 a barrel the difference could be $400 per metric ton.
Skou said there is a need to enforce the new IMO regulations to prevent cheats from gaining an unfair advantage. One of the actions taken by the MEPC in April was passage of an amendment to prevent ships from using or carrying on board fuel oil with a sulfur content of more than 0.5 percent.
The IMO said ships taking on fuel oil will have to obtain a bunker delivery note, which states the sulfur content of the fuel oil supplied. Samples may be taken for verification. The country where the ship is registered, or its flag state, must issue an International Air Pollution Prevention (IAPP) certificate that includes a section stating that the ship uses fuel oil with a sulfur content that does not exceed the applicable limit or uses a scrubber.
Countries through which ships pass can use what’s called “port state control” to verify that a ship is compliant with the new sulfur rules. Techniques such as air surveillance to identify potential violations are possible, but there is no established fine or sanction set by MARPOL — they are established by individual countries as either flag or port states.
Those fines can be variable.
John Butler, World Shipping Council president and CEO, who noted one the most powerful enforcement tools can be requiring ships to “debunker,” pump off hundreds or thousands of tons of fuel. That’s both expensive and time-consuming.
A survey of shipowners by Drewry released in April found 66 percent of those responding planned to use low-sulfur fuel in their existing fleet to meet the IMO requirement.
The IMO said a study it commissioned with CE Delft in 2016 concluded refiners are capable of supplying sufficient quantities of marine fuels with sulfur contents of 0.5 percent and 0.1 percent (for use in the ECAs), while also meeting demand for non-marine fuels.
Butler said a number of governments at the recent MEPC meeting indicated “they are not entirely convinced there will not be supply issues, and frankly that remains to be seen. The issues of supply are probably geographically specific — there may be tighter supply issues in some places on the globe than others.”
Supply will depend not only on how much low-sulfur fuel refiners can produce, but also the level of compliance by the shipping industry.
“You’re going to need, in our base case, at least another million barrels a day of something coming into the market to be compliant, but potentially 2 million if it’s going to be this full compliance scenario,” said Iain Mowat, a senior research analyst at the Edinburgh, Scotland-based consultants Wood Mackenzie.
“That’s going to have a big impact on prices,” he said, because “these compliant fuels are a lot more expensive than heavy, high-sulfur fuel oils.” He added the price jump from a high-sulfur bunker fuel to a low-sulfur bunker fuel made by blending residual fuel with other products could be 70 percent.
If distillate fuel is used by carriers, Mowat said the differential could be even higher.
Ship operators can comply with the new IMO regulation by using scrubbers to remove sulfur from exhaust gases or burning LNG, which does not contain sulfur, but relatively small numbers of shipowners have made capital investments to allow those changes. Only 13 percent of respondents to a Drewry survey planned to use scrubbers to meet the requirement and only 8 percent to use LNG.
The survey, which only had a few dozen participants, found 13 percent of the respondents plan to use other fuels. There are scattered attempts by shipowners to use biofuels, methanol, liquid petroleum gas and even electricity to operate their vessels.
Hapag-Lloyd estimated the cost of converting a ship to LNG at $20 million to $25 million and installing scrubbers at $7 million to $10 million.
Scrubbers. Nicholas Confuorto, president and chief operating officer of CR Ocean Engineering, a New Jersey-based manufacturer of scrubbers, said the shipping industry “just kind of put their head in the sand for many years. They waited a very long time and kind of lost their chance of getting a large number of scrubbers installed by 2020. So last year, for instance, almost no scrubbers were ordered at all.”
Confuorto, who is also chairman of the London-based Exhaust Gas Cleaning Systems Association (EGCSA), noted that scrubbers are now installed on between 300 and 400 ships, and since January, orders for an additional 300 have been awarded to various scrubber manufacturers.
A 2011 U.S. Environmental Protection Agency report said, “SOx scrubbers are capable of removing up to 95 percent of SOx from ship exhaust and by removing sulfur from the exhaust, the scrubber also removes most of the direct sulfate particulate matter, which are a large portion of the PM from ships operating on high-sulfur fuels. By reducing the SOx emissions, the scrubber also controls much of the secondary PM that is formed in the atmosphere from these emissions.”
Fine airborne particles are considered one of the most dangerous air pollutants.
Confuorto said while there have been some discussions between containership owners and scrubber manufacturers, “some of them have such large engines that the scrubber would be very large as well. This has made some of those companies wonder how they are going to fit them on a ship.”
But operators of other ship types — bulkers, tankers, roll-on/roll-off ships and ferries — are “all looking at scrubbers seriously and many of them are proceeding,” he said.
“Installing scrubbers may be an economically attractive option,” Mowat said. “Although there is an initial investment, shippers can expect a rate of return of between 20 percent and 50 percent depending on investment cost, MGO-fuel oil spread and ships’ fuel consumption. However, the penetration rate for scrubbers could be limited by a number of factors, including access to finance, scrubber manufacturing capacity and dry dock space” where the installation work would be done.
One of the leading manufacturers of scrubbers is Ecospray Technologies, which is a subsidiary of Carnival Corp., the cruise ship operator.
“They were forward-thinking. They realized this was going to happen, so they invested in a small company,” Confuorto said. “They are now building a very large company with a lot of backlog and a significant installed base.”
EGCSA explained that most scrubbers work by routing exhaust from an engine through a vessel, where it is mixed with water. There are both open-loop systems in which the wash water is returned to the sea after it is treated and closed-loop systems in which the wash water is retained in a holding tank for discharge into a treatment plant on shore.
The 2011 EPA report noted the increased acidity from the wash water must be neutralized, either through the natural alkalinity in seawater or by adding an alkaline chemical to freshwater.
Confuorto expects the majority of systems will be open-loop since they are “the lowest cost and there is really nothing wrong with the water coming out.”
The EPA report said, “Monitoring data from scrubber trials onboard ships demonstrate that wash water neutralization is generally effective, although large volumes of reaction water may be required in open systems depending on the alkalinity of the water body.”
But the EPA warned that metals and chemicals in the wash water “have the potential to contribute to an exceedance of water-quality standards on a localized scale.”
Andrew Khaw of Platts said some industry sources feel the estimated savings of $200 per metric ton for high-sulfur fuel versus low-sulfur fuel are sufficient incentive to install scrubbers. But he added the payoff is uncertain and there could be regulatory changes that would make them unattractive and the availability of high-sulfur fuel might be decreased.
He explained there is concern that Australia or some European countries might not allow ships with open-loop systems to discharge water overboard and there are no facilities to receive effluent from closed-loop systems in many ports.
LNG Ready. “There is still scrubber technology out there, but LNG addresses 100 percent of the SOx problem, essentially removing 100 percent of particulate emissions and about 90 percent of nitrous oxide, and is the safest, most readily available, the most fiscally responsible solution out there for the air-quality problem,” said Peter Keller, chairman of SEA/LNG, an industry coalition promoting adoption of LNG as a marine fuel.
Keller is an executive vice president with Jones Act shipping company TOTE, which operates LNG-fueled ships to Puerto Rico and is in the process of converting its Alaska ships to run on LNG.
The 0.1 percent cap on the sulfur content of fuel used in ECAs went into effect in 2015, a standard even more restrictive than the 0.5 percent global cap that will take effect in 2020. That “caused those of us who operate in the ECAs to be first movers,” Keller said.
Another earlier adopter of LNG is the cruise industry.
While it pioneered the use of scrubbers, Carnival Corp. has now contracted for seven cruise ships to be powered by LNG for its Aida, Costa, P&O and Carnival brands. MSC, Disney and Royal Caribbean also have ordered cruise ships that will use LNG.
According to SEA\LNG, as of early May there were 119 ships using LNG as bunker fuel and another 125 on order. In addition, there are 114 ships using conventional fuel that are “LNG ready” or can be switched to use LNG.
Keller noted shipowners in a variety of shipping sectors are now ordering ships that will use LNG as fuel.
In March, construction began on two ships that will be operated by Siem Car Carriers to carry Volkswagen automobiles to North America from Europe. PAO Sovcomflot and AET, part of Malaysia’s MISC Group, have ordered tankers that will be powered with LNG. CMA CGM said in November that it has ordered nine 22,000-TEU containerships that will use LNG.
United Arab Shipping Co., now a part of Hapag-Lloyd, as well as MOL and Matson Navigation, are among the container carriers that have ordered “LNG-ready” ships. South Korea’s Polaris Shipping has ordered 18 ore carriers that are LNG ready.
IMO’s 2050 Vision. In MEPC’s strategy to reduce total greenhouse gas emissions in ocean shipping by at least 50 percent of 2008 levels by 2050, it also said the energy-efficiency design index (EEDI) for new ships should be strengthened and the industry should pursue efforts for a 70 percent reduction in CO2 emissions.
The EEDIs should help the industry part of the way toward that goal. They set a minimum energy-efficiency level per capacity mile for different ship types and sizes, and those are tightened every five years. For example, a 30 percent reduction is mandated for years 2025 to 2030, when compared to the average efficiency for ships built between 2000 and 2010.
Butler said the strategy document stated that in order to achieve its goals, “technological innovation and the global introduction of alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. That’s where the hard work begins.”
Bryan Wood-Thomas, vice president of environmental policy at the World Shipping Council, said, “We believe very focused research and development in the maritime sector, specifically on marine propulsion fuels, is simply going to be critical if we expect to make these kinds of advances in the sector in the coming years.
“I don’t think we can expect it to just organically happen that developments in other energy fields will just migrate and scale over to maritime applications, absent a focused development effort,” Wood-Thomas said.
Butler said international shipping, in which vessels travel long distances between fueling stations, “require power that is energy dense. And we need to make sure it’s safe.”
The IMO strategy was adopted nearly unanimously, with the United States, Saudi Arabia and Brazil expressing reservations. That was not a surprise for many given President Trump’s statement last year that the U.S. will withdraw from the Paris Agreement unless it identifies suitable terms for re-engagement.
The United States said it objected to a section of the document that stated the strategy should be cognizant of the “principle of common but differentiated responsibilities and respective capabilities, in the light of different national circumstances, enshrined in the UNFCCC, its Kyoto Protocol and the Paris Agreement.”
Indeed, that provision in the MEPC seems to contradict another guiding principle mentioned in the document: “non-discrimination and no more favorable treatment, enshrined in MARPOL and other IMO conventions.”
The United States said the strategy “must apply equally to all ships operating internationally, regardless of flag.” It is common, of course, for shipowners in some of the richest countries to register their ships in some of the poorest and for their ships to trade all over the world.
The U.S. said establishing an absolute reduction target was premature and complained that “states were not allowed to lead the process.”
Butler disagreed with that characterization, adding, “This was a member state-driven exercise.”
Mitchell of the Rocky Mountain Institute said to meet the IMO’s greenhouse gas goals will probably require not only the development of low-carbon fuels but changes in how ships are operated and better designs and more efficient technology.
EEDIs will help push the industry toward coming up with ever more efficient vessel designs, and there are a wide variety of operational steps that can be taken to make ships more efficient, Mitchell said.
These include things such as route optimization, improving trim by adjusting ballast, “weather routing” to avoid storms, cleaning hulls or further slowing ships or increasing the size of vessels.
Other shipowners are experimenting with equipment such as “Flettner rotors,” rotating cylindrical sails that use a phenomenon called the Magnus effect to assist with propulsion, and systems that produce bubbles under the hull to eliminate friction.
In terms of fuel, Mitchell said, “What we need to reach a 50-percent reduction will be a combination of hydrogen propulsion, ammonia propulsion, biofuel propulsion, as well as electric propulsion. The best available model today suggests that different markets will probably need different fuels, depending on their cost, their availability and of course their suitability.”
In addition, if a fuel like hydrogen or electricity is used, it becomes important to make sure that it’s generated without large amounts of carbon dioxide at the source, he said.
Keller believes that even though LNG is a hydrocarbon, it can play a role in reducing carbon emissions.
“LNG makes a significant contribution to reducing CO2 between 10 and 20
percent, depending on the applications. We think we can take it up to 25 percent in a short period of time with some technology advances, and then by introducing biogas and introducing other techniques,” Keller said.
Mitchell disagreed that LNG is a low-carbon fuel. He pointed to concerns about “methane slip” — the leakage of methane through hoses and valves or during its passage from drilling site through pipelines to terminals and when it is loaded on ships.
Greenhouse gases are compared using a statistic called “global warming potential,” or GWP, that measures their ability to absorb energy.
Carbon dioxide is the most widely discussed greenhouse gas, but while it has a GWP of one, methane is much more potent with a GWP of 28 to 36 over a 100-year period, or 84 to 87 over a 20-year period, the EPA said.
Biofuels. A number of companies are producing biofuels today, including Neste, which is headquartered in Finland and has a refinery in Singapore, and Good Fuels, which is based in the Netherlands, but these are small producers.
Neste, for example, uses about 10 different products, such vegetable oils, fish and animal fat waste from the food industry, used cooking oil and vegetable oil processing waste to make its renewable diesel.
Ethanol made from corn is the most common biofuel, but there has been a long-standing debate as to whether making it actually reduces carbon dioxide emissions. Corn and soybeans grown for fuel also displace land used to grow food, and fertilizer runoff is bad for waterways such as the Gulf of Mexico. Disturbing new land to grow crops also can liberate carbon from peaty soils and increase CO2 emissions.
A 2011 article in Scientific American, titled “The False Promise of Biofuels,” offered this summary: “Despite extensive research, biofuels are still not commercially competitive. The breakthroughs needed, revealed by recent science, may be tougher to realize than previously thought.”
Still, science marches on, and it is possible that biofuels may make important contributions toward the IMO 2050 goal being reached.
Case in point — and probably one you may have seen in a television commercial — ExxonMobil and Synthetic Genomics have been collaborating since 2009 to produce algae-based biodiesel. In March, ExxonMobil said a “combination of the ongoing work in the lab and upcoming studies in the field together could lead to the technical ability to produce 10,000 barrels of algae biofuel per day by 2025.”
That’s not much more than a drop in the bucket, but it’s a start and Exxon said it hopes “this work will lead to understanding on how to scale the technology.”