January 1st of 2015 marked the commencement date of new emissions regulations for vessels operating in Emissions Control Areas (ECAs). Following regulation 14 of the IMO’s MARPOL Annex VI, vessels will be obligated to burn bunkers with a maximum 0.1% sulphur content by mass within ECAs, which currently cover the North Sea, Baltic Sea, North American coastline and US Caribbean. Operators who fail to conform with this limit (and cannot demonstrate a defence or mitigating factor under the regulations[1]) will face financial penalties and possible vessel detention by ECA states.
Compliance
In order to comply with the new limits within ECAs, operators face the choice of burning low-sulphur fuel oil, or installing emissions abatement technologies such as scrubbers to their vessels, or alternatively making the switch to burning LNG or biofuels. In essence, operators must weigh up any return on investment in new technology with costs/risks – notably, the higher price of low-sulphur fuel, but also the hidden costs of technological failure caused by burning it. From data gathered by the Lloyd’s List 2014 Sulphur Survey, it appears that, in the near term at least, operators will tend to opt to burn low-sulphur distillates in lieu of capital expenditure on their fleets.
In reality, the picture of compliance is far from settled. Some industry players have publicly committed to emissions abatement technologies (for example, Carnival’s initial investment of c.US$400m in scrubbers for their fleet[2]), whereas others (such as Maersk Line[3]) have shunned such solutions in place of efficiency upgrades to their vessels and a commitment to using low-sulphur fuel. In the longer term, the landscape of compliance will no doubt change to adapt to market conditions.
Enforcement
With the new limits now in force, the question on the minds of those in the industry has shifted from the subject of compliance to that of enforcement. Nevertheless, the two factors are intrinsically linked, as without clarity on enforcement, there will arguably be no impetus for operators to seek to comply with their new obligations. The fear of many is that a weak enforcement regime will in effect punish those operators who make the considerable expenditure on compliance. It is within this context that important stakeholders have voiced their concerns, for example, BIMCO recently called for ‘robust enforcement‘ of sulphur limits by states bordering ECAs.[4]
Some governments have been vocal in their support of the lower sulphur limit and have committed to strong enforcement in order to deter compliance failures. The Danish Environmental Protection Agency has notably invested a significant sum into “sniffer” drone technology to monitor vessel emissions in its waters, as well as formulating plans to install sulphur oxide (SOx) detection sensors on the Great Belt Bridge by the end of 2015. Similarly, the US Coastguard has already built itself a reputation for enforcing sulphur limits through fines and vessel detentions.
Other governments have been more hesitant, especially elsewhere in the European Union, where critics have highlighted the slow implementation of the Sulphur Directive[5] and lack of guidance from some member states as detrimental to the smooth adoption of the lower sulphur limits. Absent individual countries’ efforts, the Paris MoU on Port State Control signatory states – including the members bordering the European ECAs – have received guidance on enforcement. This focuses on how port states deal with operators’ main defences to prosecution under the new sulphur limits, namely, the inability to bunker the correct fuel before entering an ECA. No guidance, however, has yet been issued on the inspection of scrubbers.
In light of the current uncertainty at the governmental level, some operators have taken a proactive approach. The Trident Alliance, an industry body with over 30 members, including Stena, Scorpio and the J. Lauritzen group amongst others, has committed to the ‘robust and transparent enforcement‘ of the SOx emissions limits. It remains to be seen how active non-governmental organisations such as the Trident Alliance will have to be to ensure a level playing field of compliance.
2015 will likely prove to be an important year for the industry. We will continue to monitor the enforcement of the new SOx emissions limits and provide updates on developments.
Max Thompson
Associate, Holman Fenwick Willan
[1] For example, by using approved emission abatement technology such as scrubbers (reg 4 MARPOL Annex VI), or by demonstrating that a vessel was unable to procure compliant bunkers before entering the ECA (reg 18 MARPOL Annex VI).
[2] ‘Emissions Control’, November 2014 : Issue 214, IHS Maritime Technology.
[3] ‘Maersk Line leads ECA compliance with boxship yard tender’, 7 November 2014, TradeWinds News.
[4]https://www.bimco.org/news/2014/11/14_robust_enforcement_of_sulphur_limits_in_ecas.aspx
[5] Directive 2012/33/EU amending Council Directive 1999/32/EC.
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