Accepting the inevitable on sulphur

SOMETIMES there comes a point in a battle where it becomes blindingly obvious you are not going to win. That was the position shipowners group International Chamber of Shipping (ICS) has found itself in. The issue was when should an already agreed global 0.5 per cent sulphur in fuel cap come into effect everywhere outside IMO-designated Emissions Control Areas (ECAs). Within ECAs an even stricter 0.1 per cent limit already applies.

Last week, ICS issued a statement saying it had agreed that the shipping and bunker refining industries "should work to the possibility" that the cap, required by the International Maritime Organization (IMO), is "more likely to be implemented worldwide from 2020, rather than 2025".

Speaking after an ICS board meeting in London, ICS chairman Masamichi Morooka explained: "While postponement of the sulphur global cap until 2025 is still a possibility, the shipping and oil refining industries should not assume that this will happen simply because they are unprepared. ICS has concluded that, for better or worse, the global cap is very likely to be implemented in 2020, almost regardless of the effect that any lack of availability of compliant fuel may have on the cost of moving world trade by sea."

He added that ICS members have therefore agreed that they will continue to work with the bunker refiners to help ensure that they will be ready, if necessary, to supply sufficient quantities of compliant fuel by 2020.

Annex VI of the IMO's International Convention for the Prevention of Pollution from Ships (Marpol) Convention, which relates to air pollution from ships, allows for the possibility that implementation of the global sulphur cap can be deferred until 2025. This decision is meant to be subject to the results of a fuel availability study that IMO is legally required to complete before the end of 2018.

Despite repeated ICS requests, IMO member states have so far refused to bring forward the conduct of the fuel availability study. If supply problems are identified at the end of 2018, this will be far too late for governments to take action, ICS claims. It believes that a political decision may in effect already have been taken, at least by the United States and the European Union, which view the global cap as a public health issue.

EU's unilateral action

ICS said that its decision was influenced by the fact that the EU has already agreed, regardless of any decision by IMO to postpone the global cap, that a 0.5 per cent sulphur limit will apply to international shipping within 200 miles of the coasts of all EU member states. ICS points out that, in theory, if the global cap was not implemented until 2025, this would create a narrow corridor along the coast of North Africa in which ships could continue to burn less expensive residual fuel with a sulphur content of 3.5 per cent.

However, ICS believes that the EU member states would be unlikely to permit this and would therefore push hard at IMO for global implementation of the 0.5 per cent requirement in 2020.

His point raises the whole issue of how the rest of the international community should react when confronted with unilateral action. And in this case it is open to dispute whether states can impose such rules with their 200-mile exclusive economic zones. That, though, can be the topic for another week's column.

To return to the 0.5 per cent cap: does it matter whether the new limit comes into force in five or 10 years' time? A few years ago, it certainly did look as though there could be a huge problem and that the extra time would help. ICS continues to say that the 0.5 per cent cap will "dramatically increase the cost of marine fuel for the shipping industry worldwide, perhaps by as much as US$50 billion a year".

Leaving aside the uncertainties surrounding the price of fuel, it may well be that the price of fuel will be almost a non-issue in five years' time. The shipping industry is rapidly taking up the abatement technology (or "scrubbers") that is now becoming widely available to clean the sulphur out of engine exhausts. Ships with scrubbers can burn, relatively cheap, high sulphur fuel. If there is widespread installation of scrubbers on the world fleet, the availability study becomes irrelevant. There is no ongoing extra fuel bill to pay.

This aspect has not been mentioned by ICS but, surely, it is crucial, and makes the ICS decision all the more understandable. Moreover, by signalling that owners should forget about any deferment of the global cap, ICS has added a degree of certainty to the situation. Owners should now plan on the basis that they will need to either pay for 0.1 per cent sulphur fuel in five years' time or they should fit scrubbers to vessels that will be operating for a significant period after 2020.