New global fuel and emission regulations are putting ship owners under pressure, says Colin Chinery, with clear implications for British manufacturing
Down the slipway of memory they have gone; Cammel Laird, John Brown, Harland and Wolff. From the early 1970s when UK yards could still build the largest types of sophisticated merchant ships, British shipbuilders are now reduced to a handful specialising in defence contracts and repair work.
The world title went east a long while ago, but Britannia, if not quite ruling the waves, remains a major shipping power. The statistics may come as a surprise: registered UK tonnage in the late ‘nineties – 6.2 million – is currently 17 million, with 95 per cent of British trade seaborne. The sector directly employs 250,000 – and probably the same again indirectly – and annual turnover at £376 billion is greater than aerospace and agriculture combined.
Across the world the maritime industry is on a roll, driven by the increase in trade, and with shipbuilding undergoing the biggest boom experts can remember. But it is borne on a rising tide of pollution, CO2 emissions, and countervailing environmental regulations that have cost implications for British manufacturing?
Plying the routes between China and Europe, the cool-blue giant box ship, the ‘Emma Maersk’ is the world’s largest container vessel; 55 metres wide and longer than the Eiffel Tower is tall. On a typical month’s voyage it moves 13,000 20-footlong containers at speeds of up to 31mph.
But these are not the statistics that have troubled the UN-run International Maritime Organisation (IMO), the International Chamber of Shipping, the EU, national governments and a pursuit flotilla of environmental and health agencies – with a sympathetic and co-operative shipping industry running more or less line astern.
The ‘Emma Maersk’ burns nearly 350 tonnes of fuel a day, and in one year emits more than 300,000 tonnes of CO2 – the equivalent of a medium-sized coal power station. And according to a UN report, the world’s burgeoning shipping fleet gives out almost 4.5 per cent of the world’s emissions. And there is a parallel environmental issue – the high-sulphur ‘dirty’ fuel that powers most of its shipping.
The typical commercial vessel is run on heavy ‘bunker’ fuel, a cheap by-product of the oil refining process described by an insider as “the crap that comes out the other end that’s half way to being asphalt”.
And what billows from the smokestacks is a cocktail of sulphur dioxide, carbon dioxide, nitrogen oxide and sulphuric acid which, according to a recent study, kills up to 60,000 people a year around the world. Another report shows North Sea shipping lanes within 25 miles of the Dutch shore spewing pollution that can travel up to 1,000 miles.
Shipping was omitted from the Kyoto Protocol and the European Union’s emissions trading scheme because of the difficulty in proving which countries are responsible for which emissions. But with claims that by 2012 up to 80,000 people a year will die as a result of shipping air pollution, and that the sector’s global greenhouse gas emissions are significantly underestimated, the IMO has acted.
As a result, amendments to an international agreement known as the MARPOL Annex VI will see a phased reduction in sulphur oxide (SOx) emissions through a switch to lower sulphur but costlier fuels.
From January 2012 the global sulphur cap will be cut from the current 4.5 per cent to 3.5 per cent, and then to 0.5 per cent effective from January 2020 – subject to a feasibility review to be completed no later than 2018.
But for the North Sea and the English Channel, plus the Baltic, the restrictions go further. Within Annex VI these two waters are designated Sulphur Control Emission Areas (SECAs) – and here from March 2010 the limits will be cut from the current 1.5 per cent to one per cent, and then from January 2015 to 0.1 per cent.
Progressive reductions in nitrogen oxide (NOx) emissions from marine engines were also agreed, with the most stringent controls again in North Sea/English Channel and Baltic Control Areas.
“What has been passed addresses the air quality issues, but this legislation does nothing about CO2 which is down to fuel consumption. The more fuel consumed, the more CO2 put out,” Unni Einemo, senior editor of Bunker World told me. “The new ships coming in are a lot more fuel efficient than those built 20 to 30 years ago. So something is being done, and in some respects – with fuel prices going up – it’s plain economy. What’s lacking at the moment is the legislative framework to force them to do so, and this is being worked on at the IMO.”
The modern ship is vast and getting larger. But while each vessel consumes more fuel, it also becomes more efficient in terms of CO2 output per unit of goods transported.
Shipping is the most fuel-efficient means of moving cargoes around the world, with waterborne freight resulting in some 80 per cent fewer CO2 emissions than from road haulage.
To carry more than 90 per cent of international trade while generating officially 4.5 per cent of total global emissions – the real average is probably just below three per cent – is seen within the industry as a positive achievement.
“In terms of carbon, shipping is 10 times more efficient than road transport, and 100 times more efficient than aircraft. Since the seventies, in hull and prop design and so on, we have drastically decreased our fuel consumption in relative terms,” says Robert Ashdown, environmental manager at the Chamber of Shipping, the trade association for the British shipping industry.
“There’s no doubt that shipping today is putting out emissions that are particularly dirty when compared to land based transport, even power stations,” says Unni Einemo. “But a lot of people don’t see the distinction between dirty and being a big emitter of CO2. They assume CO2 is somehow dirty, and it isn’t.”
Ashdown expects the control areas to proliferate, starting with the east and west coasts of North America. “But a key issue is range. For instance if it’s just 12 miles off the US coast and you transit that at 90 degrees it will be a 12 mile journey. But if you take the Mediterranean, then that is a much longer time in the emission control area where you will be burning the more expensive fuel.
“So while at the moment it’s hard to say quite what it will mean in terms of cost, for some, shipping along the European shore will be very expensive, and we will be going to the European Commission to try and develop some other policy mechanisms which might offset these costs. But we have no interest in trying to re-negotiate the agreement with the IMO which we are very happy with.”
For British manufacturing the cost implications hinge on sector trade analysis. “For ships spending their time predominantly passing through emission control areas fuel costs will double. But if your ship tends to trade outside these areas then the cost increase will probably be minimal,” says Ashdown.
“Only half of the UK comes within the North Sea emission control area, so if you are trading Liverpool to New York you will find only a minimal increase in the cost of your fuel, other than that dictated by the general fuel price which of course is a level playing field.”
All transport costs will rise, says Unni Einemo. “But relatively speaking, the percentage of increases in shipping will remain quite low because of the capacity of ships to carry huge amounts of goods on a small amount of fuel.”
A core issue is the availability of sufficient volumes of low sulphur quality fuels. “We have great doubts on the availability of the required product by 2020,” says Isabelle Muller, secretary general of the European Petroleum Industry Association – fears shared by Dr Alec Coutroubis, a principal lecturer at the School of Engineering, University of Greenwich.
“How many suppliers can provide low sulphur quality fuel to ships bunkering around the world? My experience tells me not many. It is very likely that a ship complying with IMO regulations on the 4.5 per cent would find it difficult to find sources of fuel when, say, sailing from Africa to Europe and bunkering somewhere on the way.”
With a requirement to carry and switch between two types of fuel – low sulphur and bunker, together with compatible lubricants, engine room operational and design implications are another key issue. “I love the IMO,” says Coutroubis, “but politics precedes technology; political decisions come first and then engineers are asked to solve the problem.”
One promising approach is the use of sulphur and particle-removing sea water scrubbers – with BP Group Company, the Sussex-based Krystallon at the forefront of development. “If the fuels were available, Krystallon would have no role to play.
They are not available so Krystallon has a role to play,” says Dr Coutroubis.
Coutroubis, who has worked in corporate banking, set up and ran three businesses including a shipping company and a tool and machinery manufacturing firm, and is in no doubt fuel prices will slow down global trade.
“The difference between 1.5 per cent and 4.5 per cent is more on whether it is applicable and obtainable rather than massively more expensive. The cost is probably marginal, the economic implications minor compared with the impact of the price of oil. The issue is whether people can supply.
“At the beginning of this year analysts were hesitant about talking of $70 to $80 dollars. Now they’re talking $150 and the rest of it. The shipping industry has been booming in recent years, but with freight costs becoming very important, we are faced with the prospect of a fairly significant slowdown in the world economy.”