IMO agrees 0.5% sulphur cap for 2020

Climate Change

There had been much anticipation over whether IMO’s Maritime Environment Protection Committee (MEPC 70) would opt for a 2020 or a 2025 deadline for the global adoption of 0.5% sulphur emissions from ships. When the decision came yesterday (through a tweet) opting for 2020, the industry reacted with relief.

The reaction of the International Chamber of Shipping was typical in welcoming clarity: “ICS welcomes decision by Member States. But much needs to be done to ensure compliant fuel [is] available and a smooth implementation by 2020.”

The decision at MEPC 70 brings to an end months of uncertainty. The world’s largest container line, Maersk welcomed the decision, stating: “Global regulations will help create a level playing field for the shipping industry.”

But the shipping world remains divided on how feasible the IMO deadline is. On 10 October a Bimco communication cast doubt on IMO’s upbeat statement on the availability of 0.5% fuel oil by 2020.

IMO study flawed

Bimco said the IMO study had failed to fully address its own terms of reference in several critical areas including fuel quality. Bimco maintains a significant amount of fuel oil that IMO says would be available in 2020 is in fact unsafe to store and use onboard ships.

The world’s largest shipping association further accuses IMO of failing to address how the assessed shortage of sulphur removal capacity in refineries will be resolved so that capacity will be available by 2020. The IMO study lacks a model of the disruption that an overnight introduction of the global cap would cause.

As a result, Bimco states it is not possible to determine that the global refining industry will have the capacity to produce enough marine fuel by 2020. BIMCO also raises concerns that the supply of fuel to other sectors of the global economy could face major disruption if the scenario is not addressed beforehand.

Lars Robert Pedersen, deputy secretary general at Bimco, said: “It is clear that the IMO study is flawed, meaning it is not possible to determine from the study that there would be sufficient fuel available in 2020. On that basis, our opinion is that it would be irresponsible for IMO to make the decision to go for 2020 at MEPC 70 in October. There is clearly a need for additional analysis to ensure the supply chain for global trade is not seriously disrupted and developing nations are not hit hard by a lack of affordable energy”.

“This is not about the cost of low sulphur fuel for ships – that has long been known. We know that the shipping industry will buy the fuel they need. But if it is in short supply, the cost will rise not just for shipping but for all users of the fuel. This will price those in poorer economies out of the market”.

“It’s a complex issue – but the difficulties in ensuring sufficient refinery capacity and the disruption caused by an overnight introduction have to be thoroughly taken into account.”

Regulation becoming the scourge of the industry

As the deadline for the global cap approaches, almost in line with the mandatory deployment of ballast water management systems under the recently ratified Ballast Water Management Convention, cost will indeed be the big issue throughout a shipping industry that has been placed on the rack by persistently low freight rates. There is a fear and conversely a hope that the onslaught of prohibitively expensive regulation will cull a large number of vessels that will be sent to an early grave on a beach in India or elsewhere and thus accelerate a return to a more manageable supply/demand equilibrium.

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