Certainty needed – why IMO must avoid phasing in of the new sulphur limit unless as a last resort for 2020

For marine engineers of a certain age, it used to be necessary to increase the electrical power available to the ship by manually synchronising the supply of an incoming generator with those already online using a series of lights. As the phases of the electrical supplies became properly aligned, the lights would flash ever more slowly, and at the right moment the engineer (with a little nervous anticipation) would close the breaker and put the generator ‘on the board’.

What has this to do with sulphur regulations, I hear you say? Well, phases and phasing in are words that may also be heard at MEPC 70 regarding introduction of the 0.5%S limit.

In the old days if the engineer got the phase alignment wrong, there was a good chance of real damage to the generating equipment. So it is with IMO, who run the risk of causing major complications for the marine industry and beyond, if there is some sort of misplaced attempt at a gradual sulphur reduction at this late stage.

What might a phased approach entail? The options are many and the knock-on effects complex and potentially undesirable.

Division

Perhaps it might be suggested that rather than reducing fuel sulphur from the current 3.5% to 0.5% in one step there are some interim steps, say down to 1.5 or 1.0%.

Demarcation

Perhaps it might be suggested that there is temporary demarcation of as yet undefined geographic areas where up to 0.5%S fuel must initially be used with the current 3.5%S limit continuing outside as before.

So territorial waters or contiguous waters or Exclusive Economic Zones or certain ports and anchorages might be become “semi-ECAs”. After all that is what will happen when the European Union applies the 0.5%S limit in its territorial waters outside of ECA’s in 2020 if IMO doesn’t do the same globally.

Differentiation

Perhaps there may be differentiation based on ship type or size or power or fuel consumption or cargo type or a combination of these and that some ships will have to use up to 0.5%S fuel while others do not.

Dispensation

Given the reticence of IMO and ship operators in general, it hard to believe that market based measures will be discussed, but emissions trading incentivises early adopters of compliance technologies, whilst enabling those who are unwilling or unable to comply by buying sulphur credits.

Alternatively, perhaps IMO will opt for the simple way out with a period of non-enforcement after 2020 even though the 0.5%S limit has been nominally entered into force.

Derogation

Whichever of these methods IMO might discuss, ships may also be offered derogation, if for example they can prove suitable fuel was unavailable; or if abatement equipment had been ordered but for some reason not installed.

The system of filing fuel oil non availability reports (FONAR) and derogation for cruise ships trialling scrubbers have both been allowed by the USEPA in the North American ECA so these measures are not without precedent.

Don’t Delay

It is easy to see the complication of a gradual introduction. For demarcated zones adjacent to Emission Control Areas, for example, the ship operator would potentially face 2 fuel changes and may therefore decide it is simply more practical to change from high sulphur straight to distillate, effecting the changeover in the demarcated zone.

The challenges of operation, monitoring and enforcement for overstretched ship operators and port state administrators are immediately obvious. Not only does a phased approach open the door for an unacceptable number of exceptions, there is also significant potential for a high level of non-compliance.

The complication is not just for shipping, there is also the potential for knock-on effects to the wider economy. Actions that result in certain areas or trades incurring higher costs than others may well be considered discriminatory or anti-competitive and lead to unforeseen market distortions and regulatory action from outside the industry.

Time is now extremely short. MARPOL Annex VI Regulation 14 requires a decision on 2020 or 2025 on the basis of an expert review on fuel availability to be completed by 2018.

There is little or no time to agree and implement changes to the Regulation – just three more MEPC sessions in the next 2 years.  IMO must avoid the use of phasing in, unless as a last resort for a 2020 entry into force and then with caution. It simply promotes uncertainty for ship owners, suppliers and refiners needing to plan and make some very serious investment decisions right now.