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Is it the producer or the consumer that should take responsibility?

IMO 2020: Is it the producer or the consumer that should take responsibility?

16 August 2018

For anyone working in shipping, 1 January 2020 has become synonymous with the implementation of a global 0.50% Sulphur cap on emissions from vessels. However, the question remains as how to enforce the new regulation.

To enforce the Sulphur cap, the IMO earlier this year decided upon a ban forbidding vessels to carry noncompliant bunker fuel aboard unless they have installed onboard scrubbers. This means that from 1 January 2020 around 90% of the 60 000 vessels trading globally will need to be controlled for non-compliant fuel.

Höegh Autoliners has long been a supporter of robust enforcement of maritime Sulphur regulations and together with select other shipping entities, have been part of founding the Trident Alliance. The Alliance was formed as a response to the challenges the industry faced with enforcing the Low Sulphur rules in the Sulphur Emission Control Areas (SECAs). What we saw then was that a number of ship operators weighed up the likelihood of being caught, the cost of fines received and the cost of using Low Sulphur Fuel. They simply took the chance to burn High Sulphur Fuel Oil (HFO) also in the SECA, because they estimated the risk of getting caught was small and the potential fines minor compared to the extra cost of using Low Sulphur Fuel Oil (LFO).

When trying to foresee how IMO 2020 will pan out, the implementation of the SECAs is our closest reference. We can only assume that the implementation of the IMO 2020 regulation will see a similar development unless the law enforcement is stronger and the penalties are more costly.

My question is then: Why only control the consumers, i.e. the vessel operators, why not focus on the source- the refineries. There are about 700 refineries in the world today whereof about half of them produce marine oil. It should be vastly more efficient to control some 400 refineries to ensure they do not sell non-compliant fuel to vessels without scrubbers, compared to following some 60 000 vessels around the globe.

I am not saying we should not make controls onboard vessels, but port state controls will have their hands full if they are to check bunker qualities onboard all vessels trading in the world.  Just reflect on if this would had been the consumer market. If the Government decides to ban a potentially dangerous product, the first step would be to take it off the shelves and ensure distributers do not offer it to the consumers. This is the only efficient way to go about it.

Moreover, in the same perspective, it is hard to see how scrubbers can be anything but a temporary solution to the challenges at hand – rather than helping the transition to low Sulphur fuels as the new standards, it might just delay the positive effect of the new standards. The business case for scrubbers rests on the pricing arbitrage between high- and low Sulphur fuels, and the continued long-term availability of high Sulphur fuels. I do not believe any of these are here to stay.

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