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IMO2020 Emission Regulations

IMO 2020 emissions regulation

 

The effect of plastic on our environment has been well documented, especially to our oceans, and there has been much press coverage as to the steps that we can all take to reduce the impact that plastics have.

 

However, less documented have been the changes that the shipping industry is making to current regulations to play its part in making a better environment for us all.

 

Fuels used by the shipping industry contain sulphur. When sulphur combines with water and air, it forms sulfuric acid, the main component of acid rain, which seriously affects ecosystems. High levels of sulphur in the atmosphere can also produce health issues such as respiratory problems.

 

The IMO (International Maritime Organisation) has made a commitment to reduce sulphur emissions from shipping lines by 85% and will seek to achieve this through the introduction of the IMO2020 regulation, a sulphur cap on fuels.

 

From 1 January 2020, the sulphur cap for fuels used by vessels will decrease from 3.5 percent to 0.5 percent in non-emission controlled areas and 0.1 percent in emission controlled areas, from the current 1.0 percent.

 

In order to comply with the new regulation, shipping companies are already beginning to make changes. Many are looking to adopt low sulphur fuel for their fleets. However, this fuel is significantly more expensive than the current fuel used within the industry.

 

There are also a number of major capital investments being made across the industry, with some lines investing in LNG to power future container ships, which notably will result in a 99% reduction in Sulphur emissions.

 

In some instances, shipping lines are also installing ‘scrubbers’ to their vessels, engine cleaning systems which will filter the sulphur from the fuel. As with the other alternatives, these are an expensive investment, with the installation of one scrubber costing anywhere between 1 million and 5 million Euros according to sources.

 

As a result of the additional expenses that they will face, shipping lines have advised that consequently, the new regulation is likely to impact on overall freight costs.

 

Given various names across the shipping lines; New Bunker Adjustment Factor (BAF) by Maersk, Global Fuel Surcharge by MSC and Marine Fuel Recovery (MFR) mechanism by Hapag Lloyd for example, shipping lines have advised that they will be providing more clarity in the way that they calculate freight charges, through showing a complete breakdown of the costs, including fuel costs, within their invoices. It is anticipated that these changes will begin to be seen from as early as January 2019 as some vessel operators have already began making the shift to new fuels and alternative solutions.

 

Although regretfully this does mean that there is a possibility that the additional fuel surcharges could lead to an increase in freight costs, the positive effect that these changes will make to the environment should not be understated.