centre for maritime studies sari repka
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SNOOP Policy Forum 12.4.2013, Tallinn. CENTRE FOR MARITIME STUDIES Sari Repka. Economical effects of environmental regulation in maritime traffic. IMO regulates maritime transport. The International Maritime Organization, agency of the UN - PowerPoint PPT PresentationTRANSCRIPT
University of Turku
CENTRE FOR MARITIME STUDIES1
SNOOP Policy Forum12.4.2013, Tallinn
Economical effects of environmental regulation in maritime traffic
CENTRE FOR MARITIME STUDIESSari Repka
University of Turku
CENTRE FOR MARITIME STUDIES
IMO regulates maritime transport
• The International Maritime Organization, agency of the UN
• Aims to improve safety and prevent pollution from ships
• 170 member states + 3 associate members• A convention comes into effect when it has been
ratified by a certain number of member states and tonnage
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University of Turku
CENTRE FOR MARITIME STUDIES
Relationship between IMO and other actors
• IMO’s regulations are legally binding for all shipping companies
• EU introduces IMO regulations as part of EU law• EU legal acts include regulations which are
legally binding and directives which must be included in national laws
• HELCOM recommendations are binding for its member countries
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University of Turku
CENTRE FOR MARITIME STUDIES
Forthcoming environmental regulation in the Baltic Sea
• Sulphur emission (SECA)• Nitrogen emission (NECA)
• CO2
• Ballast water management (global)• Sewage treatment, Baltic• Revised MARPOL Annex V and regulation
related to dry bulk cargo (special areas including Baltic)
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University of Turku
CENTRE FOR MARITIME STUDIES
Non-global regulation
• Costs and problems to some parties and possibilities for others
• Why non-global regulation?– Somebody has to start…– Particularly Sensitive Sea Area
status (PSSA) of some areas- Baltic Sea from April 2004- North Sea not, only Wadden Sea
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University of Turku
CENTRE FOR MARITIME STUDIES
Sulphur Emission Control Area
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SULPHUR CONTENT LIMITS IN SHIP FUEL
University of Turku
CENTRE FOR MARITIME STUDIES
Costs of SECA
•Compliance options– Fuel switch (HFO MGO), scrubbers, LNG, biofuels
•According to Kalli (2012) costs for Finland 600 milj. € annually by fuel switch•For total SECA 3.6 bln € (BSR Innoship) •+ 20-40 % of freight rates
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University of Turku
CENTRE FOR MARITIME STUDIES
Feasibility of scrubbers
• Several types of Exhaust Gas Cleaning systems– Dry and wet scrubbers
• Seawater (open loop), freshwater (closed loop), hybrid
• Technical maturity? Brackish water large volumes of washing water
• Only the costs of closed loop scrubbers considered here
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University of Turku
CENTRE FOR MARITIME STUDIES
Economic feasibility
• Depends heavily on the amount of fuel spent in SECA (> 4000 tn)1 and price difference between MGO and HFO
• Pay Back Time with big price difference could be a couple of years
• Expected lifetime of a ship also relevant (net present value)
• 4-5 % ships potential21Reynolds 20112Innoship
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University of Turku
CENTRE FOR MARITIME STUDIES
Nitrogen Emission Control Area
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2000-2010
2011
NECA 2016
University of Turku
CENTRE FOR MARITIME STUDIES
Costs of NECA
• Tier III compliance– Selective catalytic reaction (SCR)– LNG– Exhaust Gas Recirculation
• Increase in freight rates, up to 4%• Minor compared to SECA
11
University of Turku
CENTRE FOR MARITIME STUDIES
Consequences?
• Modal shift? – According to SWECO in Sweden demand for maritime
transport will decrease by 21%
• May influence location of industry: copper smelting around northern Baltic Sea?
• Hits most the ships that use a lot of fuel, “roros, ropax” + cargo which value is defined in global markets (paper, metal products)
• Slow steaming• Shortage of compliant fuels, cascading to road traffic
(Sweco)?
12
University of Turku
CENTRE FOR MARITIME STUDIES
Specialized vessels in SECA?
• Vessels that only occasionally visit SECA probably will not invest in scrubbers
• Fuel switch generally also need investments in ships
• Example: Dry bulk carriers of different sizes are important for customers in the Bothnian Bay
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Photo by Pekka Sundberg
University of Turku
CENTRE FOR MARITIME STUDIES
Specialized vessels in SECA?
• Costs for technique to allow fuel switch may be over 100 000 € /vessel
• Are ship owners willing to make changes in all the suitable sizes of vessels to enable longer trips (a couple of days) in the SECA?
• Specialized ships that are technically modified to operate in SECA and NECA area less competition higher prices?
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University of Turku
CENTRE FOR MARITIME STUDIES
Uneven competition within SECA for ports
• Competitive situation within ports in SECA may change, and far away from the border of the SECA (e.g. Bothnian Bay) will suffer, either due to more expensive fleet or mandatory reloading
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University of Turku
CENTRE FOR MARITIME STUDIES
Innovations and business opportunities
• Environmental regulation fosters innovations that otherwise…
• Equipment manufactures• Slow steaming, ports may need to change their
operations• More opportunities around ports, e.g.
manufacturing fuels while waiting vessels?• Biofuels (e.g. wood, fish), local businesses• Symbioses of industry and maritime traffic, LNG
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University of Turku
CENTRE FOR MARITIME STUDIES17
LNG and Satakunta – preliminary study
Three main targets
1.To survey the current and future global and domestic market of natural gas and LNG
2.To find out the amount of potential consumption of LNG (both land-based and maritime demand)
3.To find out the business opportunities of liquefied natural gas in Satakunta
University of Turku
CENTRE FOR MARITIME STUDIES18
LNG and Satakunta – preliminary studyConclusions
1.The importance of LNG is increasing rapidly in the global market
- Consumption of natural gas in Europe is 22% and in Finland 10% (from the total energy consumption)
2.Significant business opportunities, although totally affected by the development of the LNG market
3.Potential consumption of LNG is significant in Satakunta– Land-based demand 165 000 tonnes– Maritime demand 20 000 tonnes by the year 2020– The amount is high enough -> a construction of a LNG terminal
is reasonable