IBIA members want global cap transition issues raised at IMO
Decision time is drawing near for the timing of one of the most significant regulatory shake-ups shipping has ever witnessed, with wide-ranging impacts. All stakeholders want to know, as soon as possible, if the global 0.50% sulphur limit for fuels used by ships under MARPOL Annex VI will take effect in 2020, or 2025, to help planning and preparation.
But there is one aspect of the global sulphur cap that the Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO), in its deliberations, appears to have largely overlooked. Regardless of the date, shifting global bunker supply from mainly residual fuel to 0.50% sulphur fuels, which are expected to be principally distillates, cannot happen overnight. Most ship operators will want to hold off on making the shift for as long as possible because of the lower sulphur fuel will cost much more, so a near overnight shift is what we would be looking at.
In June, IBIA highlighted transitional challenges of the change from the current 3.50% to a 0.50% sulphur limit, pointing out that it seems unrealistic to expect to successfully achieve this shift – on a scale that is unprecedented scale in the history of refining and shipping – virtually overnight.
We summarized concerns about the impacts of an abrupt shift in a membership survey:
– Shifting global bunker supply from residual fuel to 0.50% sulphur fuels, which are expected to be principally distillates, cannot happen overnight
– Market disruption is likely to inflate distillate prices in marine fuels market and beyond
– Weak initial compliance may set unhealthy precedent and create uneven playing field
– The shift is not a ‘flick of a switch’ process for ships
– HFO supply infrastructure may disappear and undermine adoption of abatement technology
We also outlined a number of potential strategies to ease the transition to the global 0.50% sulphur cap – while still achieving the desired environmental benefits in a realistic but nevertheless ambitious timeframe – that may be considered on their own, or in combination:
– Rather than a global change, first introduce a 0.50% sulphur limit for ships when sailing in the Exclusive Economic Zone (EZZ) of Annex VI signatory countries, possibly region by region
– Gradual introduction of the cap by ship type
– Allow exemptions for ships committed to emission compliance retrofits
– Confirm the issuance and acceptance of fuel oil not availability notices (FONARs) permitted under Annex VI
– Allow a period of adaption and monitoring before requiring and enforcing compliance
– Gradual reduction in the global sulphur limit – Amend the regulation to allow effective global enforcement
What you said
The question we asked our members was if they think we should bring the issues associated with the transition to a global 0.50% sulphur limit to the attention of the IMO’s MEPC.
Of those who responded, almost 15% did not see a need to interfere with this well signposted IMO regulatory change. Just over 85%, however, think IBIA should raise the global cap transitional issues in a submission to MEPC.
Some members also took the opportunity to comment.
“A more activist IBIA stance against an ill-thought arbitrary IMO global cap which will negatively impact consumers, shipowners, suppliers, refiners, and world-wide employment is a very worthwhile endeavor, in alignment with IBIA’s mission,” said one.
More than one argued that if going ahead with the global cap in 2020, there is a huge risk that it will be widely ignored, thereby damaging the IMO’s standing as a global regulator.
Some are of the opinion that 2020 will be too soon to be able to meet the increase in global distillate demand associated with the 0.50% global sulphur cap for shipping, but that sufficient refining capacity might be coming on stream a year or two before 2025. A phased introduction may therefore be helpful both to prevent a supply crunch, and to gain real experience of how it works in a region, like the European Union, before going global.
Since we put the question out to members, IBIA has also been talking to other industry NGOs and member states at IMO about these concerns and how we might address them, and collected feedback from a variety of stakeholders.
Through this feedback process, we are working on how to bring these concerns to the IMO’s attention along with some ideas for how transitional issues may be addressed.
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