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CENTRE FOR MARITIME STUDIES Sari Repka

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

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CENTRE FOR MARITIME STUDIES Sari Repka

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  1. SNOOP Policy Forum 12.4.2013, Tallinn CENTRE FOR MARITIME STUDIESSari Repka Economical effects of environmental regulation in maritime traffic

  2. 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

  3. 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

  4. Forthcoming environmental regulation in the Baltic Sea • Sulphur emission (SECA) • Nitrogen emission (NECA) • CO2 • Ballastwater management (global) • Sewagetreatment, Baltic • Revised MARPOL Annex V and regulationrelated to drybulkcargo (specialareasincludingBaltic)

  5. Non-global regulation • Costs and problems to someparties and possibilities for others • Whynon-globalregulation? • Somebodyhas to start… • ParticularlySensitiveSea Area status (PSSA) of someareas • BalticSeafromApril 2004 • North Seanot, onlyWaddenSea

  6. Sulphur Emission Control Area SULPHUR content limits in ship fuel

  7. Costs of SECA • Complianceoptions • Fuelswitch (HFO MGO), scrubbers, LNG, biofuels • According to Kalli (2012) costs for Finland 600 milj. € annuallybyfuelswitch • For total SECA 3.6 bln € (BSR Innoship) • + 20-40 % of freightrates

  8. 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

  9. Economic feasibility • Dependsheavily on the amount of fuelspent in SECA (> 4000 tn)1 and pricedifferencebetween MGO and HFO • Pay Back Time with big pricedifferencecouldbe a couple of years • Expectedlifetime of a shipalsorelevant(netpresentvalue) • 4-5 % ships potential2 1Reynolds 2011 2Innoship

  10. Nitrogen Emission Control Area 2000-2010 2011 NECA 2016

  11. 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

  12. 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)?

  13. 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 Photo by Pekka Sundberg

  14. 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?

  15. 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

  16. 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

  17. LNG and Satakunta – preliminary study Three main targets • To survey the current and future global and domestic market of natural gas and LNG • To find out the amount of potential consumption of LNG (both land-based and maritime demand) • To find out the business opportunities of liquefied natural gas in Satakunta

  18. LNG and Satakunta – preliminary study Conclusions • 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) • Significant business opportunities, although totally affected by the development of the LNG market • 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

  19. Thank you for your attention! More information http://mkk.utu.fi

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