called “scrubber” fitted on board the ship along with dedicated tanks to hold and treat
resulting wastewater from the process, or to switch from HSFO to a lower-sulfur fuel
known as low-sulfur fuel oil (LSFO) (Halff et al. 2019). Many industry participants
have yet to decide which of these three paths to take despite the imminence of the
regulation and the fact that IMO first announced the cleaner-burning bunker rules as
far back as 2008 (Halff et al. 2019).
Other fuel options include electricity, biodiesel, methanol, liquefied petroleum
gas (LPG), Ethan dimethyl ether (DME), biogas, synthetic fuels, hydrogen, and
nuclear fuel (GL 2017). The availability of fuels and their costs, uncertainty relating
to alternative technologies and their level of maturation, and the investment requirements in terms of bunkering infrastructure are just some of the factors influencing the
decision to adopt a particular option (GL 2017). Scrubbers, for instance, will require
additional expenditures, and there are uncertainties about the underlying technology.
Distillates are technically feasible, but if demand increases for them, the cost
differential with conventional bunker fuels may widen. LNG use will involve
important investments in bunkering facilities.
Halff et al. (2019) identify three sets of factors that discourage a prompt response
to the new policies: the financial burden of premature compliance, financial risks
stemming from market uncertainty (exacerbated by the IMO policy itself), and
regulatory uncertainty. LNG and scrubber options both entail multimillion dollar
up front capital expenditures. The attractiveness of the different options depends on
the premium that low-sulfur fuel has relative to HSFO. The industry’s rate of
adoption of various compliance options will also likely affect their competitiveness,
e.g., widespread adoption of LNG could lead to an increase in its price undermining
its attractiveness. HSFO prices may plummet if there is large-scale switching to
LSFO or LNG making scrubber adopters less competitive. In this sense, early
adopters may suffer from a deficit of information (on what others are planning)
providing an incentive for waiting.
Potential interaction with regulations on GHGs and NOx further adds to the
uncertainty. A global cap on NOx or GHG could damage the business case for
scrubbers that do not filter out NOx and are relatively carbon intensive. While LNG
is low in both SOx and NOx, there are concerns that methane leakage could make it a
source of high GHG emissions if the entire LNG lifecycle is accounted for. Similar
concerns apply to LSFO or MGO being too carbon intensive if the fuel lifecycle of
these fuels is considered (Halff et al. 2019). See Halff et al. (2019) for an extended
discussion of these uncertainties.
10.4.3 SO 2 Emissions Policy
IMO has chosen performance standards (“obligation of results”) over technical
standards (“obligation of conduct”) in order to regulate SO 2 emissions. It sets the
amount of sulfur dioxide that ships are allowed to release in the air but leaves it up to
the shippers to find the means (conduct) to achieve that goal. From a standard
10 Sustainable Shipping: Levers of Change
159
resulting wastewater from the process, or to switch from HSFO to a lower-sulfur fuel
known as low-sulfur fuel oil (LSFO) (Halff et al. 2019). Many industry participants
have yet to decide which of these three paths to take despite the imminence of the
regulation and the fact that IMO first announced the cleaner-burning bunker rules as
far back as 2008 (Halff et al. 2019).
Other fuel options include electricity, biodiesel, methanol, liquefied petroleum
gas (LPG), Ethan dimethyl ether (DME), biogas, synthetic fuels, hydrogen, and
nuclear fuel (GL 2017). The availability of fuels and their costs, uncertainty relating
to alternative technologies and their level of maturation, and the investment requirements in terms of bunkering infrastructure are just some of the factors influencing the
decision to adopt a particular option (GL 2017). Scrubbers, for instance, will require
additional expenditures, and there are uncertainties about the underlying technology.
Distillates are technically feasible, but if demand increases for them, the cost
differential with conventional bunker fuels may widen. LNG use will involve
important investments in bunkering facilities.
Halff et al. (2019) identify three sets of factors that discourage a prompt response
to the new policies: the financial burden of premature compliance, financial risks
stemming from market uncertainty (exacerbated by the IMO policy itself), and
regulatory uncertainty. LNG and scrubber options both entail multimillion dollar
up front capital expenditures. The attractiveness of the different options depends on
the premium that low-sulfur fuel has relative to HSFO. The industry’s rate of
adoption of various compliance options will also likely affect their competitiveness,
e.g., widespread adoption of LNG could lead to an increase in its price undermining
its attractiveness. HSFO prices may plummet if there is large-scale switching to
LSFO or LNG making scrubber adopters less competitive. In this sense, early
adopters may suffer from a deficit of information (on what others are planning)
providing an incentive for waiting.
Potential interaction with regulations on GHGs and NOx further adds to the
uncertainty. A global cap on NOx or GHG could damage the business case for
scrubbers that do not filter out NOx and are relatively carbon intensive. While LNG
is low in both SOx and NOx, there are concerns that methane leakage could make it a
source of high GHG emissions if the entire LNG lifecycle is accounted for. Similar
concerns apply to LSFO or MGO being too carbon intensive if the fuel lifecycle of
these fuels is considered (Halff et al. 2019). See Halff et al. (2019) for an extended
discussion of these uncertainties.
10.4.3 SO 2 Emissions Policy
IMO has chosen performance standards (“obligation of results”) over technical
standards (“obligation of conduct”) in order to regulate SO 2 emissions. It sets the
amount of sulfur dioxide that ships are allowed to release in the air but leaves it up to
the shippers to find the means (conduct) to achieve that goal. From a standard
10 Sustainable Shipping: Levers of Change
159