The International Maritime Organisation (IMO) has confirmed that new a global cap on the sulphur content in shipping fuel will be introduced on 1 January 2020. Since 1 January 2012, the global limit has been 3.5% mass/mass (m/m) which will decrease to 0.5% m/m when the new cap takes effect. The cap will apply to all fuel used in main and auxiliary engines as well as boilers.

The shipping industry is the biggest emitter of sulphur oxides (SOx). The new cap is intended to reduce the harmful impact that shipping has on the environment and human health from emissions and is expected to reduce relevant emissions by around 85%.

The implementation of the new cap is the result of the revised Annex VI of the International Convention for the Prevention of Pollution from ships (MARPOL) which was adopted in 2008. Annex VI envisages a progressive reduction in global emissions of SOx and nitrous oxides (NOx). MARPOL also introduced designated SOx Emission Control Areas (ECAS) such as the Baltic Sea and the North Sea areas. Since 1 January 2015, sulphur limit for fuel oil in the ECAS has been 0.10% m/m. The new global cap will not affect the emission cap already in place in ECAS.

Alternatives for the shipping industry

Instead of using low-sulphur compliant fuel oil, alternative options available to shipowners include LNG gas; methanol (currently used on some short sea services); and the use of exhaust gas cleaning systems or ‘scrubbers’ which ‘clean’ the emissions before they are released into the air. Shipowners wishing to use scrubbers must have the approval of the vessel’s flag state.

A report into the availability of low-sulphur fuel which was delivered to the IMO prior to its meeting last week, confirmed that there will be sufficient quantities of the fuel available to shippers but did not focus on the purchase price. However, previous reports estimated that the cost of low-sulphur compliant fuel could be more than 50% higher than the cost of residual fuel (with a sulphur limit of 3.5% m/m) which is currently used outside of the ECAS. Much will therefore depend on whether oil prices increase or remain the same. The implementation of the cap in 2020 may also affect decisions on whether or not ships are sent for early recycling.

Implementation

The IMO now has to consider how the new global cap will be implemented and who will regulate it. Two requirements already envisaged are: (1) ships using fuel oil must obtain a bunker delivery note which sets out the sulphur content of the fuel oil; and (2) ships must be issued with an International Air Pollution Prevention Certificate by their flag state. The certificate would confirm that the ship is using fuel oil which does not exceed the applicable cap as documented by the bunker delivery notes or an approved equivalent arrangement (e.g. scrubbers). Sanctions for non-compliance with the new requirements will be established by the state parties to MARPOL (i.e. flag and port states) and it is yet to be seen how state parties propose to enforce the new regime.