The law on emission of air pollutants from ships reflects the modern reality of global markets. The current legislation is set out at three levels: Annex VI of the MARPOL CONVENTION 73/7832 at the international (UN) level, Directive 2012/33/EC33 at EU level, and Member States are competent to set out the rules at national level.34
EU law imposes severe limits on sulphur content. As of 1 January 2015, these limits are:
- 0.1% in the ECA areas “emission control areas” (Baltic Sea, North Sea and the English Channel);
- 0.1% for when a ship is berthed in any EU port;
- 1.5% limit for fuel consumed by passenger ships on regular services to/from any EU port;
- as from 2020, 0.5% limit shall be applied to any ship in any territorial water of any EU Member State (except for ECA zones where the more stringent 0.1% shall continue to apply)35.
Member States must have implemented Directive 2012/33/EU by 18 June 2014.
A number of EU Member States (including Italy) have gone further than the limits set out in Directive 2012/33/EU, by imposing narrower limitations in the use of polluting marine fuels. Italy has envisaged the setting of a new ECA zone in the Adriatic-‐Ionic Sea.
Therefore, in the next two-‐three years we may have a new restricted area where a narrower maximum sulphur content of 0.1% shall apply.
The creation of a new ECA zone, even if it is not governed by Directive 2012/33/EU, is admitted under national and EU law. Indeed, when the EU Institutions establish a criteria or a limitation, Member States retain the liberty to tighten those limits when a general interest is at stake.
In practice, in the ordinary navigation outside the ECA zones (nearly the whole of the Mediterranean Sea), almost all merchant ships use HFO fuel to generate electrical energy. The HFO fuel is a standard gasoil and it does contain standard sulphur content much higher than the limits imposed by the current legislation. Do the rules for ship fuels also apply to this fuel?
Shipping companies that operate services through EU territorial waters have now to face a difficult strategic choice between three possible alternatives:
- they can use low -‐ sulphur fuel, such as MGO (“Marine Gas Oil”) in conventional engines with a definitive higher costs, and thereby facing the peril to interchange tanks when they enter/exit the EU territorial waters;
- they can switch to LNG (“Liquefied Natural Gas”), which is a clean fuel with a low sulphur content (definitely lower than current regulatory requirements);
- they can use a new technology by installing engine exhaust filters (the so-‐called “scrubbers”).
A part from the first option, that requires costs that -‐ sooner or later -‐ will affect competitiveness, LNG and the installation of scrubbers are the real solutions for ship-‐owners.
Using LNG originates a few serious implications, namely i) pretty much complicated ashore logistics and ii) some costly technical update on board.
Vessel updating costs are considerable. They involve the installation of “dual-‐fuel” engines, new tanks and other on board facility for the management of this particular fuel.
The onshore situation is not that different. The LNG distribution network (currently present only in Northern Europe) is expensive and storage is restricted in ports located close to a populated area.
From this standpoint, the EU -‐ after issuing Directive 2014/94/EU concerning the realization of infrastructures for alternative fuels36 -‐ invited Member States to present by 2016 national plans in order to support the expansion of appropriate infrastructures in the view of introducing alternative fuels in the marine industry.
It was also established that all EU Member States would ensure the realisation of an appropriate number of LNG suppliers in the seaports by end of 2025, in order to allow ships to use that fuel trough the TENT-‐T Network.37
Nowadays in Europe, the port of Rotterdam constitutes the main hub for the supply of LNG in the North Sea, while the port of Gothenburg applies an important discount on port charges for ships that decide to go with an LNG refuelling. In Italy, ports like Genoa, Livorno and Civitavecchia are evaluating the construction of facilities for LNG bunkering.
Due to its position in the Mediterranean, Italy could become the real LNG supplier for many vessels operating in the Mediterranean Sea.
Another option for shipping companies trying to comply with the stringent EU requirements for marine fuels sulphur emissions would be opting for scrubbers which are, in very practical terms, filters that remove sulphur from exhaust gases.
On one hand, scrubbers could be a valuable alternative to the use of LNG, thanks to the use of the cheaper conventional fuel (HFO) and the relatively lesser cost for their installation (comparing to those are necessary to switch a fossil fuel engine with a LNG capable one). However, this operation is not free of costs. Placing of filters do require extra space on board, space that has to be sacrificed by reducing cargo loading factors. In addition, scrubbers needs conspicuous electric energy consumption for their operation.
The main problem about scrubbers concerns the lack of private financial resources to allow their installation.
One remaining question: will ship-‐owners or fuel suppliers fund this gigantic transformation of the entire shipping industry? In such a case, costs shall be partially redirected to the market and -‐ in any case -‐ some distortive consequences may arise.
In order to cope with this quite unpredictable scenario and in the view of reducing the impact of the process, Directive 2012/33/EU 38 provides that Member States, can promote (i.e. fund) innovative systems in order to reduce harmful air emissions.
Article 4 septies of the new Directive provides that Member States may “grant state aids to the operators affected by this Directive, including supports for existing ships adaptation, if this measures are compatible with the internal market”.
This is the current challenge for the maritime industry in Europe. Operators and Lobbyist are warned: who will be the first to receive a financial support?