Against a background of growing global environmental consciousness, the International Maritime Organisation (IMO) has sought to introduce a number of environmental regulations in recent years to reduce emissions into the atmosphere. Whilst the ethical credentials are clear, the increased financial and logistical strain on cruise companies striving to comply with these regulations is a burgeoning concern.
Emission control is of course not a new topic. On 19 May 2006, the first Sulphur Emission Control Area (SECA) was introduced in the Baltic Sea, requiring all vessels within the prescribed geographical limits to burn fuel with reduced sulphur oxide (SOx). The Baltic Sea SECA has since been joined by the North Sea SECA and the United States and Caribbean and the North American Emission Control Areas (ECA), regulating nitrous oxide emissions (NOx) and particulate matter (PM) in addition to SOx, with the latter coming into force at the start of this year.
Collectively, these areas are now all referred to as ECAs for the purposes of the regulations established under MARPOL 73/78 and amended by Annex VI, which initially prohibited a fuel sulphur content in excess of 1.5%, reducing to 1.0% after 1 July 2010.
Because of the restricted availability of low sulphur bunkers and their corresponding relatively high expense, practically, this has meant cruise vessels carrying small parcels of low sulphur fuel in segregated bunker tanks to burn on entry into an ECA.
Tightening regulatory regime
Apart from the ongoing threat of the Mediterranean becoming an ECA, which would have serious ramifications on the cost of cruising and route planning, the industry now faces the further reduction of SOx and PM emissions within the existing ECAs to just 0.10% from 1 January 2015, with current plans, depending on the outcome of a review to be concluded in 2018 as to the availability of low sulphur fuel oil (which might cause a deferral to 1 January 2025), also to limit these emissions outside of an ECA to 0.5% from 1 January 2020 (a 3% reduction from the current prescribed limit of 3.5%).
In tandem with the tightening IMO regime, the European Union enacted legislation requiring Member States to ensure that passenger ships operating on “regular services” to or from any EU port use fuel with a maximum SOx of 1.5%1 (Directive 1999/32).
Passenger ships on regular services
The expression “regular services” was defined as meaning:
“A series of passenger ship crossings operated so as to serve traffic between the same two or more ports, or a series of voyages from and to the same port without intermediate cause, either: (i) according to a published timetable, or (ii) with crossings so regular or frequent that they constitute a recognisable schedule”.
Although, at first blush, the Directive might appear to catch ferries rather than cruise vessels, the European Court of Justice (ECJ) recently held in Manzi and Another v Capiteneria di Porto di Genova Case C-537-11 (an Italian case in which a preliminary ruling from the ECJ was requested), that Directive 1999/32 does apply to cruise vessels on the basis that the list of ports contained in the itinerary for a normal cruise would necessarily consist of at least two ports which could not be avoided, i.e. the port of arrival and port of departure.
The transport was thus made between the same two or more ports, even where the transport ended at the port of departure. Further, the ECJ held that because not all EU Member States are contracting parties to MARPOL 73/78, it was not possible for the cruise line to argue that the provisions of Directive 1999/32 should be interpreted in light of the lesser requirements of Annex VI, which they were in fact adhering to in good faith.
With this in mind, owners need to be extra cautious of not only the implications of the existing Directive 1999/32, but the more stringent restrictions set to apply from January 2020 when the EU regulations will limit the SOx content of fuel used in all EU waters to maximum of 0.5%, regardless of whether the corresponding planned MARPOL Annex VI restrictions for fuel used outside of an ECA go ahead or not.
Options available to the cruise industry
The cruise industry is currently in a state of flux as various options are being considered to ensure compliance with the regulatory regimes. Although the wider shipping industry has sought to counter increased low sulphur fuel bunker costs by advocating slow steaming, this is often not an option to the cruise industry where high speed overnight runs, particularly in the Mediterranean, are required to ensure that a competitive itinerary can be offered to passengers with increasing expectations for the cruises on offer. An alternative of exhaust gas cleaning systems, or scrubbers, which can bring the emissions within the prescribed limits, have the advantage of allowing ships to use the cheaper, high sulphur fuel without falling foul of the regulations. Despite their high initial installation costs and dubious ‘green credentials’ (they increase power consumption, thereby increasing CO2 emissions), they appear to be becoming an increasingly popular option with a number of cruise lines announcing plans to install scrubbers in newbuilds, delivering over the next few years, in conjunction with shipbuilders such as Meyer Werft. This is in addition to the retro-fitting schemes in place elsewhere.
Aside from the obvious impact of fuel costs on the overall cost of cruising, as time passes, these regulations may prove one of the biggest hurdles for the cruise industry to overcome with the main challenge being whether the availability of low sulphur fuel bunkers and/or economically viable technological alternatives can keep pace with the constricting regulatory framework.