Speaking at Inmarsat’s Smart Operations conference yesterday, Balston argued that shipping companies would suffer greatly from EU environmental measures, including the new Emissions Control Area (ECA) arriving in January 2015. “We now have, very unhelpfully, the EU trying to take its own measures. In the first place it seeks to bring in system of monitoring and reporting carbon emissions – that’s not without cost,” said Balston. “I’m sure in the years to come we’re going to see the whole of the European waters becoming an ECA.”
Balston highlighted the infeasibility of existing carbon-cutting measures, such as low availability of diesel in Europe for fuel-switching. “Shipping will be competing for the middle distillates… Europe alone, will require an additional 12-16m tonnes of diesel, and that will have to be brought in. European refineries don’t refine diesel at the level required. This will have a knock-on effect on other sectors, and the price of diesel in the forecourts will rise significantly.”
Balston also discussed alternative SOx-cutting measures, such as scrubbers, “…but for the average-sized ship, by the time you include downtime and lost working time, you’re talking about $8-9m per vessel. It is not a cheap option but for those operating in an ECA 100% of the time, maybe it is an option.”
“Thirdly, the use of alternative fuels… LNG… but LNG is generally speaking only viable for newbuild vessels.
Balston cited one North Sea study by AMEC in which it was demonstrated that freight rates would have to increase by 36% for cargo in order for shipowners to maintain current, and often negative, levels of profitability. “If you then look at the alternatives for that freight, we believe it will shift onto roads. This will be very bad for UK business – if you were a multinational business, why would you set up in the UK? You’re going to have this huge cost of import and export of goods. It’s making the UK uncompetitive.”
“And the cost of refining additional low-sulphur fuel is about 12m tonnes of CO2 per year… too often we see environmental regulation having a negative impact on carbon. We believe in a more pragmatic approach. The US is granting very short-time limited exemptions for use in their ECAs, because they’re only bound by the IMO rules which allow that. Here, we’re bound by the EU sulphur directive, which doesn’t.”
However, Balston highlighted a number of inconsistencies in existing ECA regulations. “The whole reason we have ECAs is for human health reasons – there is no doubt that Sulphur emissions cause major health problems… but if you were a UK politician, and you really cared about the health of this country, why is the Irish sea not an ECA? That’s where our trade winds come from – from the West. If you look at the deposition of SOx on our shores, it’s quite high all down the West coast.
“Perhaps it is politicians first, human health second, and shipping companies third.
“The ICS estimates that between 2015 and 2025, the cost to shipping will be $500bn. I think the cost to shipping is going to be significantly more than that.”
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