As one of the world’s largest industries, shipping plays a key role in the path towards decarbonization. Greenhouse gas emissions from the sector account for 2.5% of the total emissions released into the atmosphere, and many regulations have emerged and continue to emerge in order to reduce this impact and its environmental consequences. If you want to discover what you need to know about IMO 2020 keep reading.
One of these regulations is the global limit imposed by the IMO on the sulphur content of fuel used for maritime transport. On January 1, 2012, the IMO already set a limit on sulphur emissions from the sector, limiting them to 3.5%. However, from January 1, 2020, just a few months away, the new limit on sulphur emissions from maritime transport will be 0.5%, which urges all players in the sector to act, especially shipping companies, as they operate cargo ships.
The regulation affects both the fuel used on board and that required by the main engines, auxiliary engines and boilers. Exceptions are only considered in cases where an emergency occurs, putting the safety of the ship or the persons on board at stake, as well as in cases where tests are being carried out for the development of technology designed to reduce emissions from maritime transport.
Consequences of the IMO 2020 regulation
The main consequence of this regulation is the need to implement the relevant changes so that ships can comply with the limits imposed. There are three ways of achieving the 0.5% sulphur emissions target:
-Use a fuel with a low sulphur content, i.e. not exceeding a concentration of 0.5%.
-Use fuels with a sulphur content greater than 0.5% in combination with a cleaning system, the so-called “scrubbers”, which clean the gases before they are emitted into the atmosphere.
-Choose an alternative fuel such as liquefied natural gas (LNG), which can reduce greenhouse gas emissions by up to 30% but requires changes to vessels’ engines. Methanol is also another alternative fuel that is already used in some shipping services.
Pros and cons of the different alternatives to comply with the IMO 2020 regulation
All options offer advantages and disadvantages and require significant changes and investment. In the case of using low sulphur fuels, vessels do not require any modification, but the problem comes with the reduced availability of these fuels, which could make their price more expensive with supply and demand.
Both in the case of using scrubbers and in the case of opting for LNG as fuel, some modifications will be necessary in the infrastructure of the vessel, with its corresponding investment, but in both cases the reduction of emissions is guaranteed. The use of LNG offers an economic advantage, as it is a more affordable fuel, but requires modifications to the vessel’s engines.
Consequences of the IMO 2020 regulation on freight rates
Freight rates may increase after the investment that carriers will have to make in order to comply with this regulation. Some examples of the surcharges that could be made are: BAF (Bunker Adjustment Factor), EBS (Emergency Bunker Surcharge), BUC (Bunker Contribution), BRC (Bunker Recovery Cost). However, it is still too early to be certain about the consequences that the regulation could have on freight rates.
In conclusion, everything will depend on how the market situation evolves and on the measures taken in each case. Shipping companies can adapt to the new regulations until January 1, 2020.
