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Business Shipping

Greening a blue industry

New directives to decrease the environmental impact of ships are coming into force and mean increased costs for shipping companies and inevitably the consumer reports Andria Kades

As the world grows increasingly aware of the threat to the environment posed by human activity, shipping has followed suit and the industry is preparing for the introduction of new rules that will see vessels reduce their impact on the environment although meeting them may drive up costs.

Now gathering pace, these efforts are not entirely new. The International Maritime Organization (IMO) has been working to this end since the 1960s although changing technologies mean strategies and their implementation also develop.

Closer to home, despite Cyprus’ small size, the country boasts the third largest merchant fleet in Europe and with that comes a powerful drive to promote a blue growth strategy, while meeting IMO environmental directives and those of the EU, under which Cyprus’ jurisdiction obviously falls.

According to the Cyprus Shipping Chamber (CSC) there are four pressing issues at the moment which the industry is focusing on in terms of the environment and the protection of marine species. They are: reducing the sulphur content of fuel oils used on board ships, reducing greenhouse gas emissions from ships, controlling the transfer of potentially invasive species through ship ballast water and reducing marine plastic litter from ships.

“There are really some ground breaking rules that are coming in in 2020 for the reduction of sulphur emissions and then there’s quite an ambitious strategy for the reduction of carbon dioxide emissions by 2050,” for both of which Cyprus has been very vocal, Deputy Shipping Minister Natasa Pilides said.

Where sulphur content is concerned, ships will be banned from using fuels with a sulphur content above 0.5 per cent as of January 2020, compared with the current limit of 3.5 per cent. Companies have different options to choose from in order to become compliant. FML Ship Management Ltd, for instance, has chosen to change over to compliant fuel, with a sulphur content that does not exceed 0.5 per cent, according to director Sunil Kapoor.

The aim of the firm is to phase the change to compliant fuel and offload all remaining non-compliant fuel well before the deadline.

Other options available, as per IMO regulations, are to use other sources of cleaner fuel such as liquefied natural gas (LNG) or methanol. Ships can only continue to burn high-sulphur fuel if they are fitted with scrubbers – or sulphur cleaning devices. Alternatively, they have the option to use onshore power supply while at berth.

“The decision on how to comply with the requirement is a commercial one and it is up to each company to assess its fleet and make the appropriate decisions,” CSC Marine Manager Alexandros Josephides said. Enforcement of the regulations lies in the hands of flag and port states and failure to comply will result in fines or vessels being detained.

Where greenhouse gases are concerned, the IMO has ambitious plans including reducing emissions by at least 50 per cent by 2050 compared to 2008, with the view of completely phasing them out. Similarly, the goal where carbon dioxide emissions are concerned is to reduce them by at least 40 per cent by 2030 and 70 per cent by 2050, compared to 2008.

It is worth noting that ships are the most energy efficient and environmentally friendly mode of transport, compared to other means such as aviation, trucks and railways, despite the fact that they carry 90 per cent of global trade, according to Josephides.

However, there appears to be an overlap between the IMO, which is the global body responsible for the shipping industry, and the EU which has its own regional responsibilities that Cyprus is subject to.

For instance, the IMO has a data collection system, in force since January 1, 2019, requiring ships to monitor and report their carbon dioxide emissions. Though this is simple enough, a regulation set by the European Commission which came into effect on January 1, 2018 on reducing greenhouse gas emissions requires ships to monitor carbon dioxide emissions as well as fuel consumption, distance travelled, time at sea and cargo carried on a per voyage basis to gather annual data for an emissions report to be submitted to an accredited shipping verifier.

The CSC suggests the two schemes be aligned to “remove administrative burden from companies and governments operating under both,” and avoid jeopardising the efforts in place, Josephides said.

Shipping companies in Cyprus and elsewhere are concerned how these regulations will affect their competitiveness. Lavar Shipping said that “EU regulations are stricter than IMO regulations, therefore competitors outside the EU have a competitive advantage on international projects.”

As Pilides said, there are always teething problems that come with any kind of change. “For us, both platforms are really important because if we have a position it needs to be debated and decided at EU level but then one of our main beliefs and arguments is that all policies should be on a level playing field and they should be international not regional.

“Of course we want to do our utmost to protect the environment and that’s the primary priority without any doubt but we need to be doing enough work so that it is implemented in every country because if there is a country that is not implementing the rules then there’s automatically solutions for people to get out of the regulations and it doesn’t really solve the problem.”

Indeed, Kapoor states that companies based under EU jurisdiction “are under much more scrutiny, paperwork and bureaucracy. All these delays and the extra workload cost money and thus increase the operational costs of doing business.”

These undertakings, however costly, barely scratch the surface. In September 2017 the international convention for the control and management of ships’ ballast water and sediments came into force aiming to control the spread of invasive species in the water that damage biodiversity.

The concern surrounding ballast water – necessary for safe and efficient shipping operations – poses “serious ecological, economic and health problems due to the multitude of marine species carried in ships’ ballast water,” ranging from bacteria, microbes, small invertebrates, eggs, cysts and larvae of various species, according to the IMO. These species, which are transferred in the ballast water “may survive to establish a reproductive population in the host environment, becoming invasive, outcompeting native species and multiplying into pest proportions.”

Currently port states, flag states and other stakeholders gather, prepare and submit data as part of an experience-building phase but ships will also have to be equipped with “expensive ballast water management systems” to comply with the convention requirements, Josephides said.

Last but not least is plastic. Images of marine life dying because of plastic in the ocean are widespread and the effects cannot be stressed enough. “Garbage dumped at sea can actually be as harmful as oil or chemicals. Plastics in particular can take years to degrade and marine life can easily confuse plastics with food. This threatens biodiversity and dangerous toxins can enter the food chain, ultimately being consumed by humans,” Josephides added.

Shipping has its own regulations to reduce marine plastic litter from ships. Lavar Shipping outlined their garbage management plan which includes waste segregation. According to IMO regulations “it is not permitted to dispose of garbage at sea and ship’s garbage including plastic must be minimised, recycling should be undertaken and discharged to port reception facilities,” Josephides said.

Citing the World Economic Forum, the CSC pointed out that 90 per cent of plastic found at sea originates from land, making the problem of plastic litter from ships far less than shore based sources. Nonetheless, Josephides stressed that “the shipping industry has a special responsibility to play its part in eliminating any pollution of the sea” and fully supports the work undertaken by the IMO.

However, “necessary measures must be taken by governments to provide adequate port reception facilities to receive waste from ships calling at their ports and terminals. At the moment the quality and availability of reception facilities worldwide is unreliable. It is the CSC’s view that adequacy of reception facilities is key to properly implementing the regulation.”

Cyprus wholeheartedly supports all strategies aimed to protect the environment and marine life, Pilides said, however she outlined that more stakeholders, beyond the shipping industry, need to be brought on board with actions aimed at solving the problem.

“It’s also good to know that it’s not just the shipping industry that needs to be involved because the fuel that shipping uses is produced by oil and gas companies, not the shipping companies, so it’s not a discussion that needs to be happening just within the shipping industry and it’s important to raise awareness on a wider level and that’s also something that we are trying to do within the EU, within the IMO and even within Cyprus.”

Kapoor is far more forthright in highlighting discrepancies he feels the shipping industry is paying for. “We can observe a fragmentation as to how much pressure is put on each sector and too much pressure is put on the shipping sector. According to the IMO, annual greenhouse gas emissions from shipping amount to approximately three per cent of global manmade emissions. The rest of the emissions come from sources like cars, trucks, trains, planes, power plants, oil refineries, industrial facilities etc.”

Using the 2020 sulphur regulation as an example, Kapoor said “the IMO rushed into enforcing this decision and put the shipping industry under so much pressure without proper lobbying and guidelines. On top of that, oil refineries which not only play a major role in this, but are also a big contributor to the greenhouse gases, were not targeted at all.

“In my opinion the change should have started from them, they should have been pressurised to find cleaner fuel and when they are ready to supply it then force the shipping sector to comply with it and take the necessary steps. My point is that, all of us have the responsibility to protect the environment, but the efforts should come from everyone and everyone who is contributing to environmental pollution should be targeted in an equal and fair way.”

Lavar also stressed that every industry “has a part to play when it comes to the environment” with responsibility not lying squarely on the shipping industry, especially as it is actually powered by the oil and gas industry.

The company, however, outlined that controlling some of the current practises will inevitably benefit current and especially future generations.

“The current heavy oil that has been the primary marine fuel for over a century is a by-product of the oil refining process, and traditionally, this bunker fuel has been the means by which many global oil refiners, especially those that only have atmospheric distillation capability, and no hydrotreaters, or vacuum capability, get rid of their high sulphur content residues. These are residues that cannot be blended with other mediums / fuels. Controlling and stemming this practice is good for all of us and especially our kids and grandkids.”

Cost of course, is a recurring theme. According to Kapoor, all of these new regulations “demand new technologies and investments which are very costly to install. This extra cost to the shipowner will be reflected in higher freight rates and consequently as higher prices to the end consumer. Additionally, the limited supply of the new grade fuel will push the fuel costs up, at least in the short term, resulting in rising freight rates, with much of these costs being passed to consumers.”

Lavar too said without a doubt there will be an increase in cost, however it is not all bad news. “Whether this is reflected as an additional €5 or €10 or even €25 on a 50” at screen TV we are sure that the (global) market will absorb the effect.”

In the long term it reduces the environmental impacts and the risk of an environmental disaster that could possibly have a huge impact on a company, and there is also the advantage that clients prefer responsible companies, Lavar added.

Indeed, stakeholders agree this is for the betterment of the planet and future generations. Cyprus and its shipping industry have embraced these wholeheartedly, overhauling their systems with the government now setting its eye on connecting blue growth to keeping the industry green.

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