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 Ships are typically powered by heavy fuel oil or bunker oil, both of
which produce harmful pollutants such as sulphur dioxide which can
cause respiratory and heart problems.
Such fuels contain 2.5 to 3 percent sulphur on average, which is up
to 3,000 times the sulphur content of road fuel in Europe, according
to marine campaigners Seas at Risk.
Under EU rules from Jan. 1, 2015, all ships operating in the North
Sea, Baltic Sea and English Channel will have to use a fuel with a
maximum sulphur content of 0.1 percent.
Ship owners can comply by changing fuels, such as to low-sulphur
marine gasoil, which can cost four times as much as high-sulphur
bunker fuel.
Or they can use bunker fuel and fit a "scrubber", a technology that
filters out pollutant gases before they are released into the
atmosphere.
This costs as much as 3 million euros ($4 million) for a small
vessel - often more than the value of the ship itself - and as much
as 12 million euros for a larger ship, and it could take up to two
years for every ship to be fitted.
Another option is to use liquefied natural gas (LNG), but ships
would need expensive retrofitting, and there is not yet a reliable
supply chain in place for LNG.
"Neither of these options (scrubbers and LNG) can easily be deployed
by January 2015," the International Energy Agency said this week.
COST OF COMPLIANCE
Many shipping firms have complained about the costs of meeting the
regulation, saying it will damage competitiveness and lead to job
losses.
All ships worldwide, however, will be subject to a limit of 0.5
percent sulphur content in fuels by 2020 under rules by the
International Maritime Organization, which are still subject to a
feasibility review.
Maersk Line [APMOLM.UL], the world's biggest ship container group,
said switching to low-sulphur fuel under the EU rules will cost it
an extra $200 million a year. P&O Ferries' fuel bill will rise by 30
million pounds ($50 million) a year, which it said it would pass
onto customers.
"On longer routes fares will need to rise more than on shorter ones
to cover the greater increase in fuel costs," P&O Ferries Chief
Executive Helen Debbie wrote in a letter to staff, which was seen by
Reuters.
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There is also the risk that some firms will find it cheaper to pay
fines for not complying with the limits than pay upfront capital
costs to change fuels or fit technology.
"The potential for not following the regulations is there, because
you can save a lot of money. It is so significant that over time
companies in compliance may not even be able to compete with
companies who are not in compliance," said Mads Stensen, global
adviser on sustainability at Maersk Line.
Britain-based ferry group Red Funnel has been using low-sulphur fuel
for 18 years, however, and a spokeswoman said the company has
maintained its competitiveness through efficiency improvements.
Apart from the costs, there is also a lack of clarity about how
enforcement will work. Each EU member state is responsible for
deciding its own methods of enforcement including penalties,
according to the European Commission.
Industry sources say many countries have yet to decide on the level
of fines, how to monitor the sulphur content of fuel or how often to
check ships.
A spokeswoman at Britain's transport ministry said the government
was still in consultations on the new sulphur regime.
"Repeat offenders could potentially be subject to penalties other
than fines, including the detention of their vessels until such time
as compliant fuel was supplied," she said.
Britain's shipping minister, Stephen Hammond, said the government
was trying to secure EU finance to compensate ship owners and ports
for the higher fuel costs.
(editing by Jane Baird)
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