Stringent emissions standards for sea freight hit other transport modes
THE fuel market transition underway because of the International Maritime Organisation's (IMO) new regulation that caps the sulphur content in maritime fuels to 0
THE fuel market transition underway because of the International Maritime Organisation's (IMO) new regulation that caps the sulphur content in maritime fuels to 0.5 per cent is having a ripple effect on other modes of transport.
The push to cut the amount of permissible sulphur content in fuel started decades ago. As one example, the US commercial trucking industry began its move towards ultra low sulphur diesel with lower sulphur tolerance beginning in the 1990s.
The Environmental Protection Agency's Clean Air Act limited the trucking industry's sulphur content limit of on-highway diesel fuel to 500 parts per million (ppm) beginning in 1993. This was already lower sulphur content than what the commercial maritime industry has transitioned to over 25 years later (5,000 ppm).
Commercial trucking sulphur limits became even more aggressive in 2006, when the sulphur content of on-highway diesel fuel was limited to just 15 ppm.
The initial push to dramatically decrease sulphur content in transport fuel did not stop with the trucking industry. The United States Environmental Protection Agency limits later extended to non-road fuel, including locomotive diesel fuel in 2012, and US marine fuel soon after.
In 2015, the IMO implemented the North American Emission Control Area (ECA) as part of an amendment to a 1997 protocol of the International Convention for the Prevention of Pollution from Ships (MARPOL). MARPOL also helped us arrive to today; the post-IMO 2020 world with lower international maritime sulphur emissions.
The next decade will see freight transportation grapple with accepting the costs of what has commonly been omitted from emissions regulations: carbon dioxide (CO2).
The commercial maritime industry, through the IMO, has already adopted plans to reduce greenhouse gases produced from shipping by 50 per cent by 2050. Additionally, there have been calls within the industry to tighten or move up the timeline for these emissions targets.
Meanwhile, international progress toward lower CO2 emissions for the truckload and rail industries exist in pockets, despite these industries having higher carbon intensity per freight ton-mile. To date, an uptick in carbon emissions standards and costs for trucking and rail have mostly been limited to advanced economies, specifically in the Eurozone and Canada.
The commercial maritime industry is in the process of defining quantitative steps toward reducing its Greenhouse Gas impact, particularly CO2, despite being far more efficient than other modes of freight transportation on a ton-mile basis
The energy requirements of moving a heavy-duty truck can easily account for 20 per cent to 30 per cent of its operating costs, whereas fuel may account for over 50 per cent of operating costs for moving containerised ocean freight.
IMO 2020 is an example of how cleaner emissions targets can potentially lead to higher transportation costs and disruptions to budgets. Not only is the conventional, high sulphur marine fuel ceding much of its market share to low sulphur fuels and emissions-reducing technologies, the increased low-sulphur fuel demand created by IMO 2020 has shifted international refining production and supply chains.
All of this has culminated in a significant surge in marine fuel prices and ultimately more expensive maritime transportation costs for shippers moving goods to market.
Very low sulphur fuel oil (VLSFO 0.5 per cent) now captures the most market share, and year on year is over US$250/mt more expensive than the industry's former conventional fuel, high sulphur fuel oil (IFO 380).
To conclude, shippers must continually work toward reducing the cost, consumption, and emissions of moving their goods to market. Emissions will continue to increase their impact upon transportation networks as their full societal cost factors into the movement of freight. Shippers who advance their sustainability strategies ahead of policy change will create a competitive advantage.