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Reducing Maritime Emissions: Impacts of MARPOL Annex VI on Transport

Corporate Partnership Board

Summary

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Growth in emerging economies will have several knock-on effects on international trade and the transport services that underpin these exchanges. A rebalancing of trade flows is likely as is an increase in the volume of goods traded. Where these goods are produced, how they travel, and how far they travel, will be largely determined by relative transport and production costs which are also set to evolve.

This project will look at one component of this dynamic equation – namely maritime transport costs – and investigate how these are set to evolve under recent regulations relating to environmental quality and performance. New rules mandate a maximum 0.1% sulphur content in bunkers used in emission control areas since 2015 and foresee a maximum 0.5% global sulphur content fuel cap to be implemented in 2020. These caps will have impacts on vessel operating costs and these will in turn have an impact on overall maritime transport costs.


This project will:

  • discuss the scope and scale of costs imposed by sulphur emission rules under MARPOL Annex VI
  • investigate how these might evolve under changes in trade patterns and different scenarios and, alternatively, how these might impact future freight flows, and
  • discuss potential compliance strategies of ship owners and shipping companies including cleaner fuels, scrubbers, LNG and other alternative fuels, and
  • appropriate regulatory responses to facilitate these choices.

This work will build on ITF’s global freight transport model, recent work on shipping emissions in ports, and previous work investigating MARPOL impacts on transport costs. In the ITF global freight transport model, the cost imposed by MARPOL Annex VI may potentially have two types of impact:

  • In the immediate, extra fuel/operational costs in low emission zones may lead to re-routing that would increase travel times and distances.
  • After 2020, the uniform imposition of low sulphur content for maritime bunkers may structurally affect maritime transport costs and potentially lead to modal transfer to competitive alternatives or changes in hubbing patterns.

Changes in both of these dimensions will be tested by introducing alternative travel time scenarios that affect freight mode choice and the weight intensity of maritime freight. The evaluation of costs will be conducted for container shipping in one of the busiest maritime trade lanes, namely between the Far East and North Europe. Different scenarios will be assessed for different ship container ship sizes. The scenarios will be differentiated according to bunker prices (US$ 300, 450 and 600) and voyage speeds (16, 18, 20, 22 and 24 knots). The different vessel sizes taken into account will be container ships with capacity of 8,500, 15,000 and 19,000 TEU. Voyage costs will be calculated for three situations: one prior to 2015, one in 2015 and a projection for the situation 2020. In these calculations the price differential of cleaner fuels will be taken into account for the relevant legs of the voyage (ECA). This will give an assessment of the increase in maritime transport costs on this trade lane. This will be used to reflect on the relation between these cost increases and maritime trade flows.