New Study Suggests 2020 Global Sulfur Cap Could Increase CO2 Emissions Attributable to Shipping

Wednesday December 7, 2016

The IMO's decision to implement a 0.50 percent global sulfur cap on marine fuel from 2020 could result in an overall increase in emissions of CO2 attributable to shipping, a new study published by Trans Oleum has warned.

While there is no question that the new rules will reduce direct emissions of SOx from the sector, if they did result in increased CO2 it would mean the new rules were at odds with IMO's need to reduce shipping's GHG emissions as part of its implied obligations under the COP21 global climate agreement.

"This report brings a whole new way of looking at how we calculate the emissions from shipping," Gustav Krantz, the paper's author, told Ship & Bunker.

Krantz's work stems from the industry expectation that in 2020 most ships will switch to burning MGO, or at least blends with dominant shares of MGO, to comply with the new rules, which in turn means there will be an increase in demand for distillate fuel from shipping.

To meet that increased demand, refineries will have three main options; run a lighter crude slate, invest in technology to improve the gasoil to fuel oil output ratio, or simply increase throughput and produce more of all products.

As refinery technology upgrades are a multi-year, $1 billion plus investment, and some regions are already running a near maximized crude slate, Krantz argues that increased throughput is the only realistic near term option to meet the expected demand increase in 2020.

Further, Krantz posits that because the increased throughput yields other petroleum products that otherwise would not have been produced, and because they will have only been produced due to shipping's distillate demand, then the emissions from burning all those extra petroleum products should in fact be attributed to shipping.

Potential Impact

To asses the potential impact, Krantz looks to ARA as an example, which in 2015 saw a small uptick of around 3 percent in refinery throughput.

He calculates that if this increase was only to meet shipping's ECA distillate demand then it would have resulted in over 100 million extra tonnes of CO2 that he argues should be attributable to shipping.

Of course, how much of the increase is actually attributable to shipping is not clear, and expanding this idea globally to understand what the 2020 picture is even more difficult.

At this stage, trying to quantify what the increase in global refinery throughput might have to be, and what proportion of that could be directly attributed to meeting the needs of shipping, is an almost impossible task.

Increased talk of diesel being banned as a land transport fuel also muddies matters, but if increased throughput is indeed a result of the 2020 sulfur cap, Krantz's work certainly invites the question as whether the impact of that needs to be better understood.

"A diesel ban in road transport is a promising solution in terms of CO2 if it helps balance the European supply/demand to favour gasoline," Krantz argues.

The paper also suggests that from an overall emissions perspective, using a scrubber and continuing to burn fuel oil might actually be more environmentally sound than switching to MGO.

The full report is available here:

http://www.transoleum.se/wp-content/uploads/2016/11/CO2-and-sulphur-emissions-from-the-shipping-industry.pdf