ICS: Environmental Regulations are a $500 billion Risk to Shipowners

ICS Chairman Masamichi Morooka has urged regulators for greater focus on the economic sustainability of shipping.

The Chairman of the International Chamber of Shipping (ICS), Masamichi Morooka, today told delegates at the Nor-Shipping event in Oslo that impending environmental legislation could cost the shipping industry more than half a trillion U.S. dollars between 2015 and 2025.

Morooka has said the cost burden comes at a time that, for many shipping companies, is the worst economic climate in living memory,

Echoing his comments made at the Connecticut Maritime Association (CMA) event earlier in the year, he urged regulators for greater focus on the economic sustainability of shipping, not just environmentally sustainable shipping.

"As many companies struggle to survive during the difficult years ahead, we must persuade governments to avoid placing yet more straws that risk breaking the shipowner's back - and the straws to which I refer are the impending costs of environmental legislation," he told delegates at the Nor-Shipping event earlier today.

"Many of the expensive environmental regulations that are about to enter into force were conceived in a different world, at a time when shipping markets were booming and finance for retrofitting had not dried up."

Much of these costs will result from the switch to low sulphur distillate fuel, he said, assuming that a 0.5 percent global sulfur cap comes into effect in 2020, and from 2015 the 0.10 percent sulfur requirements are enforced in Emission Control Areas in North West Europe and North America.

However Morooka also highlighted that the costs of installing new ballast water treatment equipment will be "significant," as will the potential contribution that shipping might have to make to the UNFCCC Green Climate Fund.

ICS stressed that while protection of the environment must always remain a priority for the industry, it said the prevailing economic situation requires that "a degree of pragmatism" is applied to enforcement as new environmental regulations are implemented. 

"Unless this is understood, there is a danger of creating real barriers to investment in our industry as we hopefully move closer to recovery," warned Morooka.

Potential Costs of New Environmental Regulations

A graphic released by ICS showing the potential costs of new environmental regulations.

Assumptions: Ballast water treatment equipment - average $2M per ship with IMO agreeing five year implementation of BWM Convention, assuming entry into force in 2015; differential between distillate and residual fuel of only $300 per tonne with global consumption remaining at 300M tonnes per year (in reality both figures are expected to be higher by 2025) and IMO confirming that global sulphur cap will apply from 2020; UNFCCC replacement to Kyoto Protocol coming into effect in 2020, with shipping contribution to GCF in line with IMF/World Bank proposals. Potential costs of proposed Tier III NOX Emission Control Areas, plus other anticipated requirements, have been excluded.