SeaIntel: ECA Fines Not High Enough to Encourage Fuel Switch

Tuesday April 15, 2014

A study by Danish analyst SeaIntel finds that fines faced by shipping lines violating new rules for Emission Control Areas (ECAs) in Europe may not be sufficient to convince them to comply, industry news site International Transport Journal reports.

Fines for vessels that fail to switch to fuel with 0.10 percent sulfur fuel vary greatly and are often too low to incentivise companies to take on the higher cost of the low-sulfur bunker.

SeaIntel also found that less than 1 percent of vessels sailing in the ECAs have their engines tested to determine whether they are using the correct fuel, and only Sweden, Norway, and Finland plan to increase the number of inspections next year when the new limit on sulfur content comes into force.

Switching to the low-sulfur fuel as required could result in costs for operations in the ECAs increasing by $180 to $280 per metric tonne (mt), according to Brightoil CEO Per Wistoft.

SeaIntel partner Alan Murphy said carriers may be much better off financially risking a fine than paying for the more expensive fuel, with the extra bunker cost 2.5 to 6 times higher than the fine an offender would pay for using the wrong fuel in German waters, for example.

"Our analysis shows that a 4,500 teu vessel sailing at 16 knots from the beginning of the English Channel to Hamburg will save EUR 12,000 ($16,600) if it uses bunker fuel with a 1% sulphur content, instead of the mandated 0.1% sulphur content," Murphy said.

Even in Poland, which has the second-highest fines after the United Kingdom's, the extra cost of low-sulfur fuel would only match the savings on a round trip between the English Channel and Dansk, assuming the vessel was caught and fined.

European authorities have been looking at plans for enforcement of the ECA rules.

Maersk Line recently said that, while it supports the new low-sulfur mandate, it is concerned that poor enforcement would give a competitive advantage to companies that "cut corners."