2020 Regs Doing Little for the Uptake of LNG Bunkers, Scrubbers, or Alternative Fuels, a New Report Finds

by Ship & Bunker News Team
Thursday August 10, 2017

The upcoming 0.50% global sulfur cap on marine fuel set to come into force in 2020 is doing little to help the uptake of liquefied natural gas (LNG) bunkers, other alternative marine fuels, or scrubbers, a new report released today has found.

The revelation was one of several conclusions from the report Slow Steaming To 2020: Innovation and Inertia in Marine Transport and Fuels, released today by The Center on Global Energy Policy (CGEP) at Columbia University and authored by CGEP Senior Research Scholar Antoine Halff.

IMO's new rules address only sulfur emissions and from 2020 require vessels to use a fuel with a maximum 0.50% sulfur content.

Vessels can also achieve an equivalent level of compliance through the use of otherwise noncompliant fuel in conjunction with an exhaust gas cleaning (scrubber) system or similar technology.

"In opting to set a performance standard rather than a technical one, the IMO has ostensibly chosen technical neutrality. Performance standards are normally more supportive of innovation than technical ones, which by definition 'lock in' a given technology," the report says.

"By effectively disincentivizing capital-intensive solutions and making low-sulfur fuel the default compliance option, however, the global sulfur cap entrenches, as it were, the role of oil in shipping more than it threatens to displace it with 'cleaner' options."

The industry is also acutely aware that new regulations are on the horizon set to limit other emissions such as SOx, NOx, and GHGs.

This regulatory uncertainly adds further reason for shippers to avoid "locking in" to a particular solution, the report says, even if this "wait and see" approach costs them more in the longer term.

"Due to market and regulatory uncertainty and to the long lead times and capital requirements of LNG retrofits and scrubbers, shippers have by default adopted the compliance option that requires the least planning and upfront capital spending for existing ships, though not necessarily the most cost-effective one in the long run: conversion to lower-sulfur residual fuel oil," the report says.

"By selecting performance standards over technical ones to desulfurize marine fuels, and by adopting a sequential approach to the sector's main types of air emissions, regulators may have unwittingly entrenched the role of oil in shipping for decades to come.

"Given their high capital costs and the advanced planning required, neither scrubbers nor LNG engines seem destined to play a leading role in meeting the new specs, at least initially. That leaves low-sulfur bunker fuels as the default compliance option for most. A more integrated approach, combining restrictions on SOx, NOx and GHG, could have incentivized a faster switch to LNG."

The full report can be found here: http://energypolicy.columbia.edu/publications/report/slow-steaming-2020-innovation-and-inertia-marine-transport-and-fuels