INSIGHT: Med ECA Impacts, Now and Next

The Mediterranean joined the 0.1% ECA club earlier this year. File Image / Pixabay

While much of the shipping industry has had its attention on how to cut GHG emissions, progress is still being made on the reduction of sulfur and other emissions.

The International Maritime Organization set a global marine fuel sulfur limit of 0.50% in 2020, cutting it from the previous 3.5% cap. But other parts of the world are still seeking to impose a tougher 0.1% limit, following the example set by Northern Europe and North America in 2015.

The Mediterranean was the latest region to join this club. As of May 1, the Mediterranean Sea has been designated an emission control area under Marpol Annex VI, limiting sulfur emissions from ships in the area to 0.1%.

As with the ECAs in Northern Europe and North America beforehand, the change has prompted a significant shift in bunker demand.

Industry analysts, including projections highlighted by Ship & Bunker, have forecast as much as a 20% increase in global MGO demand driven by the Mediterranean ECA, while fuel oil sales may drop by 3%. Local changes in demand patterns are likely to be more pronounced.

The change is also likely to increase interest in the use of scrubbers in the Mediterranean region – allowing ships to use cheaper HSFO while complying with the sulfur limit – as well as prompting the emergence of a ULSFO market in some areas.

As voyages in the Mediterranean are likely to involve EU ports and thus be affected by the EU-ETS and FuelEU Maritime regulations, GHG emissions will also be a factor in determining how to approach ECA compliance here. MGO's higher GHG emissions per tonne versus fuel oil will add additional costs from the point of view of GHG regulation compliance.

Further ECAs are also set to emerge in time. The IMO's Marine Environment Protection Committee adopted a measure last year designating the Canadian Arctic and Norwegian Sea as ECAs, effective from March 2026. This year, the committee approved one setting out plans to add a Northeast Atlantic ECA from 2028, subject to adoption later this year.

Once these ECAs are in place, 0.1% sulfur limits will apply in the entire coastlines of the EU, UK, US and Canada. MGO, ULSFO and HSFO with a scrubber will become much more popular bunker grades, while VLSFO will lose more of its market share.

But over time, the effect of these ECAs on shipping costs will be reduced in relative terms by the much higher cost of complying with GHG emissions regulations at both the global and EU levels. Once these regulations are fully phased in, delivering the lowest carbon intensity at the lowest cost, rather than sulfur content, will become the most important metric in determining which type of bunker fuel to consume.