Freight by Water Conference Teesside7 September 2012

Sulphur Directive Impacts

The Solutions

• Fitting scrubbers– estimate €4m per ship

• Using MGO at – +€200 per tonne

• Switching to LNG in the longer term– Not widely available currently

Operator View

• Scrubber is the best short term solution - technology permitting

• LNG coming (long term) • Both may be part of the solution, but not

the entire answer in 2015. • More time needed for technical

development (Reliability)

Operator View – use scrubbers

• The technology works, but…• Not yet ready for use on 60% of ships

– Rules for using scrubbers (washing of materials into the sea) not yet in place (needed for investment decisions)

– Practicalities for waste disposal from scrubbers not yet in place

• Loss of energy efficiency = greater emissions of CO2 (1.5%)

• Expensive investment solution = higher operating costs– Possible 10% cost increase to customers where it is available

Mitigating Solutions

• Derogation/exception/transitional period for the 2015 requirement?

• Grants• New/upgraded technology - scrubbers• Increased infrastructure availability – LNG• Increased compliant fuel availability – MGO

Wider Context

• Everybody faces the environmental challenge…

…and the regulatory challenge

UK Targets

• UK climate change reduction targets against 1990:– 34 per cent by 2020– 60 per cent by 2030– 80 per cent by 2050

• Influences public policy decisions

Corporate

• Emissions Reporting– Increasing requirement for companies to report their

carbon footprint• From April 2013 all quoted companies will have to report on

GHG emissions in the Directors’ Report section of their Annual Report

• Transport operators have to report GHG emissions• Users “encouraged” to report third party emissions –

guidance provided on freight

– Review in 2016 – possible expansion of requirement

Rail

• Non-Road Mobile Machinery Directive– Regulates carbon oxide (CO), hydrocarbons (HC),

nitrogen oxides (NOx) and particulate matter pollution from rail engines (and inland waterway vessels)

– Affects new and refitted engines– Applied at the start of 2012– Flexibility for UK to end of 2014– Rolling effect as new engines have to be purchased

• Track Access Charges

Road

• Euro standards– Progressively tighter emissions standards for engines since

1992– Euro 6 emission standards for newly-manufactured trucks

applies from start of 2014• particle emissions halved and oxides of nitrogen emission

reduced by 77 per cent• Expected to increase fuel consumption

• Road Fuel Taxation• Road Charging• Fuel Prices

– Demand imbalance for diesel

• Increase in driver costs– Levelling of living standards with east European states– Shortage of drivers

END

Sulphur Directive

• Limit sulphur content of marine fuels to 0.10% from 2015 within defined areas

• Based on MARPOL Annex VI amended in October 2008

• Effectively ban heavy fuel oil unless emission abatement methods employed

• SECA at 0.1% sulphur defined as Channel, North Sea and Baltic

The Sulphur emission control area