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September 2018

The London P&I Club News Alert: 2020 Global Sulphur Cap - ICS Guidance on Compliance

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

Dear Sirs,

Below please kindly find the above circular from the London Club as well as a brief summary in Turkish.

2020 'Global Sulfur Cap' - Uluslararası Deniz Ticaret Odası'nun yayınladığı "Uygunluk Kılavuzu" hakkındaki ilam.

MARPOL Ek VI uyarınca 2020 Global Sulphur Cap olarak adlandırılan yönetmelik

1 Ocak 2020 tarihinden itibaren yürürlüğe girecektir. Bu yönetmelik gereği ana makine ve yardımcı makineler ve kazanlar dahil olmak üzere Emisyon Kontrol Alanları" dışında da ticari gemilerde kullanılan akaryakıtın kükürt içeriğinin %0,50 m/m yi geçmeyecektir.

MARPOL Ek VI'da belirtildiği gibi, daha düşük kükürt emisyon standartları aşağıdakiler kullanılarak karşılanabilir:

1. Düşük sülfür uyumlu akaryakıt; veya

2. Tutuşturulduğunda ihmal edilebilir sülfür oksit emisyonları üreten gaz / metanol / LNG kullanılması; veya

3. Atmosfere salınmadan önce emisyonları temizleyen "yıkayıcılar" olarak da bilinen egzoz gazı temizleme sistemleri (EGCS) kullanılması.  

IGF Kod , EGCS için 2015 Kılavuz İlkelerine ,Uluslararası Deniz Ticaret Odası tarafından yayınlanan kılavuza ve diğer detaylara aşağıdaki İngilizce metinde belirtilen  URL bağlantılarından ulaşabilirsiniz.

http://www.imo.org/en/KnowledgeCentre/IndexofIMOResolutions/Maritime-Safety-Committee-(MSC)/Documents/MSC.391(95).pdf

http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Documents/LNG%20Study.pdf

http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Documents/MEPC.259%2868%29.pdf

https://www.londonpandi.com/documents/ics-guidance-on-implementation-of-2020-global-sulphur-cap-september-2018/

2020 'Global Sulphur Cap' - ICS Guidance on Compliance

Members are reminded that as from 1 January 2020, in accordance with MARPOL Annex VI, the sulphur content of fuel oil used "on board" (including in main and auxiliary engines and boilers) commercial ships trading outside sulphur Emission Control Areas must not exceed 0.50%m/m. The requirements are referred to as the 2020 'Global Sulphur Cap'.

As outlined in MARPOL Annex VI, the lower sulphur emission standards can be met by using:

1.            low-sulphur compliant fuel oil; or

2.            gas/methanol/LNG which produces negligible sulphur oxide emissions

when ignited - see the IGF Code, available here, and a feasibility study on LNG as a fuel for shipping, available here; or

3.            exhaust gas cleaning systems (EGCS), also known as "scrubbers",

which clean the emissions before they are released into the atmosphere.  For further details see the 2015 Guidelines for EGCS, available here.

For ship owners/operators who have chosen to achieve compliance with the 2020 Global Sulphur Cap through the use of low-sulphur compliant fuel oil, the International Chamber of Shipping (ICS) has published "Provisional Guidance to Shipping Companies and Crews on Preparing for Compliance with the 2020 'Global Sulphur Cap' for Ships' Fuel Oil". The ICS Guidance provides an overview of the upcoming requirements, with recommendations on developing ship specific implementation plans to meet the mandatory deadline.

For a full copy of the ICS Guidance click here. Ship owner/operator Members should take note of the ICS Guidance, and take steps to prepare ship specific implementation plans and other measures necessary in advance of the 1 January 2020 deadline.

Best regards

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