How to implement abatement measures
Implementing policy instruments to limit GHG emissions from international shipping industry should contribute to global, cost-effective emission reductions. Thus, abatement measures in the shipping industry should only be implemented if the marginal costs are equal to or lower than the marginal abatement costs in other sectors.
It is likely that the ratification of the Kyoto Protocol is dependent of the establishing of the flexible mechanisms international emissions trading, JI and CDM. Therefore, there will be an international market for emission allowances and credits, and the price in this market will form the upper limit of what abatement measures that will be cost effective to implement, also in the shipping industry. Therefore, the abatement measure implementation towards international shipping should aim at such cost-effective measures.
When using a bunker fuel charge, a charge equal to the international emission allowance/credit price will automatically ensure global cost effectiveness. Ship owners will implement measures with a marginal cost lower than the current charge. Also emissions trading will ensure cost effective emission reductions from ships. The ship owners will face the international allowance/credit price, which will determine the level of actions they will take to reduce emissions. When technical standards are used as the policy instrument, careful calculations of costs for the different abatement measures will have to be done before the standards are fixed, to ensure the same marginal abatement cost level in the shipping industry as in other sectors.
It is very difficult to predict what the price level in the future emission allowance/credit market will be. A survey of different studies of abatement costs in some key countries and possible prices in future international emission trading markets presented in ECON, 1998, indicate price levels from slightly above zero to almost USD 40/tonne CO2. However, most of the estimates are in the range of USD 5 to USD 13/tonne CO 2. This could form a very uncertain indication of what abatement measures in the shipping industry that would be cost effective to implement.
2. Operational measures
These are measures that can be implemented during the operation of ships to reduce GHG emissions. The discussion in chapter 5 shows that operational measures include the following activities:
• Operation plannning/speed selection: reduced speed/slow steaming may reduce emissions up to 40%.
• Weather routing: 2-4% emissions reduction could be possible
• Optimising operating parameters: include measures like steady power (minimum RPM variations), optimal trim and propeller pitch, minimum ballast, and optimal rudder. 1-5% emissions reduction is possible.
• Reduced time in port: comprises more efficient cargo handling and more efficient anchoring. 1-7% emission reduction could be obtained.
It can be seen from the list that operational planning/reduced speed (see also conclusions from
Chapter 6) and reduced time in port are the measures with the greatest reduction potential.
A bunker fuel charge and emissions trading based on emissions allowances will give incentives to implement all the operational measures mentioned above. What measures the ship owner may choose to implement, will depend on the level of the fuel charge compared to the marginal costs. Those measures with marginal costs lower than the charge will be implemented, others not.
An important question is whether a bunker charge will result in reduced speed. During the early
1980s, reduced speed is reported to have been common, resulting in energy intensity reductions by 10-20% [OECD, 1997]. This practice was motivated partly by high oil prices and partly by over-capacity in the industry. Melissen et. al. 1993 analyses the economics of specific voyages for different types of bulk carrier (a 4,700 nautical mile voyage for an iron ore carrier and a 11,000 nautical mile voyage for an oil tanker). The possible effects on costs of a hypothetical fuel price increase from USD 85/tonne to USD 170/tonne are evaluated. This shows for these voyages that while the overall costs for older oil tankers are 35% lower than the costs for new vessels with a fuel price at USD 85/tonne, the gap is reduced to about 20% when the fuel price is doubled. The fuel price increase results in 30% lower optimum (minimum cost http://www.ukassignment.org/azdxassignment/ ) operating speed for older vessels, newer vessels minimise their overall costs by operating at maximum speed even at the higher fuel price.
These results indicate possible implications for how a bunker charge might affect GHG emissions from bulk carriers. According to OECD, 1997:
• The remaining steam turbine-powered fleet would be less economical to operate and would probably be operated at lower speeds, resulting in more demand for new vessels with lower energy intensity and higher optimum operating speeds.
• Reduced speed by old vessels and accelerated fleet replacement would lead to reduced energy-intensity.
• Higher transport costs would dampen the growth in demand for maritime transport.
Technical/emission standards are in general not very well suited to implement operational measures to reduce emissions, due to limited control possibilities. Exceptions may be standards for maintenance and possibly also standards to reduce time in port. Requiring a certificate showing that required maintenance have been carried out according to specified technical standards or as a part of fulfilling an emission standard could be checked by port authorities.
Such standards could therefore be implemented. It should be considered whether it is possible to impose standards on ports and/or ship owners for measures for more effective handling of cargo in ports and/or to set some maximum time for time spent in ports.
Emissions credit trading could most likely not be based on operational measures. This view is based on the ongoing discussion on guidelines for the CDM mechanism, where only investments in technical installations where emissions reductions are embedded (for instance fuel switching, investments in more energy efficient equipment etc.) will be accepted. This is due to verification problems for operational measures and a doubt that such measures would be additional i.e. not carried out in the absence of credit trading. A possible exception is maintenance measures that could probably be verified and subject to credit trading. However, the UNFCCC would have to be convinced that these measures would be additional.