The IMO International Maritime Organization is introducing an update of regulations regarding fuels used in maritime transport. The changes will apply from January 1, 2020, and will concern the global reduction of sulfur oxide emissions from ships. Consequently, IMO 2020 will significantly affect the freight market.
IMO 2020 Regulation
The new IMO 2020 standard introduces a new limit on sulfur oxides emissions for ships operating outside designated emission control areas. As of January 1, 2020, this value was reduced to 0.50% m / m. Until now, the value was 3.50% m / m. Besides, it should be noted that stricter regulations will apply in coastal zones with limited sulfur emissions (ECA zones) – the sulfur content has been reduced to 0.1%. In practice, this means that with the entry into force of the regulations, all transport vessels are obliged to reduce sulfur oxide emissions by 85%.
Who does IMO 2020 apply to?
IMO applies to all seagoing vessels. The new IMO requirements will mainly affect ship operators, refineries, and international oil markets. It turns out that they will also apply to the global sector of fuels used in the open sea.
Ways to adapt to new limits
There are several ways to meet the requirements of IMO 2020:
1. Application of VLSF or MGO
At the moment, it seems to be the most viable option. The oil industry, and thus the entire supply chain, has not yet been adapted to the IMO 2020 Regulation. Fuels that comply with the new requirements are:
- VLSF – fuel with very low sulfur content
- MGO – used for diesel engine drives and heating boilers used in maritime and inland navigation (VLSF)
2. Application of “scrubbers.”
“Scrubber” is a device used to clean exhaust gases from the main engine of a ship by pumping water through its chimney. It owes its name since it can be used to “scrub” sulfur and other particles. Using this technology is more expensive in countries such as Singapore or China. This is because those countries have established strict rules for the use of scrubbers, especially those with open circulation, and the subsequent processing of the leached product as toxic waste. However, the use of scrubbers allows the use of fuels with higher sulfur content.
3. Use of non-petroleum fuel
An example of such a fuel is liquefied natural gas (LNG). Unfortunately, there is still a lack of adequate infrastructure to support the usage of LNG. By 2020, around 250-500 ships will be equipped with pollution treatment technology or will use LNG, which means 10-12% of the global container fleet.
Change fuel prices
Currently, you may notice fluctuations in prices and problems with the availability of petroleum products. IMO 2020, as well as geopolitical events (including sanctions, wars, and activities of the Organization of Petroleum Exporting Countries) or the general demand of the world economy for oil, are cited as the main factors of this situation.
Calculation of the BAF and IMO additions
The term BAF defines the costs of energy in deep-sea transport. In connection with the entry into force of IMO 2020, no additional costs are expected except for the overall increase in fuel prices. Freight rates will be determined using a formula based on recent (monthly or quarterly) price changes according to the formula:
FUEL PRICE PER TON x FUEL CONSUMPTION FOR TEU (average fuel consumption on the trade route) = VARIABLE ENERGY COST
IMO 2020 goals
The International Maritime Organization deals with reducing negative environmental impacts from the maritime industry. The main goal of IMO is to reduce sulfur emissions from ships by 77% in the period 2020-2025.
IMO 2020 implementation focuses on reducing sulfur emissions, not carbon dioxide emissions. It aims to reduce the negative impacts of freight on human health by reducing air pollution by 68% globally, in particular in coastal areas of Asia-Pacific, Africa, and Latin America. The changes will not improve the global warming situation.
Reducing sulfur emissions
prevents acid rain and ocean acidification. It is estimated that IMO 2020 will
contribute to reducing the incidence of stroke, asthma, cardiovascular disease,
and lung disease, which will help to avoid over 570,000 premature deaths.