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International Forwarding Association Blog » Sea freight in Europe » New Shipping Regulations to Curb Greenhouse Gas Emissions
Sea freight in Europe

New Shipping Regulations to Curb Greenhouse Gas Emissions

The maritime shipping industry has been a major polluter for decades and now faces new regulations that will soon come into effect.

Maritime Transport and Environmental Pollution

Reports by the UN International Maritime Organization show that over 90 percent of cargo is transported by sea. The main reason is that this is the most cost-effective way to ship raw materials and commodities all over the world. At the same time, shipping large volumes of goods is destructive for the environment as demonstrated by a 2014 IMO Greenhouse Gas Study. Ships release about 940 million tons of carbon dioxide a year which makes for about 2.5 percent of the total emissions. They also emit sulphur dioxide because international freight forwarders mainly use fuel oil of low quality with high sulphur content.

New Shipping Regulations

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New Regulations and Impact on Maritime Shipping

The new regulations aim to reduce sulphur emissions and meet the environmental mandate. Shipping companies have to either use alternative fuels or install scrubbers that remove sulphur from bunker fuel. This will be expensive for freight forwarders in light of the fact that fuel with low sulphur content costs about 30 percent more.

Experts estimate that fitting ships with scrubber exhaust systems will cost companies about $170 million. Container shipping companies estimate that they will face significantly higher fuel costs by switching to higher-quality low-sulphur fuel. Some companies even predict rises as high as $2 billion. While shipping companies face high conversion costs, some experts argue that the new regulations will not result in significantly higher shipping costs. Shipping expert at McKinsey Steve Saxon explains that transportation costs will increase only marginally. In fact, he estimates that the cost to ship a pair of jeans will increase by just ¢60. This is because transport makes for a small share of consumer prices.

 

New Regulations and Impact on Maritime Shipping

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At the same time, economists point to the fact that the new regulations will have a significant negative impact on the global economy. Experts from Landesbank Baden-Württemberg explain that the new regulations will result in a global economic slowdown. This is mainly due to the fact that companies are not prepared to install scrubbers and face considerable conversion costs. The McKinsey team, however, argues against the significant negative impact of the new environmental regulations. In their view, low-sulphur fuels will be more expensive than conventional fuels in the future, but prices will not be significantly higher.

Many agree that the transition toward low-sulphur fuels is the key to reducing greenhouse gas emissions. One of the reasons is that emissions of particulate matter, nitrogen oxides, and sulphur dioxide are continuously rising over the years. They are harmful to human health and are considered a health hazard, especially along major routes and in and around big ports. A recent study published in the journal Nature reveals that pollution caused by maritime shipping causes some 400,000 deaths annually. Premature deaths are mainly due to cardiovascular diseases and cancer, and the transition to low-sulphur fuels will result in over 30 percent less premature deaths.