IMO 2020 Compliance | MEPC 74 Promises Future Emissions Reductions

The 74th session of the Marine Environment Protection Committee (MEPC 74) approved a resolution offering further guidance through the implementation of the sulfur cap and strengthened existing requirements for improved efficiency across new ships.

The IMO Expects Sulfur Cap Compliance Will be High

Of course, the coming sulfur cap remained a primary focus of discussion during the committee meeting. The MEPC approved additional guidelines to support the implementation of the sulfur limit. These included guidance regarding fuel testing, vessel non-compliance, and situations of fuel oil non-availability. Ultimately, the released guidelines will ensure a high level of compliance with the new sulfur limit. The MEPC’s resolution on the _2019 Guidelines for consistent implementation of the 0.50% Sulphur Limit Under MARPOL ANNEX VI _specifically addressed port states’ rights once non-compliance is determined:

“4.2.4.5 If a non-compliance is established, consistent with regulation 18.2.3 the port State may prevent the ship from sailing until the ship takes any suitable measures to achieve compliance which may include de-bunkering all non-compliant fuel oil. In addition, the port State should report the information of the ship using or carrying for use non-compliant fuel oil to the Administration of the ship and inform the Party or non-Party under whose jurisdiction a bunker delivery note was issued of cases of delivery of non-compliant fuel oil, giving all relevant information. Upon receiving the information, the Party detecting the deficiency should report the information to the MARPOL Annex VI GISIS module in accordance with paragraph 3.4 of these Guidelines.”

One final insight offered by the committee regarding the sulfur cap was a report of the MEPC’s monitoring of the worldwide average sulfur content of marine fuels supplied during 2018. The worldwide average sulfur content of residual fuel oil was 2.59 percent while distillate fuel had 0.08 percent sulfur content. This knowledge is helpful when contemplating potential blends to achieve a new, compliant fuel specification. For example, at these sulfur volumes, blending would require approximately five barrels of low-sulfur distillate fuel to be blended with a single barrel of high-sulfur fuel oil to meet compliance standards below 0.50 percent sulfur.

Stronger Efficiency Standards for Containership New Builds

MEPC 74 made additional progress toward improving freight-based emissions by addressing the Energy Efficiency Design Index (EEDI) Phase 3 requirements, which will tighten efficiency targets for several vessel types. The EEDI is an index that indicates the efficiency of a vessel in terms of its grams of carbon dioxide (gCO2) generated per freight ton-mile as a representation of the vessel’s performance.

While ship designers and builders are free to choose how to satisfy the EEDI requirements, over time the EEDI levels (measured as gCO2) will continue to decline, gradually introducing less polluting and more efficient vessels to the international merchant fleet. These measures include more aggressive standards for container ships, as shown in the table below. The EEDI reduction rate for containerships is mandated for applicable ship sizes and calculated from a reference line representing the average efficiency for container ships built between 2000 and 2010.

The table above displays the updated EEDI standards for containerships following the MEPC 74 meeting. All containership new builds will need to be compliant with the index standards by 2022. The Phase 3 EEDI standards for containerships initially covered the period from 2025 onwards and only mandated a 30 percent reduction from the 2000 to 2010 baseline. Most containership new builds had already surpassed the 30 percent threshold creating the opportunity to strengthen standards further.

The impact of fuel costs on financial performance continues to incentivize carriers to invest resources toward improving their fleet efficiency, with higher EEDI standards ultimately pushing up the floor for acceptable efficiency in the market. Beneficial cargo owners (BCOs) who benchmark vessel efficiency will benefit from these measures as the EEDI pushes vessel fleet efficiency improvements over time, reducing fuel cost per freight ton-mile.

No Steaming Speed Limits Yet, With More GHG Discussions to Follow

The MEPC also announced it will continue research for the next phases of vessel efficiency and emissions standards. While candidate measures for short, medium, and long-term initiatives aimed specifically at reducing GHG emissions from ships were discussed – such as establishing steaming speed limits – no formal adoption or direction was taken during the meeting. A group was established to research additional future EEDI requirements and a committee to oversee a fourth GHG study was created. The next GHG study will be completed in Autumn 2020, so there are limited expectations for additional emissions standards to be communicated over the next year.

Breakthrough’s Applied Knowledge team will continue to keep clients informed of fuel market developments concerning the maritime market’s transformation through IMO 2020. Please contact us to learn more about our outlook and forecasts across transportation energy markets.