Low-Sulfur Fuel Rules Expected to Raise Shipping Costs, Cut Emissions in Hong Kong

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Bloomberg, Hong Kong, China

Hong Kong's Legislative Council is taking the first step in controlling sulfur content in fuel used by ships in its waters, requiring local vessels to use marine light diesel with a sulfur content of 0.05 percent or less starting April 1.

The council is expected to review plans later in 2014 that also would require ocean-going vessels to use lower sulfur fuels, likely beginning early in 2015.

Under the new regulations for smaller local vessels, announced by the secretary of the environment March 19, suppliers of noncompliant marine light diesel face up to three months in jail and fines of up to $6,500.

Secretary for the Environment Wong Kam-sing said the new fuel would “emit about 90 percent less sulfur dioxide and 30 percent less large particulate matter (PM-10)” than the fuel now being used with a sulfur content of about 0.5 percent.

Pollution Decreases Predicted

Sulfur dioxide levels around Hong Kong are expected to drop by 10 percent annually, with PM-10 levels dropping by 4 percent annually, he said.

In February, Hong Kong shippers renewed a pledge to voluntarily switch to lower sulfur fuels through the end of 2014 under an agreement called the Fair Winds Charter (37 INER 323, 2/26/14).

They hope that the mandated regulation, as well as further efforts to establish similar policies in neighboring Guangdong province, can ensure a more level playing field for ports in the area, including a possible emissions control area for the Pearl River Delta region several years from now.

The delta, which includes Hong Kong, Macau and the area from Shenzhen to Guangzhou to Foshan in Guangdong province, is a key port and manufacturing center for southern China.

Costs Expected to Increase

The use of lower sulfur diesel is expected to increase local shipping costs due to the higher price of the fuel and expenses involved in switching fuels.

The low-sulfur fuels “are more expensive and do have a cost burden,” Diego Perdones, head of sales for South China at Maersk, told Bloomberg BNA by e-mail March 24.

Maersk is party to the Four Winds Charter pact and its ships voluntarily switch to bunker fuel, with a sulfur content of 0.5 percent or less, while in Hong Kong waters.

Perdones said fuel switching for Maersk in Hong Kong has increased costs about $2 million per year since 2010. But he added that it has “incentivized a stronger drive to improve fuel efficiency, as comparative cost savings will be greater than with traditional heavy fuel.”

Michael Hazen, project manager with Ocean Recovery Alliance, a nongovernmental organization promoting ocean health, told Bloomberg BNA on March 28 that he believes ocean-going vessels also should eventually move to lower-sulfur fuels.

This could “have downstream effects on the cost of goods, as shipping prices would have to increase to compensate for the higher cost of fuel,” Hazen said.

But he said carbon dioxide and sulfur dioxide emissions “have many indirect costs that the world ends up paying for” such as increased health care costs, tourism losses from damaged ecosystems, infrastructure damage from acid rain and increased intensity of storms.

Future Actions

Rémi Parmentier, deputy executive secretary of the Global Ocean Commission, an environmental think tank, told BBNA at the group's annual meeting in Hong Kong on March 16 that in June, the commission will recommend steps for reducing greenhouse gases and emissions leading to acidification on the high seas,

Perdones said vessel emissions control has been a regular item for discussion in recent years between Maersk and China's Ministry of Transport. And he said that Shenzhen, which neighbors Hong Kong on the mainland, has been soliciting opinion on control of emissions from marine vessels in its waters and is talking to shippers about future policy.

“We believe that the relevant authorities in mainland China have realized the problem and [are] planning to take action to address that,” Perdones said. “We are looking forward to seeing relevant regulations and policies being established to align with regulations in Europe and North America regarding vessel emissions control, that will benefit not only the local community but the whole industry.”

Currently emissions control areas cover much of the U.S. and Canadian coasts and the North and Baltic seas in Europe.

‘Green Ports Action Plan.'

Guangdong's Transportation Bureau, Maritime Affairs Bureau and Environmental Protection Department will work with Hong Kong on strengthening emissions control policies on marine vessels, according to a working agenda between Hong Kong and Guangdong province released March 18 by Guangdong authorities.

Guangdong's provincial transportation bureau also issued a “Green Ports Action Plan” on March 5, a guiding document about increasing energy efficiency, cutting carbon dioxide and sulfur dioxide emissions in the province's ports through 2020.

The plan states that Guangdong will “research cooperation on controlling pollution from ships and ocean-going vessels as well as the possibility of implementing regulations requiring vessels to use lower sulfur diesel fuels” in Pearl River Delta area ports.