The 0.1% limit in sulphur content within Sulphur Emission Control Areas as of 1st January 2015 requires that ship operators either use pricier ultra-low sulphur fuel oil, or alternatively install abatement technologies through substantial capital investments. A part of the resulting higher operating costs are passed on to shippers resulting in increased freight rates. These may lead to modal shifts towards rail or road options competing with Ro-Ro operators. Due to the unexpectedly low fuel prices in the period 2014–2016, Ro-Ro operators were relatively unharmed by the new limits, but nascent research has shown that if fuel prices increase some Ro-Ro services may not survive. This paper examines a set of policy options that can mitigate or reverse the negative effects of the low-sulphur regulation. The measures include internalizing external costs of transport, repaying fuel surcharges to shippers, subsidizing technological investments of ship operators, or increasing the landbased costs of transport via levies. To compare their efficacy, total costs are calculated for each measure. The results show that the proposed measures can successfully reduce the negative effects of the regulation but this would entail significant costs. A combination of subsidies towards shippers and ship operators is shown to be effective at reversing potential modal shifts and can be crucial in case of high fuel prices in the near future. The findings of this work can assist operators to develop new strategies and improve the resilience of their network, and regulators designing environmental policies that may have negative implications on certain sectors.
As policy makers acknowledge the high degree of supply chain vulnerability and the impact of maritime emissions on coastal population health, there has been a consistent effort to strengthen maritime security and environmental regulations. In recent years, overdependence on deeper and wider multinational supply and production chains and lean-optimization has led to tightly integrated systems with little “slack” and high sensitivity to disruptions.
This study considers the impact of Emission Control Areas and establishes a link between environmental and network resilience performance for maritime supply chains using operational cost and SOx emissions cost metrics. The proposed methodological framework analyzes various abatement options, disruption intensities, fuel pricing instances and regulatory strategies. The methodology utilizes a minimum cost flow assignment and an arc velocity optimization model for vessel speed to establish the payoff for various network states. Additionally, an attacker defender game is set up to identify optimal regulatory strategies under various disruption scenarios. The results are complemented by a sensitivity analysis on SOx emissions pricing, to better equip policy makers to manage environmental and resilience legislation. The methodology and findings provide a comprehensive analytic approach to optimize maritime supply chain performance beyond minimisation of operational costs, to also minimize exposure to costly supply chain disruptions.
The 0.1% sulphur limit within Sulphur Emission Control Areas (SECA) has made compulsory the use of either pricier ultra-low sulphur fuel, or the installation of abatement technologies that require significant capital investments. Due to the unexpectedly low fuel prices, Ro-Ro operators have been able to cope with the new sulphur limits, but recent research has shown that if fuel prices increase some Ro-Ro services may face the risk of closure. This paper proposes three key performance indicators (KPIs) to enable the asssessment of the impact of SECAs on Ro-Ro shipping. The KPIs are used on a set of case studies for services of a leading European Ro-Ro operator, and allow benchmarking of a series of operational and policy measures that aim to reverse the negative impacts of SECAs. The operational measures consider speed reduction, new sailing frequency, fleet reconfiguration, as well as investments in abatement technologies. Policy measures include the options of either subsidizing shippers or ship operators, or alternatively introducing new taxes on landbased options. The KPIs can be useful to ship operators seeking to improve the resilience of their network, as well as to regulatory bodies designing new environmental policies and understanding any negative implications these may have on ship operators.
In an effort to reduce the environmental impacts of maritime transportation, the International Maritime Organization (IMO) designated special Sulphur Emission Control Areas (SECAs) where ships are required to use low-sulphur fuel. In January 2015, the sulphur limit within SECAs was lowered to 0.1%, which can only be achieved if vessels are using pricier ultra-low sulphur fuel, or invest in abatement technologies. The increased operating costs borne by Ro-Ro operators in SECAs due to the stricter limits can result in the shutting down of some routes and a redistribution of cargo flows with land-based alternatives. The exact repercussions of the new sulphur limits are difficult to identify in the wake of significant recent reductions of the fuel prices for both low-sulphur and heavy fuel oil. This paper presents a modal split model that estimates modal shifts vis-a-vis competing maritime and land-based modes available to shippers. This allows examining the implications of the recent low prices to modal choice, and the influence a potential increase in fuel prices may have. The model is applied to seven routes affected by the regulation based on data from a leading European Ro-Ro operator. Sensitivity analyses on market share data, cargo values, freight rates, and haulers rates are conducted. Emissions inventories are constructed to assess the environmental efficacy of the SECA regulation. The novelty of the proposed model lies in the examination of the ex-post implications of shutting down a service and the redistribution of transport. Recommendations to mitigate and reverse the negative side-effects of such environmental legislation are proposed.
As of January 2015, the new maximum limit of fuel sulfur content for ships sailing within emission control areas has been reduced to 0.1%. A critical decision for ship owners in advance of the new limits was the selection of an abatement method that complies with the regulations. Two main options exist: investing in scrubber systems that remove sulfur dioxide emissions from the exhaust and switching to low-sulfur fuel when sailing in regulated waters. The first option would involve significant capital costs, while the latter would lead to operating cost increases because of the higher price of the fuel used. This paper presents a literature review of emissions abatement options and relevant research in the field. A cost–benefit methodology to assess emission reduction investments from ship owners is also presented. A study examined the effects of recent drops in bunker fuel price to the payback period of a potential scrubber investment. The results show that lower prices would significantly delay the payback period of such investments, up to two times in some cases. The case studies present the emissions generation through each option for representative short sea shipping routes. The repercussions of low-sulfur policies on large emission reduction investments including cold ironing are examined, along with implications of slow steaming for their respective payback periods. Recommendations are made for research in anticipation of future regulations and technological improvements.
This paper deals with two speed optimization problems for ships that sail in and out of Emission Control Areas (ECAs) with strict limits on sulfur emissions. For ships crossing in and out of ECAs, such as deep-sea vessels, one of the common options for complying with these limits is to burn heavy fuel oil (HFO) outside the ECA and switch to low-sulfur fuel such as marine gas oil (MGO) inside the ECA. As the prices of these two fuels are generally very different, so may be the speeds that the ship will sail at outside and inside the ECA. The first optimization problem examined by the paper considers an extension of the model of Ronen (1982) in which ship speeds both inside and outside the ECA are optimized. The second problem is called the ECA refraction problem, due to its conceptual similarity with the refraction problem when light travels across two different media, and also involves optimizing the point at which the ship crosses the ECA boundary. In both cases the objective of the problem is to maximize daily profit. In addition to mathematical formulations, examples and sensitivity analyses are presented for both problems.
This paper examines the costs and benefits of reduction measures for the shipping industry to comply with the forthcoming sulphur emission regulations. Sulphur scrubbers and marine gas oil are two promising alternatives for ship owners. However, their economic comparisons are primarily based on a private perspective. This paper provides a wider viewpoint by integrating the private abatement costs of ship owners and the social environmental benefits from emission reduction. The results showed that the price spread between marine gas oil and heavy fuel oil is a determining factor in making this choice. Marine gas oil tends to have higher net present values than scrubbers when the price spread of fuel is less than 231 Euros per tonne. Furthermore, it is more beneficial to install a scrubber on new ships than retrofits. An old ship is not suitable for a scrubber installation when its remaining lifespan is less than 4 years.