Impacts of the Increasingly Strict Sulfur Limit on Compliance Option Choices: The Case Study of Chinese SECA

Lixian Fan and Bingmei Gu
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Lixian Fan: School of Management, Shanghai University, Shanghai 200444, China
Bingmei Gu: School of Management, Shanghai University, Shanghai 200444, China

Sustainability, 2019, vol. 12, issue 1, 1-20

Abstract: The International Maritime Organization (IMO) has proposed several environmental regulations on controlling SO x and NO x emissions from ships in coastal areas. Under the framework of IMO, some areas have established strict emission control areas (ECAs) to reduce emissions, which mainly contain Europe and North America. To further strengthen the control and supervision over air pollutants from shipping activities, the Sulfur cap regulation of 0.5% by mass will come into effect on 1 January, 2020 globally, when all the sailing vessels on the high sea should use fuels with sulfur content less than 0.5%. This limit is stricter for the global recognized sulfur emission control areas (SECAs), where it was 0.1% since 1 January 2015. However, Chinese local SECA lags behind the globally recognized SECAs, where the 0.5% Sulfur cap was implemented from 2016 and it has to be strengthened along with the global sulfur cap 2020. These increasingly stringent emission regulations have huge effects on shipping operators. The current study discusses the potential impacts of the stricter sulfur cap on operators’ compliance option choices, where fuel-switching and scrubber system are analyzed under different sulfur limits. Meanwhile, the slow steaming practice is incorporated into the fuel-switching option by considering speed differentiation in different sulfur limit areas. This study develops a cost-minimizing model using NPV (net present value) method. It analyzes the optimal option within vessels’ lifespan considering the tradeoff between the initial investment and future operational cost for newbuilding vessels based on a case study. In addition, emissions of CO 2 and SO x are compared under different compliance options in different sulfur cap scenarios. Our results find that the scrubber system is a suitable option to comply with the 0.5% global sulfur limit, and a higher efficiency of sulfur abatement can be attained by the scrubber system option. However, it emits more carbon emissions due to higher energy consumption used by the scrubber system. In addition, the effects of additional vessels deployed in the cycle on the compliance choices are also demonstrated in the analysis.

Keywords: shipping industry; compliance option; SECA; sulfur limit; emission reduction (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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