NGO calls for NOx tax in EU

Malcolm Latarche
Malcolm Latarche

17 June 2016


A recent report commissioned by the NGO Transport and Environment calls for the establishment of a NECA in EU waters and an EU tax on NOx emissions for all vessels including those currently operating with Tier l or Tier ll engines installed. The study conducted by IVL Swedish Environmental Research Institute and CE Delft, compares NOx abatement options and their associated costs for the shipping sector with EU level measures implemented either on their own or in addition to the designation of Nitrogen Emissions Control Areas (NECAs) under the IMO in the Baltic Sea, North Sea and the English Channel. T&E considers that in addition to implementing NECAs, the EU option of a NOx levy and fund, the revenues of which will be used to finance the uptake of NOx abatement technologies, is the best way forward. It promises 70% annual NOx reduction compared to business as usual and about 60% in 2025 and about 30% in 2040 if the NECAs are also established. Shipping has been subject to the IMO’s NOx Code for many years and at the beginning of this year the Tier lll level kicked in for new vessels (or for ships refitted with new engines) operating in ECAs of which currently only the coastal waters of North America and the Caribbean are included. Tier II which became effective in 2011 and which applies globally required a reduction of NOx emissions of 20%. Tier III delivers a NOx reduction of 80%. Countries around the Baltic Sea, North Sea and the English Channel have been considering a similar NECA in these seas for many years and final agreement to submit a NECA application was eventually reached by Baltic coastal states in March 2016. Applications to the IMO for the Baltic, North Sea and English Channel NECAs are currently under preparation for consideration by the IMO later this year. Implementation date is expected to be 2021. T&E says that as these NECAs will only apply to ships built after 2021, and sailing in the NECAs, it leaves NOx emissions from all existing ships and the new ships outside NECAs under-regulated. This, it says, warrants extra EU-level policy measure to cover existing ships and all EU seas which will not be covered by NECAs. The report itself says that ‘Significant reductions of NOx emissions from marine engines are not accomplished by any regulation in effect today’. This claim appears to be based on the fact that the NOx code levels are not retroactive on all vessels but only affect new engines installed on ships after the appropriate dates. Shipowners would argue that both Tier l and Tier ll reductions resulted in significant reductions of NOx and apply globally not just in a restricted area. The report also suggests that the NOx levy would provide a fund that could be drawn on by vessels installing NOx abatement technology. This appears similar to the Norwegian NOx levy which has provided for funds for some reduction technologies including LNG fuelled ships and the installation of battery technology in a small number of vessels but which favours the few over the many with most of those that have installed such systems saying that they would not have done so were it not for the grant from the NOx fund. Quite clearly a levy cannot provide the funding for all affected ships. NOx is of course only formed when a ship’s engine is operating and while it can be reduced by technologies such as SCR or EGR (which all add to the cost of the vessel and which in retrofit situations are expensive), it also can have the undesired effect of reducing engine efficiency and increasing fuel consumption and thus CO2 emissions. T&E proposal may have environmentalist support but the additional cost that it brings with it will not be welcomed by ship operators or by cargo interests and consumers (for in the end higher freight rates and increased goods of goods in shops will be the result). There is always a price to pay for economic activity and at the present moment, the population of Europe are not in a good position to absorb any extra costs associated with this proposal. The report can be downloaded from the T&E website.