Where is the level playing field in NOx rules?
It wasn’t unexpected and some might say that it is long overdue but when last week’s MEPC decided to extend NOx emission controls to new areas, it is almost certain that few involved considered this would impose a new burden on shipowners. MEPC 71 adopted amendments to MARPOL Annex VI to designate the North Sea and the Baltic Sea as emission control areas for NOx under regulation 13 of MARPOL Annex VI. Both ECAs will take effect on 1 January 2021. The move will only affect newbuildings operating in those areas and delivered after the set date in the same way as newbuildings operating in the existing North American ECAs were affected by the 2016 deadline. Unless there are future changes to the rules it will mean that affected vessels must meet NOx Code Tier III emission limits. Meeting the Tier III limits is not without expense on any vessel whether power is provided by a two-or four-stroke engine operating on fuel oil. Unless the ship has a dual-fuel engine or is powered entirely by LNG or some other alternative fuel, there will be a need for EGR or SCR systems or both. The systems will only be needed to be operated when trading in an ECA and for the rest of the time they can be by-passed or otherwise switched off. There is a cost attaching to both the addition of the equipment to the ship’s propulsion package and in operating when there will be power and consumables to consider. Those costs are not required for new ships not intending to trade to the areas concerned and who are under no obligation to install them. That is why engine makers’ catalogues contain both Tier II and Tier III versions of their products. So a newbuilding intended to operate in a range from the Mediterranean to the Asia and Africa need not have the equipment but one intended to operate from a range from Northern Europe to the same regions must. That gives one owner a clear advantage in capital expenditure over the other for ships that may be otherwise identical in all other respects. That in turn will translate into a financial advantage in setting freight and time charter rates. Of course one owner will not be able to accept business to ECAs but the other will so there is some payoff. It is difficult to square the fact that many argue for a level playing field when it comes to GHG emission regulations but do not take up a position when it comes to measures to control another exhaust gas.