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Fuels regulation overview

Updated 11 Oct 2019

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The shipping world has become almost obsessed with the issue of fuel since the IMO decided in 2016 to reduce the global limit of sulphur permitted in fuels to 0.5% with effect from 1 January 2020 and followed up this long-standing rule change by adopting an ambitious plan to reduce shipping’s carbon emissions to zero over the next 50 years.

The 2020 changes will introduce many new regulations and will even make the carriage of non-compliant fuel illegal under normal circumstances except as cargo. Although the rules are now changing on an international level, it is true to say that ships have long been permitted to choose whichever fuels they wish to operate with provided that they have the backing of the flag state.

Most regulation that does exist around fuels and lubricants is aimed at prevention of pollution or controlling emissions rather than being concerned with the product itself. The exception to this is the limit that has existed in SOLAS for some time that marine fuels should have a minimum flashpoint of 60°C.

There are related aspects in SOLAS concerning the fuel system, as might be expected. Fuel quality is always a case of caveat emptor but there are ISO standards which, so long as they are stipulated as part of the purchase contract, will afford the shipowner a degree of protection against damage caused to the engine or the quality of the fuel provided as well as being a defence against possible pollution claims for contravention of MARPOL Annex VI regulations.

On an international level, the IMO deals with various aspects of fuel in both the MARPOL and SOLAS conventions as well as the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 – ordinarily referred to as the Bunker Convention and in effect from 2008.

Under the Bunker Convention ships over 1,000gt registered in a state that has ratified the convention must carry a certificate certifying that the ship has insurance or other financial security to cover the liability of the owner for pollution damage. The convention defines the owner in such a way as to include others, such as managers, bareboat charterers, operators and beneficial owners.

The US is not a party to the convention but under the Oil Pollution Act of 1990 (OPA 90), ships above 300gt operating in US waters are obliged to be covered by insurance and will be issued a Certificate of Financial Responsibility (COFR) to prove the fact. Individual nations, states in the US and regional bodies are permitted to make regulations concerning fuels used within their jurisdiction with the EU’s ban on fuels with sulphur levels above 0.1% being used in ports being a prime example. One current area of concern is the Arctic where there are moves in numerous bodies including the IMO and the EU to ban the use of HFO.

Preventing pollution

The financial liability for accidental pollution is more than adequately covered by the Bunker Convention and national legislation such as OPA 90. No ship operator plans to pollute by dumping bunkers at sea and pollution by bunker fuel has generally been a result of accidental damage to the ship compounded by location of fuel storage tanks.

Once it was common for fuel to be stored in the double bottom spaces, but this is a vulnerability that has been addressed. Regulation of fuel systems on board ships now begins with the design stages and the size and location of fuel tanks. A regulation on oil fuel tank protection was adopted in 2004 and entered into force on 1 January 2007. The regulation applies to all ships delivered on or after 1 August 2010 with a total oil fuel capacity of 600m3 and above. It includes requirements for the protected location of the fuel tanks and performance standards for accidental oil fuel outflow.

A maximum capacity limit of 2,500m3 per oil fuel tank is included in the regulation, and flag states are obliged to consider general safety aspects, including the need for maintenance and inspection of wing and double-bottom tanks or spaces, when approving the design and construction of ships in accordance with the regulation.

Taking into account that this regulation has now been in place for 15 years and that the average life of a ship is around 25 years, it can be seen that the accidental loss of fuel is now much less of a risk and is lessening with each year that passes.

Pollution is not only a result of fuel leakage into the sea but also is an inevitable result of the combustion process. All fuels containing hydrocarbons, whether they are mineral oil based or from any other source, will produce carbon dioxide (CO2). This is because the chemistry of combustion means that the carbon in the fuel will combine with oxygen in the air when combustion occurs resulting in the exhaust gas containing some levels of both CO (carbon monoxide) and CO2.

Reducing CO2 emissions

Although cited by environmentalists as the root cause of climate change, CO2 is not generally considered as a pollutant and is an essential element in growth of all forms of vegetation around the globe. As a major user of oil fuels, the shipping industry has been demonised by environmentalists although in truth the industry produces only around 2-3% of all manmade CO2 which in turn accounts for only around 6% of all sources of the gas.

Thus, it can be shown that shipping’s contribution is less than 0.2% of all CO2 and since CO2 in total only accounts for 0.04% of the atmosphere it means that shipping’s contribution is below 1ppm.

As things stand the only control of CO2 from ships is that caused as a result of complying with the IMO’s Energy Efficiency Design Index (EEDI) regulations however, that may soon change. The EEDI rules, which limit the amount of CO2 an individual new ship design is allowed to produce, are based on a complex formula aimed at measuring the work done.

This involves the carrying capacity of the vessel, its intended speed and the power of the ship’s main and auxiliary engines. It is the only example of a global industry being regulated.

The rules provide for the output of ships to be reduced against a base level established in 2011. The extent of reduction depends upon the order or build date of the ship and falls in steps of 10%. The first reduction was under Phase 1 in 2015, the second under Phase 2 will occur in 2025 and the third under Phase 3 in 2025 although for some ship sizes and types this has been brought forward to 2022.

Under EEDI, not all ship types are subject to the exact same formula with due allowance being made for the varying power demands of different ship types. In addition, the lowest deadweight at which the rules apply is different for each ship type and there is also a sliding scale applied to ships of each type below certain deadweights, recognising the fact that some part of the power will be used for essential items (navigation, habitation and control requirements) which will consume a higher percentage of the overall power requirement in smaller ships than in larger vessels.

The EEDI rules applying to specific ship types are not actually fixed in stone but have been amended from time to time as new technologies emerge and flaws in the formulae themselves identified. Any changes are not retrospective so ships which were built to an earlier version retain the EEDI rating calculated at the time – unless they undergo conversion or major changes. This makes using the EEDI as a decision support tool for charters extremely ifficult when comparing ships of different ages.

Despite the EEDI rules already limiting individual ships’ CO2 production, demands for shipping to be included in the Paris Agreement controls on CO2 production have grown and at MEPC 72 this ambition was recognised. Although there are as yet no new regulations beyond the current amended EEDI rules, MEPC agreed a strategy that envisages for the first time a reduction in total GHG emissions from international shipping which, it says, should peak as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts towards phasing them out entirely.

One of the measures is a possible new Phase 4 of EEDI which could add a further reduction to the limited bringing forward of Phase 3. Other options to be considered will be a speed restriction on ships and requirements to improve the efficiency of existing vessels.

Demands for speed restrictions on ships are made frequently by environmental NGOs and the matter was debated at MEPC 74 in May 2019.

The delegates at that meeting heard conflicting views on the efficacy of slow steaming as a real means of reducing CO2 emissions and no speed limit regulation was decided upon. The matter was however referred to a working group that will further examine the issue. Even if a speed limit is eventually seen as something desirable by the IMO, the rule making processes would mean it would be 2022 at the earliest before any limit was enforced.

With regard to the GHG roadmap, it is recognised that in order to achieve the declared ambitions, step changes in technology will be required and presumably means to meet the ambitions will need to be available before further regulation is made.

It should also be noted that the IMO refers frequently to greenhouse gases and does not limit the term to CO2 alone. That would mean that fuels such as LNG and LPG, both of which produce quantities of CO2, cannot feature in a zero-carbon future. If taken to the extreme, it would also make hydrogen suspect, since the scientists behind the Intergovernmental Panel on Climate Change (IPCC) recognise the forcing effect of water vapour on global warming. It is of course possible for water vapour to be condensed back to liquid form and possibly even used on board as fresh water but it is a factor that will need to be considered.

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