Charge NOX emissions from ships

Large emissions of nitrogen oxides (NOX) are a cause of major health and environmental problems, and ships account for a large and growing share of these emissions.

 In spite of the somewhat strengthened emission standards for new ships adopted in 2008 by the International Maritime Organization (IMO), NOX emissions from international shipping in European sea areas are projected to increase by nearly 40 percent between 2000 and 2020.

If no additional abatement measures are taken, this means that by 2020 the emissions from shipping around Europe are expected to equal or even surpass the total from all land-based sources in the 27 EU member states combined.

In addition to the NOX requirements for new ships from 2011, the IMO decided that in designated sea areas called Emission Control Areas (ECAs), significantly more stringent rules will apply from 1 January 2016. Here, ships built after that date will have to reduce emissions of NOx by about 80 percent from the current limit values.

There are currently no NOX-ECAs in place, but the countries surrounding the Baltic Sea are co-operating through the Baltic Marine Environment Commission (HELCOM) to prepare a proposal to the IMO to designate the Baltic Sea as a NOX ECA.

In March 2009, the United States and Canada jointly proposed that most areas of their coastal waters – extending 200 nautical miles from the coast – be designated as an ECA for the control of sulphur oxides, particulate matter and NOx emissions. After being approved in principal by the IMO in July, the proposal is set for formal adoption in March 2010.

However, a problem in the context of the new IMO NOX standards is that they will apply to new ships only, and the turnover of the fleet is slow. Ships tend to have a life of 25-35 years before being scrapped. In addition it is feared that the new regulation could be at least partly evaded by operators deploying older ships in the NOX ECAs.]

Therefore, in order to limit not only the growth in ships’ NOX emissions, but actually to reduce them, there is a need both to cut emissions from existing vessels and to speed up the introduction of efficient NOX abatement technologies in new ships built before 2016.

A new study1 by the Swedish environmental economist Per Kågeson has investigated a series of different market-based instruments that could be used for this purpose, and also assessed the potential additional emission reductions that could be achieved by applying such instruments. The study focuses on the Baltic Sea, but the general conclusions are most probably also applicable to other sea areas.

Three technologies are identified that can achieve emissions that meet the stringent ECA requirements: Selective Catalytic Reduction (SCR), Humid Air Motor (HAM) and engines fuelled by gas (LNG = liquefied natural gas).

When comparing the abatement costs with the monetised health benefits from reducing NOX from Baltic Sea shipping by these technologies, it is concluded that the benefits are about five times the average cost, provided that a pay-off time of 10 years is allowed. There are also other, less expensive, technologies that can reduce emissions, which is relevant when considering the economic efficiency of retrofitting old engines.

After having analysed several types of economic instruments – such as emissions trading, differentiated fairway and port dues, and emissions charging – the report proposes the introduction of a NOX differentiated enroute charge, largely along the lines of the current Norwegian NOX charge.

From 1 January 2007 Norway introduced a charge of NOK15 per kilo (equivalent to €1,765/ton) on NOX emissions from ship engines above 750 kW. However, a number of Norwegian business organisations have entered into an agreement with the Ministry of the Environment to establish the Business Sector’s NOx Fund, effectively reducing the charge to NOK4/kg (470/ton) for the participants. Through the NOX Fund, NOK600 million per year will be allocated to NOX reduction projects over three years. The NOX Fund selects the most cost-effective projects, which may receive 75 percent of the investment costs. The Fund will also support operational costs, such as urea for SCR.

A NOX-differentiated en-route charge would be relatively easy to operate. It is suggested that port authorities around the Baltic Sea would be mandated to assist a common authority that collects a mandatory charge reflecting the calling ship’s emissions of NOX during its latest trip in Baltic Sea waters. The charge would correspond to emissions emitted from the point of entry into Baltic Sea waters or since departure from another Baltic port.

 It is argued that as long as the revenues are not recycled to the industry, the scheme runs the risk of being legally challenged by third parties. Therefore the proceeds could be used to finance grants to ships along the lines used for recycling the revenues from the existing Norwegian NOX Fund. A charge similar in size to that of the Norwegian NOX Fund ( 470 per ton NOx) may be sufficient when the proceeds are used for grants. The combined effect of a grant and a modest charge should, for frequent visitors, be enough to justify investment in SCR in engines with a remaining life of about ten years or more. Ships should be equally eligible to the grants regardless of flag and ownership.

Ideally there should be only one fund for the Baltic Sea run jointly by the participating coastal states. To improve the overall efficiency it may be worthwhile widening the scheme to also cover the North Sea.

A rough calculation of the emission reduction potential indicates that application of an emissions charge, as outlined above, could cut NOX emissions from ships in the Baltic Sea by about 72 percent. If it is assumed that only four out of five ship owners respond to the incentives in the way foreseen, the actual effect on emissions would be lowered to 58 percent. This would correspond to an annual reduction of about 270,000 tons in NOX, from an expected business-as-usual level of approximately 460,000 tons in 2015.

Health and environment damage from NOX

Emissions of nitrogen oxides (NOX) cause damage to ecosystem biodiversity through eutrophication (over-fertilisation) and acidification. These impacts extend over some 800,000 sq km of land based ecosystems (e.g., forests and heathlands) in the EU, as well as in freshwaters and coastal waters. NOX emissions are a significant factor in the formation of ground-level ozone, a major health hazard and a cause of vegetation damage and reduced crop yields. Moreover, NOX emissions result in the formation of nitrate aerosols which lead to increased levels of and exposure to fine particulate matter (PM2.5). In its Thematic Strategy for Air Pollution from 2005, the European Commission estimated that exposure to elevated concentrations of fine particles and ozone resulted in approximately 370,000 premature deaths – equivalent to more than 3.6 million life years lost – every year in the EU, at emission levels of year 2000. While NOX emissions from land-based sources in the EU, such as road traffic and power plants, are gradually coming down, those from shipping in the sea areas surrounding Europe, show a continuous increase.

Market-based instruments for NOX abatement in the Baltic Sea, APC-report No 24. By Per Kågeson. Published jointly by AirClim, T&E and EEB. Available at www.airclim.org