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Lower sulphur levels in north Europe “are not sustainable”

06 Nov 2009
Figure 1: The sulphur emission control area.

Figure 1: The sulphur emission control area.

The Swedish Forest Industries Federation argues that the stringent regional sulphur rules of the SECA (the Sulphur Emissions Control Area, comprising the English Channel, North Sea and the Baltic Sea) was a decision “made in the dark with no impact assessment conducted prior to the decision”. The SFIF’s Karolina Boholm gives their view

The new IMO sulphur regulation will dramatically affect costs for sea transports, leading to large cost increases and changed directions of logistics flows in Europe. It will also lead to a modal back-shift to the road, making short sea shipping unfeasible in many cases as well as drastically reducing competiveness. Most importantly the new regulations are not in line with the EU internal market and therefore not in line with the Rome treaty and the Lisbon agenda.

In a report by the Swedish Maritime Administration, published in May, it was concluded that for the pulp and paper industry, the regulations will lead to a cost increase of marine fuel by 50-80 percent, and a sea transport cost increase of 30-45 percent. The report also shows a cost increase for the pulp and paper industry in the range of €2 - €9 per tonne product. This will lead to an enormous cost increase and amount to 7 percent (see Table 2) of value added for the forest industry. The Confederation of Swedish Enterprise has shown that for Swedish companies from all sectors, the annual cost is as large as €2.3 billion (Table 1) when using marine fuel of 0.1 percent instead of 0.5 percent.

At the same time the cost benefit to society has been calculated by the Swedish Maritime Administration to be €0.7 billion. The measure is therefore +230 percent more expensive than the value of it. Sustainable Development is built on three aspects: environmental, social and economic. In this case, the economic aspect is clearly not fulfilled making the SECA regulation unsustainable.


The EU has, for a long time put pressure on the UN maritime organisation, IMO, to take action concerning lowering emission levels of sulphur and nitrogen oxide. The Ceilings Directive sets the emission levels of sulphur and nitrogen oxide for the member states and it is argued that sea transport has to be included in order not to exceed the limits (“ceiling”). Since shipping is an activity where national borders have little importance and where around 80 percent of the world fleet is flagged with non-industrialised countries, it was argued that IMO was a better body to deal with this very international issue. EU has, in a way, threatened the IMO that if they do not act the EU will implement EU regulations.

Also a special Sulphur Emission Control Area (SECA) has previously been established including the Baltic Sea, North Sea and English Channel, where special emission restrictions apply. Present regulations in the SECA stipulate a maximum sulphur content of 1.5 percent in bunker fuel, whereas the international regulation stipulates a maximum of 4.5 percent.

 As shown in the map above, Russia has not signed the Marpol convention that regulates the sulphur emissions; this could have significant impact on trade flows, if Russian ships do not comply.


The sulphur regulations

The Emission Control Area (ECA), com - prising the Baltic Sea, North Sea and the English Channel, is an area covering only about 0.3 percent of world water surface. In April 2008 at the 57th meeting of IMO’s Marine Environmental Protection Committee (MEPC), new regulations of sulphur and nitrogen oxide emissions were adopted, which were later confirmed at the 58th meeting in October 2008.

The member states, EC and other stakeholders, had previously agreed to the lowering of the ECA regulation from 1.5 percent sulphur content to 0.5 percent even though this is a hard and stringent regulation for the shipping industry. However, at the meeting due to an unknown reason, the level was suddenly lowered to 0.1 percent; to be implemented as soon as 2015. This was done without any prior study of feasibility.

The new sulphur rules, with levels both globally and within the SECA, are shown in Figure 2.


Dramatic cost increase and no impact assessment

The cost of bunker fuel increases dramatically when going from 0.5 percent to 0.1 percent, resulting in a fuel cost increase of 60-100 percent. Hence, the decision of 0.1 percent came truly as a shock for all stakeholders. It is most disturbing that no impact assessment was made of the level 0.1 percent before making the decision. Also, note that on the international level stricter rules will apply if an impact assessment shows it possible.

Even the environmental effect of lowering the sulphur emission in the ECA is arguable, since eutrophication in the Baltic to a large extent is dependent on the nitrogen emission in this area, not the sulphur emissions. The argument of particulates is also questionable.

 The report by the Swedish Maritime Industry clearly shows that sulphur levels of 0.1 percent lead to a modal backshift, forcing freight on to roads, since lorries will become more cost-effective. Even from the north of Sweden it would be more cost effective to go by lorry to Germany or even to the south of Europe in some cases. This obviously leads to a changed logistics flow in Europe, to other ports in order to reduce time in the SECA, for example to Le Havre or Marseille in France, the west coast of U.K and Narvik harbour in the north of Norway. Besides changed logistics flows and the trade-off effect, is the increased greenhouse gas emissions. The Swedish Maritime Administration has showed one scenario, in which road transport will increase by 6 percent within Sweden, corresponding to more than 300 000 tonnes of CO2.

The European refining industry has also expressed concerns that tighter sulphur restrictions will double Europe’s diesel shortfall, leading to increased imports, a price spike and a knock-on effect on road transport in general, which could be more significant than a modal backshift in terms of CO2 emissions.


The way forward

Obviously, the regulations seriously impact the competitiveness of the industry and should not be implemented before all consequences are properly analysed. An impact analysis at EU level is still lacking.

The distortion of competition due to the new IMO sulphur regulation is unacceptable. A level playing field must be kept within in the European internal market. The objective is therefore that fair competition within the EU internal market must be secured. Thus, the demand of the industry is that harmonized rules regarding ship emission apply for all of Europe and be implemented into all of Europe at the same time.


Table 1. Total fuel cost increase by industry sectors in million with different levels of price of marine fuel MGO, where the middle column is regarded as the more likely scenario.





+75 percent =

1160 USD/ton

+150 percent =

1655 USD/ton

Chemical Industry




Minerals & Mining




Forest Industry








Soil & Rock




Metal Industry




Technology Industry




Food Industry
















Cost increase in percent of the total profit in the industry*




Source: Johan Nyström - Confederation of Swedish Enterprise with data from Swedish Maritime Administration, SIKA and Statistics Sweden

* Gross profit from 2006



Table 2. Total fuel cost increase by industry sector in relation to value added at different levels of price for marine fuel MGO.





+75 percent =

1160 USD/ton

+150 percent =

1655 USD/ton

Forest Industry




Minerals & Mining





Images for this article - click to enlarge

Figure 1: The sulphur emission control area. Figure 2: The new sulphur regulations Figure 3: Cost of marine fuel of different qualities

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