Policies and measures to reduce air emissions from shipping : recommendations for Swedish stakeholders

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Policies and measures to reduce

air emissions from shipping

Recommendations for Swedish stakeholders

Inge Vierth

VTI notat 24A-2019

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VTI notat 24A-2019

www.vti.se/en/publications

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VTI notat N24A-2019

Policies and measures to reduce air

emissions from shipping

Recommendations for Swedish stakeholders

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Author: Inge Vierth, VTI, https://orcid.org/0000-0001-6401-6536

Reg. No., VTI: 2017/0352-7.4 Publication: N24A-2019

Cover pictures: Ronan Furuta/Unsplash and Chris Pagan/Unsplash Published by VTI, 2020

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Preface

Shipping is a major source of emissions of harmful air pollutants and greenhouse gas emissions. The purpose of the “Carrots and sticks” project was to identify the policy instruments and measures that can reduce air emissions from shipping and contribute to the fulfilment of the Swedish environmental quality objectives Reduced climate impact, Clean Air, Natural acidification only and Zero

eutrophication in a cost-effective way. The project has been carried out by a research team from the Swedish National Road and Transport Research Institute (VTI) and the University of Gothenburg (GU) between the end of 2017 and the beginning of 2020.

During that period several things happened that had a significant impact on the project:

1) The Swedish environmental quality objectives were revised and comprise, except for the climate goal, no longer quantitative targets. The International Maritime Organization (IMO) agreed on a goal to reduce the greenhouse gas emissions from international shipping by at least 50 percent by 2050, as compared to the 2008 level.

2) Sweden’s official statistics on air emissions from shipping were improved using data from the Automatic information system (AIS). The “Carrots and sticks” applied a similar AIS-based approach to calculate the emissions and compared the outcome, as far as possible, to the official statistics that were published in the end of 2019. See Trosvik et al. (2020). 3) The Swedish Transport Administration commissioned a study on emission factors for sea

transports that are supposed to be used in the Swedish CBA guidelines. This study (Carlsson et al, 2019) was published in august 2019. The “Carrots and sticks” project used emission factors from the literature and compared them to the emission factors in Carlsson et a. (2019). See data set A and B in Holmgren (2020).

4) The Swedish Maritime Administration appointed VTI to evaluate the impacts of the in 2018 revised fairway dues, see Johansson et al. (2020, forthcoming). The “Carrots and sticks” project used the results regarding port calls and environmental discounts derived in this study. See Vierth (2019).

Except for this report, the following deliverables that have been produced within the “Carrots & sticks” project.

• Christodoulou, A., Gonzalez-Aregall, M., Lindé, T., Vierth, I. & Cullinane, K.P.B. 2019. Targeting the reduction of shipping emissions to air: A global review and taxonomy of policies, incentives and measures, Maritime Business Review, 4(1), 16-30.

• Christodoulou, A., 2019. Maritime environmental performance indices: useful tools for the evaluation of the transport supplier environmental performance? WIT Transactions on The Built Environment, Paper DOI 10.2495/MT190171, pp. 187 - 198.

•_{Christodoulou, A., Gonzalez-Aregall, M. & Cullinane, K.P.B. (2019) An analysis of measures} employed to promote the environmental profile of shipping (keynote speech; International Conference of Maritime Science & Technology, NAŠE MORE 2019, Dubrovnik, Croatia, 17-18 October)

•_{Gonzalez-Aregall, M., 2020 (forthcoming). Leaders in the reduction of shipping air emissions:} California vs Sweden

• Holmgren, K., 2019 Emission reductions and costs for measures abating air pollution from shipping (poster; Conference on the environmental impacts of shipping and their coupling to the development of the maritime transport sector, policies and maritime spatial planning. Gothenburg, 4-6 September 2019)

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•_{Holmgren, K., 2020. Abatement measures for the reduction of air pollutants and greenhouse} gases from shipping - With importance for the Swedish Environmental Quality Objectives and the IMO GHG reduction targets, s.l.: VTI (VTI Notat 8A-2019).

• Lindé, T., Vierth, I. & Cullinane, K.P.B., 2019. Evaluating the effects of Sweden's

environmentally differentiated fairway dues. Transportation Research Part D (70), pp. 77-93. • Trosvik, L., Vierth, I. & Andersson-Sköld, Y., 2019. Shipping and air emissions in Sweden

and business-as-usual scenarios for 2030 and 2045 / Based on AIS data in 2015, s.l.: VTI (VTI Notat N23A-2019).

• Vierth, I. & Johansson, M., 2020. The impact of alternative environmentally differentiated fairway dues systems in Sweden. forthcoming.

• Zis, T. & Cullinane, K.P.B. 2020. The Desulphurisation of Shipping: Past, Present and the Future under a Global Cap, Transportation Research D, forthcoming.

• Vierth, I., Trosvik, L. and Holmgren, K., 2020. Morötter och piskor inom sjöfarten för att uppnå miljökvalitetsmål. VTI PM, 2020-03-31. Diarienummer: 2017/0352-7.4.

• Homepage: https://www.vti.se/en/research-areas/carrots-and-sticks/

The authors would like to thank the participants of the reference group, Sofi Holmin-Fridell (Swedish Maritime Administration), Leif Holmberg and Per Andersson (Swedish Environmental Protection Agency), Katarina Wigler (Swedish Transport Agency), Björn Garberg (Swedish Transport

Administration), Helena Leander and Katarina Händel (Swedish Energy Agency), Christine Hanefalk (Ports of Sweden), Åsa Burman (Lighthouse), Fredrik Larsson (Swedish Shipowners´ Association), Christer Ågren (Air Pollution and Climate Secretariat) and Siri Strandenes (Norwegian School of Economics NHH) for their contributions. We especially thank Siri and Christer for valuable comments on earlier versions of our reports.

Furthermore, we thank the Swedish Transport Administration and Sweden’s Innovation Agency (Vinnova) for funding the project.

Stockholm, March 2020 Inge Vierth

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Quality review

Internal peer review was performed on 13 March 2020 by research director Jan-Erik Swärdh. Inge Vierth has made alterations to the final manuscript of the report. The head of research Mattias

Haraldsson examined and approved the report for publication on 19 March 2020. The conclusions and recommendations expressed are the author’s and do not necessarily reflect VTI’s opinion as an

authority. Prof. Kevin Cullinane, University of Gothenburg has reviewed the script.

Kvalitetsgranskning

Intern peer review har genomförts 13 mars 2020 av forskningschef Jan-Erik Swärdh. Inge Vierth har genomfört justeringar av slutligt rapportmanus. Avdelningschef Mattias Haraldsson har därefter granskat och godkänt publikationen för publicering 19 mars 2020. De slutsatser och

rekommendationer som uttrycks är författarens egna och speglar inte nödvändigtvis myndigheten VTI:s uppfattning. Prof. Kevin Cullinane, Göteborgs universitet har språkgranskat manuset.

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List of abbreviations

AIS Automatic Identification System

BAU Business-as-usual

CARB Californian Air Resources Board

LCFS (CARB) Low Carbon Fuel Standards CEF (program) Connecting Europe facility

CH4 Methane

CO Carbon monoxide

CO2 Carbon dioxide

CO2eq CO2-equivalents

CompMon (pilot project) Compliance monitoring

CSI Clean Shipping Index

DCS (IMO) Data collection system

DME Dimethyl ether

ECA Emission Control Area

EEA European Environment Agency

EEDI Energy Efficiency Design Index

EEOI Energy Efficiency Operational Indicator

EnviSum (project) Environmental Impact of Low Emission Shipping: Measurements and Modelling Strategies

ESI Environmental Shipping Index

EU European Union

EU ETS European Union Emissions Trading System

FAME Fatty Acid Methyl Esters

FTD Fischer Tropsch diesel

GHG Greenhouse gas

GIMEEP The Global Industry Alliance to Support Low Carbon Shipping

GT Gross tonnage

H2 Hydrogen

HAM (system) Humid Air Motor

HELCOM Baltic Marine Environment Protection Commission - Helsinki Commission

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HVO Hydrogenated Vegetable Oil

IFO Intermediate fuel oil is a blend of gasoil and heavy fuel oil IMRB International Maritime Research and Development Board

IMO International Maritime Organization

kW Kilowatt

LBG Liquified Biogas

LCFS Low Carbon Fuel Standards

LNG Liquefied Natural Gas

LPG Liquefied Petroleum Gas

MARPOL Maritime pollution

MDO Marine Diesel Oil

MGO Marine Gas Oil

MEPC (IMO) Marine Environment Protection Committee MRV (EU) Monitoring reporting and verification system

N2O Nitrous oxide

NECA Nitrogen oxide Emission Control Area

NHO (Norway) Næringslivets Hovedorganisation

NMVOC Non-methane volatile organic compounds

NOx Nitrogen oxide

OPS Onshore Power Supply

PM Particulate matter

REP Refunded emissions payment

RoPax (ferry) Roll-on/roll-off Passenger vessel RoRo (ferry) Roll on, Roll off

Rpm Revolutions per minute

SCR Selective Catalytic Reduction

SECA Sulphur Emission Control Area

SEEMP Ship Energy Efficiency Management Plan

SMA Swedish Maritime Administration

SOFT (Sweden) Samordningsuppdrag för omställningen av transportsektorn till fossilfrihet

STEPS Stated Policies Scenario (World Energy Outlook)

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SO2 Sulphur dioxide

TEN-T Trans European network - Transport

TRIMIS European Transport Research and Innovation Monitoring System

TTP Tank-to-propeller

VSR (program) Vessel speed reduction

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Summary

Policies and measures to reduce air emissions from shipping. Recommendations for Swedish stakeholders

by Inge Vierth (VTI)

The purpose of the “Carrots and sticks” project is to identify the policy instruments and measures that can reduce air emissions from shipping and contribute to the fulfilment of the national Swedish environmental quality objectives Reduced climate impact, Clean Air, Natural acidification only and Zero eutrophication in a cost-effective way. The climate objective has quantified targets 2030 and 2045; the EU and the IMO (International Maritime Organization) have also set up climate goals. The identification of the most relevant policies and measures is based on a global review of the

policies and measures. Available ex-ante and ex-post analyses and studies that estimate the potential to reduce air emissions from shipping are analysed. It is shown that most policies have been implemented in Northern Europe and North America.

Specific circumstances for Sweden are considered. The visiting profile is extreme, as just a few ferries perform about two-thirds of the calls and cause about half of the air emissions while one-third of the ships call into Sweden less frequently than once a year. The share of international transport is high and growing, which implies the importance of IMO and EU policies as well as the strong cooperation with neighbouring countries to reduce the air emissions from shipping.

Air emissions of sulphur dioxides (SO2), nitrogen oxides (NOX) and particulate matter (PM) and greenhouse gases (GHG) from shipping in the waters in and close to Sweden 2015 are estimated based on the bottom-up approach using AIS-data (Automatic Identification System) and other sources. Four BAU-scenarios (business as usual) are developed for the target years 2030 and 2045. They comprise different assumptions about the development of transport demand, energy efficiency improvement and the fuels used. The calculated volumes of air emissions are highest when the assumptions of the Swedish public agencies are used. It is recommended to consider estimates from different sources in the next Swedish forecasts and scenarios.

In none of the four BAU scenarios are the Swedish climate objectives for 2030 and 2045 fulfilled, neither is the IMO’s climate goal 2050. The NOX emissions are estimated to decrease in all four of the scenarios due to the implementation of the North European NECA (Nitrogen oxide Emission Control Area) in 2021, that requires that all new vessels comply with Tier III standards. The SO2 emissions have decreased, mainly due to the implementation of the North European SECA (Sulphur Emission Control Area) in 2015 and are expected to decrease further. It is difficult to follow up the development in detail based on official statistics.

The societal costs and benefits are compared for four different policies and cases (Promotion of full electrification of ships, Promotion of onshore power supply, Integration of shipping in the EU ETS and other sustainable policies developed by the World Energy Outlook, Implementation of a regional NOX-fund) are carried out using ship-specific abatement costs and their potential to reduce the air emissions. The emission reductions are evaluated in monetary terms applying European as well as Swedish unit values for the emissions. The impact on the total volume of the different emissions is studied briefly.

The overall picture is that the challenge is large since none of the scenarios 2030 and 2045comes very near to achieving the Swedish climate objective set even merely for domestic transport when the integration of shipping in the EU ETS and other sustainable policies are assumed to be implemented in addition to the in the BAU-scenarios assumed energy efficiency improvement and fuel shifts. Similar

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challenges are assumed to exist for IMO’s climate goal for international transport and the Swedish objectives regarding Clean Air, Natural acidification only and Zero eutrophication.

It is recommended to develop a monitoring tool based on official statistics that can be used to follow up the volumes of the different air emissions from shipping, including the impacts of different policies and measures. In the light of the importance of international transport. It is especially important to create more detailed and transparent statistics for this transport and “to synchronize” the Swedish and the international statistics. The fragmented responsibility in Sweden makes it difficult to figure out how differences from year to year can be explained.

Our analyses show undoubtedly that a “patchwork” of different policies is needed, that target the different air emissions, ship types and transport segments. In order to promote a level playing field, there is a need for policies and measures that can make effective compliance control of existing and new regulations.

Regarding the reduction of SO2 and PM emissions, no specific policies are for now recommended in addition to the already implemented policies as the North European SECA and the Global sulphur cap 2020. However, unwanted side-effects of policies to reduce the SO2 emissions need to be eliminated or restricted. Examples are the use of open loop scrubbers, that reduce the emissions to air and increase the emissions to water, and methane slip due to the use of LNG.

Regarding the reduction of GHG emissions, it is recommended to lobby for the inclusion of shipping in the EU ETS or a similar global cap and trade system. Our calculations indicate that many energy-efficiency measures and fuel shifts become commercially profitable when the relative fuel prices change. Furthermore, it is recommended to investigate global or regional speed reductions, that have the advantage that emissions are reduced immediately. The above-mentioned policies contribute to the reduction of other GHG-, SO2-, NOx-- and PM-emissions.

The reduction of the NOX emissions requires on top of that specific policies and the introduction of the North European NECA in 2021, that give incentives to invest in SCR (Selective Catalytic Reduction) or similar technic solutions. Our recommendation is to implement a NOX fond or similar. A regional system is assumed to be more efficient than a national system in Sweden as more companies can be reached.

At the national level, it is recommended to make use of the relatively low electricity price and “greener electricity mix” in Sweden. Our analyses indicate that both the use of electricity for the propulsion and the use onshore power in ports can be societally profitable. Both require standards and the provision of charging facilities etc.

A recommendation at the national and international level is to study how the design of the Swedish environmentally differentiated fairway dues and port fees can be improved and how the schemes for these charges can be coordinated at the national and international level, in order to reach more ships and to give larger environmental incentives than today.

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Sammanfattning

Styrmedel och åtgärder för att minska sjöfartens emissioner till luft. Rekommendationer för svenska intressenter

av Inge Vierth (VTI)

Syftet med projektet ”Morötter och piskor” är att identifiera styrmedel och åtgärder som kan minska sjöfartens utsläpp till luft och därmed bidra till uppfyllandet av de nationella svenska miljökvalitets-målen Begränsad klimatpåverkan, Frisk luft, Bara naturlig försurning och Ingen övergödning på ett kostnadseffektivt sätt. Klimatmålet har kvantifierade mål för 2030 och 2045, EU och den internation-ella sjöfartsorganisationen IMO har också satt upp kvantifierade klimatmål.

De mest relevanta styrmedel identifieras baserade på en global översyn av befintliga och planerade policys och tillgängliga konsekvensanalyser (ex ante och ex post) och potentialanalyser. Det visar att de flesta styrmedel för att minska sjöfartens emissioner till luft har implementerats i Norra Europa och Nordamerika.

De specifika förutsättningarna för Sverige studeras. Ett fåtal färjor står för ungefär två tredjedelar av anloppen och orsakar ungefär hälften av emissionerna medan en tredjedel av fartygen kommer mer sällan än en gång om året. Andelen internationella transporter är stor och ökar, vilket understryker vikten av att arbeta inom IMO och EU och att samarbeta med grannländerna för att minska sjöfartens emissioner.

Sjötransporternas emissioner av svaveldioxid (SO2), kväveoxider (NOX), partiklar (PM) och växthus-gaser till luft i och nära Sverige 2015 beräknas med hjälp av AIS-data (Automatic Identification System) och andra källor. Fyra BAU-scenarier (business as usual) utvecklas för 2030 och 2045. De omfattar olika antaganden om utvecklingen av transportefterfrågan, förbättringen av energieffektivi-teten och bränslemixen. De beräknade emissionsvolymerna är störst när de svenska myndigheternas antaganden används; det rekommenderas att beakta antaganden från flera olika källor i kommande svenska prognoser och scenarier.

I inget av de fyra BAU-scenarierna uppfylls de svenska klimatmålen 2030 och 2045, detsamma gäller för IMO:s klimatmål 2050. NOX -utsläppen beräknas minska i alla fyra BAU-scenarier på grund av införandet av det nordeuropeiska NECA (Nitrogen oxide Emission Control Area) 2021, vilket kräver att alla nya fartyg som seglar i området uppfyller Tier III-standarder. Utsläppen av SO2 emissionerna har minskat, främst på grund av genomförandet av det nordeuropeiska SECA (Sulphur Emission Control Area) 2015 och förväntas minska ytterligare. Det är dock svårt att följa upp utvecklingen i detalj, baserade på den officiella statistiken.

De relevanta kostnaderna och nyttorna för samhället jämförs för fyra olika styrmedel och fall (Främjande av fullständig elektrifiering, Främjande av användningen av landström för fartyg som ligger i hamn, Integrering av sjöfarten i EU:s handelssystem med utsläppsrätter (EU ETS) och annan hållbar politik som har utvecklats av World Energy Outlook, Etableringen av en regional NOX-fond) genomförs baserade på specifika åtgärdskostnader per fartygstyp och deras potential att minska de olika emissionerna. Emissionsminskningarna värderas i monetära termer genom att använda europeiska och svenska värden. Effekterna på emissionsvolymerna totalt studeras kortfattat. Helhetsbilden är att utmaningen är stor, eftersom det svenska klimatmålet, som gäller nationella sjötransporter, inte heller nås 2030 och 2045 om det antas att sjöfarten är integrerade i EU ETS och annan hållbar politik genomförs utöver de energieffektiviseringar och bränslebyten som antas i BAU-scenarierna. Liknande utmaningar antas finnas för IMO:s klimatmål för internationella sjötransporter och de svenska miljökvalitetsmålen Frisk luft, Bara naturlig försurning och Ingen övergödning.

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En rekommendation är att det tas fram ett uppföljningsverktyg, som baseras på officiell statistik och kan användas för att följa upp sjöfartens emissioner till luft och effekterna av olika styrmedel. Mot bakgrund av den stora andelen internationella sjötransporter är det särskilt viktigt att skapa mer detaljerad och transparent statistik för dessa transporter och ”synka” den svenska och den inter-nationella statistiken. Det fragmenterade ansvaret i Sverige gör det svårt att förstå vilka faktorer som förklarar utvecklingen mellan åren.

Våra analyser visar utan tvekan att det behövs ”ett lapptäcke” av olika politikområden, som är inriktat på de olika emissionerna, fartygstyperna och transportuppläggen. För att främja lika villkor, krävs att efterlevnaden av befintliga och nya bestämmelser säkerställs.

När det gäller minskningen av SO2 emissioner, rekommenderas i dagsläget inga egna styrmedel utöver de redan genomförda, t.ex. införandet av det nordeuropeiska SECA (Sulphur Emission Control Area) och det globala svaveltaket (Global sulphur cap) 2020. Oönskade biverkningar av styrmedel som syftar till att minska SO2 emissionerna måste dock elimineras eller begränsas. Exempel är använd-ningen av öppna skrubbers, som minskar SO2 emissionerna till luft och ökar emissionerna till vatten, och metanslip på grund av användningen av LNG.

När det gäller minskningen av växthusgasutsläppen, rekommenderas att svenska aktörer arbetar för att sjöfarten inkluderas i EU:s utsläppshandelssystem eller ett liknande globalt system. Våra beräkningar visar att många energieffektivitetsåtgärder och bränslebyten blir kommersiellt lönsamma när de relativa bränslepriserna ändras. Därutöver rekommenderas att förutsättningarna för globala eller regionala hastighetsminskningar undersöks, dessa har fördelen att de reducerar sjöfartens emissioner omedelbart. De ovannämnda styrmedlen bidrar också till att minska växthusgaser såväl som SO2- , NOX- och PM-emissioner till luft.

Minskningen av NOX-utsläppenkräver, utöver de ovan-nämnda styrmedlen och implementeringen av det nordeuropeiska NECA 2021, styrmedel som ger incitament till investeringar i katalysatorer (SCR= Selective Catalytic Reduction) eller liknande tekniklösningar. Vår rekommendation är att införa en NOX fond eller liknande. En regional NOX fond anses vara effektivare än en svensk NOX fond eftersom fler företag kan nås.

På den nationella nivån föreslås att utnyttja det, jämfört med andra länder, relativt låga elpriset och den ”gröna el-mixen” i Sverige. Våra analyser antyder att både elektrifieringen av fartyg och användning av landström i hamnar kan vara lönsamma för samhället. Når det gäller styrmedel kräver båda standarder och investeringar i laddningsstationer med mera.

En rekommendation som rör både den nationella och internationella nivån, är att studera hur

utformningen av de svenska miljödifferentierade farledsavgifterna och hamnavgifterna kan förbättras och hur dessa avgiftssystem kan samordnas på nationell och internationell nivå för att nå fler fartyg och ge större miljöincitament än i dag.

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1. Introduction

1.1. Policies and measures to reduce air emissions from shipping

The growing concern of society for reducing air emissions from shipping has resulted in the development and adoption of various policy instruments and measures1_{targeting the reduction of} these emissions from inter-governmental organizations as well as regional2_{, national and local public} institutions and private actors.

These policies and measures have become an issue of major concern, as the air emissions of sulphur dioxides (SO2), nitrogen oxides (NOX) and particulate matter (PM)3 are negative externalities that have impacts on human health, while greenhouse gases (GHG) contribute to climate change. Theoretically, different policies are applied to regulate or to give incentives to adjust the production and/or consumption of certain goods or services to achieve a more efficient use of resources. This implies that policies and measures need to be analysed, evaluated and developed further to identify those with the greatest potential for reducing air emissions from shipping in a cost-efficient way. The Carrots and sticks project focuses on Sweden and the policies that contribute to the fulfilment of the Swedish environmental quality objectives of Reduced climate impact, Clean Air, Natural

acidification only and Zero eutrophication.4_{The environmental quality objectives related to Clean Air,} Natural acidification only and Zero eutrophication do not have quantified targets5_{, except from}

standards at the local level6_{but follow the changes that are made over time (Regeringskansliet, 2018).} For the objective Reduced climate impact, there are quantitative goals at the national, European and global level. Sweden has goals to reduce GHG emissions caused by domestic transport (excluding air transport) by 70 percent by 2030 and to reduce emissions from all sectors to net zero by 2045

(Regeringen, 2017). Due to agreements within the European Union (EU), GHG-emissions (excluding the European trading system for GHGs, the EU-ETS) shall be reduced by 40 percent by 2030

compared to 1990 (European Commission, 2018). Recently, the International Maritime Organization (IMO) agreed on a goal to reduce the GHG emissions from international shipping by at least 50 percent by 2050, as compared to the 2008 level (IMO, 2018a).

A high share of shipping is by nature international and, compared to land-based transport, there are typically no taxes on marine fuel. The IMO has adopted technical and operational measures targeting the reduction of the emissions of SO2, NOX, PM and GHGs by including them within Annex VI of its MARPOL 73/78 (IMO, 2019a). The EU has adopted directives for the abatement of maritime air emissions within its territorial waters and has, on certain issues, gone ahead of the IMO. The EU’s

Green Deal (European Commission, 2019a), stresses that the drivers of climate change are global, and that the EU wants to build alliances with like-minded nations and regions.

1_{Two types of measures can be differentiated: measures undertaken by public stakeholders, e.g. infrastructure}

investments and (abatement) measures undertaken by private and public stakeholders to comply with policies. This report does not focus on private firms’ voluntary measures that go beyond the actual legal requirements.

2_{involving two or more countries.}

3_{PM is used for a broad class of chemically and physically diverse substances, it mainly takes the form of soot}

and ash. PM are typically measured in PM10 and PM 2.5. PM10 (10 micrometers or less in diameter) comprises

PM2.5 (2.5 micrometers or less in diameter).

4_{The overall generation goal (Generationsmålet) states that: “the major environmental problems in Sweden have}

been solved, without increasing environmental and health problems outside Sweden’s borders.”

5_{Quantitative targets existed when the Carrots and sticks project was started.} 6_{Miljökvalitetsnormer}

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Decisions in the IMO and the EU require the acceptance by a majority of the member states. The scope of individual countries to decide on polices that go beyond international regulations is limited (Swedish Energy Agency, 2017c). Sweden has been relatively restrictive in implementing

requirements that go beyond IMO’s regulations for ships that sail under the Swedish flag, ships that sail in Swedish waters (about 22 km from the coastline) or ships that call at Swedish ports. This is due to the risks that Swedish ships flag out and that foreign ships avoid Swedish waters and ports.

Furthermore, there are risks of distorted competition and negative impacts on Sweden's confidence in the IMO (Swedish Energy Agency, 2017c). At the local level, a variety of policies and measures have been adopted for stimulating the employment of technical innovations and better operational practices. Despite the various initiatives taken by the different stakeholders, the reduction of air emissions from shipping has been quite slow and targeted goals and ambitions have not been achieved.

1.2. Purpose and approach

The overall purpose of this report is to give recommendations to Swedish stakeholders on how to reduce air emissions from shipping and to contribute to the fulfilment of the Swedish environmental quality objectives and IMO’s climate goal in a cost-efficient way. The EU’s climate goal is not studied in detail, as the Swedish climate goal is more ambitious. In contrast to previous studies, that focus on the analysis of the effectiveness and feasibility of speciﬁc initiatives or have targeted the abatement of specific emissions, diverse policies and measures are analysed together in a comprehensive way. The analysis focuses on public policies and measures and does not comprise the air emissions caused by barges, leisure boats and fishing boats. Policies that promote the modal shift from land to sea and policies with the target to achieve the Swedish environmental objectives by reducing the emissions in other than the maritime sector are not included either. Both the tank to propeller perspective (TTP) and the wheel to propeller perspective (WTT) are applied.7

Chapter 2 studies different policies around the world that have contributed or are expected to

contribute to the reduction of the air emissions from shipping, based on the literature and suggestions brought up by different stakeholders. Section 2.2 refers to the reduction of the emissions of SO2, NOX, and GHG one by one; there is no sub section for PM as the SO2- and NOX-regulations have an indirect

effect on the emissions of PM.8_S_{ection 2.3 addresses the general reduction of the air emissions from}

shipping (e.g. by using alternative fuels); policies that target the reduction of the air emissions at sea and at berth are distinguished. Publicly controlled ships are addressed separately in section 2.4 and questions related to data and research in section 2.5. The type of policies that are expected to have a large contribution to the reduction of air emissions from shipping are identified in section 2.6. Chapter 3 describes the air emissions from shipping in the waters in and close to Sweden as of 2015. This is done based on the bottom-up approach using AIS9_{-data and other sources described in Trosvik} et al. (2020) and information derived in Johansson et al. (2020). Specific circumstances for Sweden, that need to be considered in the choice and design of the policies, are pinpointed. Also based on Trosvik et al. (2020), it is shown how the SO2, NOX, PM and CO2 emissions are assumed to develop in four different BAU10_{-scenarios for 2030 and 2045 and to what extent the climate goals are assumed to} be fulfilled.

7_{Regarding the Swedish climate objectives, TTP is relevant for the goal and WTP for the} 2045-goal.

8_{There are no IMO-requirements regarding PM but the IMO has agreed on a definition of PM as a} first step.

9_{Automatic Identification System} 10_{business as usual}

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Chapter 4 analyses to what extent the polices identified in chapter 2 can reduce the air emissions from shipping and contribute to the fulfilment of the environmental objectives set by the Swedish

government and the IMO. Comparisons of the societal costs and benefits of different policies and measures are carried out using the ship-type specific abatement costs and their potential to reduce the SO2, NOX, PM and GHG emissions, based on Holmgren (2020). The emission reductions are

evaluated in monetary terms applying Swedish and European unit values for SO2, NOX, PM and GHG. The impact on the volume of emissions and the contribution to the fulfilment of the Swedish

environmental quality objectives and IMO’s climate goal is studied.

Chapter 5 comprises overall conclusions and recommends policies and measures that Swedish stakeholders should prioritize, at the national and international level, in order to achieve the environmental objectives that have been set up.

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2. Identification of relevant policies and measures

2.1. Introduction

The identification of the most relevant policies and measures for Sweden that address the reduction of air emissions from shipping, is based on the global review and taxonomy of policies, incentives and measures (Christodoulou et al., 2019) and complementary literature. Available ex-ante and ex-post analyses and studies that estimate the potential to reduce air emissions from shipping are analysed. The global overview showed that 111 out of the 249 single policies identified are economic instruments and that the majority of the policies and measures have been implemented in Europe (60%) and North America (23%), where emission control areas have been implemented for SOX and NOX (see below). Within Europe, the Nordic countries are ahead and within the US, California11 (see section 2.2).

In Northern Europe, HELCOM (Baltic Marine Environment Protection Commission - Helsinki Commission) has considered air emissions from shipping over three decades. The contracting countries are Denmark, Estonia, the European Union, Finland, Germany, Latvia, Lithuania, Poland, Russia and Sweden. HELCOM’s maritime group developed and negotiated the submissions of the proposals to the IMO regarding emission control areas (ECA) in the Baltic Sea for SO2 (SECA agreed in 1997) and for NOx (NECA agreed in 2017), HELCOM (2018a). For the time being, the North European ECA comprises the Baltic Sea, the North Sea (incl. the English Channel. See also sections 2.2 and 2.3).

To cover the actual discussions in Sweden, suggestions for policies brought up by different

stakeholders are studied based on reports published by the National strategy for transition to fossil-free transport developed by six public agencies (SOFT = Samordningsuppdrag för omställningen av transportsektorn till fossilfrihet) (Swedish Energy Agency, 2016; 2017a; 2018; 2019a). Furthermore, the policies suggested by Miljömålsberedningen (SOU 2016:47, 2016) and Trafikutskottets

arbetsgrupp för Forskningsfrågor (Riksdagen, 2017) and the public policies and measures in the Roadmap for fossil free competitiveness Sjöfartsnäringens Färdplan för fossilfri konkurrenskraft (below Roadmap) developed by Swedish shipowners and ports within the Fossil free Sweden initiative (Skärgårdsredarna, et al., 2019) are considered.

The analysis is based on ex-post and ex ante analyses etc. of policies and measures to reduce the air emissions from shipping, that have been carried out in different parts of the world, considering that Northern Europe is one of the forerunners.

2.2. Reduction of specific emissions to air

Existing policies and measures (including those that are decided but not in force yet) and suggested policies to reduce air emissions from shipping are described below. The presentation of the policies and measures starts at the inter-governmental level (IMO and EU) and continues with the regional, national and local levels.

2.2.1. Reduction of SO

2

emissions

2.2.1.1. SECA regulations

The North European SECA and the North American SECA (comprising most of the US and Canadian coast and the US Caribbean coast) were designated as MARPOL Annex VI SO2 Emission Control 11_{Therefore, the Carrots & sticks project initiated the study Gonzalez-Aregall (2020, forthcoming) to} identify policies and measures that could be transferred from California to Sweden.

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Area (SECA) in 1997 (IMO, 2019a). The SO2 emission limits were tightened over the time; the last revision included a schedule with further tightening of the emission limits, to 0.1% within the SECAs in 2015 and globally to 0.5% in 2020. The latter is known as the Global Sulphur Cap. The EU’s Sulphur directive, EU 2016/802, (2016), adapts the EU legislation for the developments under

MARPOL Annex VI.12 _{Table 1summarizes the IMO and EU regulations on sulphur emissions over the} last decade.

Table 1. SO2 limits described by allowed sulphur content of marine fuels according to IMO and EU regulations (Percentages based on a m/m basis).

Global SO2 limits outside SECAs SO2 limits inside SECAs 4.5% prior to 1st January 2012 1.5% prior to July 2010

3.5% on and after 1st January 2012 1.0% on and after 1st July 2010 0.5% on and after 1st January 2020 (Global Sulphur Cap) 0.1% on and after 1st January 2015 Sources: IMO (2016) (IMO, 2016))

Since 1st January 2015, all ships sailing in the North European and North American SECA have to use fuel with a sulphur content not exceeding 0.1% m/m. The use of fuels with higher sulphur content is allowed, if the ships are equipped with scrubbers or similar, that reduce the sulphur content in the exhaust gases to levels corresponding to the use of a fuel with sulphur content complying with the set limits.13

Shipping companies use both “closed loop scrubbers” and “open loop scrubbers”. The latter reduces shipping’s SO2 emissions to air but increase the emissions to water. HELCOM (2018a) assume that retrofitted and newly built scrubbers will become more common and that there will be significant negative environmental impacts caused by scrubber emissions containing sulphuric acid and other pollutants, unless the emission of scrubber water discharge is prohibited. Many ports around the world have banned the use of these scrubbers (Argus, 2019). One reason for using open-loop-scrubbers are the lower costs; according to Lindstad & Eskeland (2016), the investment costs and running costs for “closed loop scrubbers” are twice the costs for “open loop scrubbers”. The “closed loop scrubber systems” also requires the handling of scrubber wastewater and sludge. The ports need to invest in facilities so that vessels can empty their effluent wash waters and then society needs to invest in installations where this wash water can be treated (not necessarily located in the ports). The sludge cannot be discharged into sea and the ports have to provide reception facilities according to MARPOL Annex VI Regulation 17.

Revealed impacts of the stricter SO2-regulations in the North European SECA

Transport Analysis (2017a) find that the stricter SO2 regulations in the North European SECA resulted in fuel shifts; mainly from Heavy Fuel Oil (HFO) and other residual oils to marine distillate fuels like Marine Gas Oil (MGO) and Marine Diesel Oil (MDO) in Sweden. The implementation of the Sulphur directive did not lead to the initially calculated cost increases for shipping companies, as crude oil prices fell sharply at the end of 2014/beginning of 2015, Raza el al. (2019) studied the measures undertaken by companies in the RoRo and RoPax segment and found that switching to distillate fuels 12_{In addition, a 0.1% maximum sulphur requirement of fuels used by ships at berth in EU ports was introduced}

from 1rst January 2010. According to the Directive, passenger ships operating on regular services to or from any EU port shall not use marine fuels if the sulphur content exceeds 1,5% in sea areas outside the SECAs.

13_{The discharge of scrubber wash waters is not allowed in German rivers and ports. In most of the other}

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(e.g. MGO and ultra-low sulphur oil), installing scrubbers and converting to LNG (Liquified Natural Gas) driven ships were the most common compliance measures. They also found that the use of more expensive fuel did hardly lead to any slow steaming. Regarding the use of LNG, it is important to remember that this is a fossil fuel and with the current level of methane slip in engines, a fuel shift from MGO to LNG results in a net increase in GHG emissions (for details, see Holmgren (2020)). The InterReg project EnviSuM (2019) calculated that the stricter sulphur requirements in the North European SECA led to an 87% reduction of the SO2 emissions and a 36% reduction of the PM 2.5 emissions in the Baltic See Table 2. The emissions of CO2, NOX, Carbon monoxide (CO) and Non-methane volatile organic compounds (NMVOC) increased during the same period. PM emissions are not reduced as much as SO2 emissions, as PM consists of various chemical species that do not contain Sulphur.14_{In EnviSuM’s business as usual alternative (BAU) for 2030, all air emissions are assumed} to decrease by 2030 compared to 2014 and 2016.

Table 2. Emissions from Baltic Sea vessels in tonnes. Year CO2 (million

tonnes) NOx SO2 CO NMVOC PM 2.5

2014 14.4 31,400 7,510 2,110 256 1,500

2016 15.0 32,300 998 2,210 267 962

2030 (BAU)* 12.7 17,100 845 1,820 229 828

*including efficiency gains as described in Kalli et al. (2013), fleet and vessel growth rates, as well as already agreed regulations to reduce NOX emissions that will be applied from 2021 onwards in the NECA.

Source: EnviSuM (2019)

EnviSum (2019) calculated yearly benefits of at least € 670 million related to health and at least € 109 million related to the environment and yearly costs of € 124 million for shipping companies and € 0.260 million for maritime authorities. This means that the benefits for society of reducing SO2 emissions are calculated to be more than six times higher than the costs.

Compliance

Regarding enforcement, there are regulations at the IMO level (IMO, 2020) at the EU-level (EU directive (2016/802, 2016)) and at the national level in Sweden (Sveriges Riksdag, 2014).

Enforcement of the sulphur content of fuel oil is traditionally done through bunker delivery notes, documenting the quality of oil provided and spot checks of the fuel used. However, because high sulphur fuel can be purchased for use outside the SECA or in combination with scrubbers or other exhaust gas cleaning technologies, the presence of high sulphur fuel inside fuel tanks cannot be used as grounds for violation of sulphur rules. For this reason, alternative monitoring methods have been tested in the Baltic Sea (HELCOM, 2018a).

The European CEF-program (Connecting Europe facility program) supported the action “Compliance monitoring pilot for MARPOL Annex VI” (CompMon, 2014 - 2016). CompMon joined forces from Finland, Sweden, Denmark, Germany, The Netherlands and Belgium, to perform pilot projects targeting the enforcement of sulphur regulations. CompMon produced information that the national authorities can use to target on-board inspections in a cost-efficient way. Different remote surveillance 14_{The foreseen measures for NO}

X emission reduction will decrease the atmospheric concentrations of

PM (EnviSuM, 2019; HELCOM, 2018a). Additionally, black carbon from PM on snow and ice reduces the backscatter of light energy to the atmosphere and, therefore, contributes to global climate change(HELCOM, 2018a).

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methods, such as mobile platforms (using airplanes and ships) and fixed platforms along the fairways, were tested. Automatic sniffer sensors were applied, e.g. in the Gothenburg ship channel at Älvsborg island and at the Oresund bridge. The compliance level was 91.5% to 99% in Gothenburg and 98% at the Oresund bridge (Mellqvist et al., 2017a).15_{The ratio of compliance with the SECA regulations in} Sweden was in the same magnitude (about 95%) in Transport Analysis (2017a).

HELCOM (2018a) stresses that even if the compliance monitoring challenges are to be solved, the fines for infringements need to be a greater deterrent than the potential economic gains through non-compliance. Already in 1998, HELCOM adopted Recommendation 19/14 in order to harmonize administrative fines for non-compliance with environmental regulations concerning ships.

2.2.1.2. Suggested policies and measures

As mentioned above, the implementation of the stricter sulphur regulations in the North European SECA in 2015 led to a significant reduction of the SO2 and PM emissions from shipping in Sweden and the Baltic Sea area. The introduction of the global sulphur cap in 2020 is expected to reduce maritime SO2 emissions also outside the SECAs in Northern Europe and Northern America. To our knowledge, there exist, for the time being, no further specific suggestions except the use of (more) efficient enforcement methods targeting the reduction of the SO2 emissions to air in the waters surrounding Sweden.

2.2.2. Reduction of NO

x

emissions

2.2.2.1. Tier and NECA regulations

16

In contrast to SO2 emissions from shipping which originate from the sulphur in the fuel, NOX emissions are formed when nitrogen and oxygen in the ambient air react at the high pressures and temperatures in the engine during combustion. Table 3 summarizes the NOX regulations in the MARPOL Annex VI (IMO, 2020). The regulations are based on the three emission reduction levels, Tier I, Tier II and Tier III, that become stricter over time. The Tier III level implies about 75 percent lower NOX emissions than the Tier II level and about 80 percent lower NOX emissions than the Tier I level. The Tier regulations for NOX apply to new ships only. Tier I and Tier II are mandatory

worldwide while Tier III is applied in the Nitrogen Emission Control Areas (NECAs). The North American NECA has been in place since 1rst _{January 2016, while the North European NECA will} come into force 1st January 2021.

15_{Mellqvist et al. (2017b) performed spot checks on the exhaust emissions of individual ships with the help of}

automatic gas sniffer measurements at the Great Belt Bridge and airborne surveillance measurements using sniffers and sensors. 94 percent of the ships complied at the 95 percent confidence limit.

16_{MARPOL Annex VI regulations apply to marine diesel engines with a power output of more than 130 kW}

installed on a ship, with the exception of engines used solely for emergencies and engines on ships operating solely within the waters of the state in which they are flagged. The later exception only applies if these engines are subject to an alternative NOX control measure. The Tier III requirements do not apply to a marine diesel

engine installed on a ship constructed prior to 1st January 2021 of less than 500 gross tonnage, of 24 m or over in length, which has been specifically designed and is used solely, for recreational purposes.

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Table 3. MARPOL Annex VI NOx emission limits.

Tier

level For ships built Applies Rated engine speed and emission limits (g NOx/kWh) Rpm< 130 Rpm 130- <

2000c Rpm > 2000

I 2001–2010 Globally 17.0 g

NOx/kWh 45*n-0.2 NOx/kWh 9.8 g

II 2011 and

onwards Globally NOx/kWh 14.4 g 44*n-0.23 NOx/kWh 7.7 g

III 2016 and

onwards _{(Tier II outside}in NECAs NECAs)

3.4 g

NOx/kWh 9*n-0.2 NOx/kWh 1.96 g

Source: IMO MEPC (2014)

Estimated impacts in the Baltic Sea and North Sea NECA

As the Tier-regulations only cover new ships (built after 1st January 2021) in the North European NECA, it will take 20–30 years before all ships are replaced, new technologies are mainstream and the full benefits of NOx emission reduction from ships can be expected (HELCOM, 2018a).

Transport Analysis (2016) compiled five studies that were carried out between 2012 and 2016 and analysed the NOX reduction potential of introducing the NECA a) in the Baltic Sea, b) in the North Sea and c) in the Baltic Sea and the North Sea. Table 4 shows how the NOX emissions are expected to decrease. The studies presented in the table, applied different assumptions about future transport demand, scenario years, the year in which the NECA is introduced and the available technologies to reduce NOX emissions. Winnes et al. (2015) estimate a 58 percent reduction of NOX emissions by 2040 if the NECA regulations are introduced in the Baltic Sea and the North Sea in 2021, which was actually agreed on in 2017.

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Table 4. Estimated reductions in NOX emissions by introducing a NECA in the Baltic Sea, the North

Sea or both.

Study (on behalf of) Introduction of NECA regulations

Scenario

year Reference scenario (without

NECA)

NECA in

Baltic Sea North Sea NECA in Baltic Sea NECA in and North Sea MEPC (2016) (HELCOM) 2016 2045 compared + 60% to 2007 (Baltic Sea) - 60% compared to 2007 Hammingh et al. (2012) (Netherlands Environmental Assessment Agency, PBL) 2016 2030 - 6% compared to 2009 (North Sea) -30% compared to reference scenario Åström et al. (2014) (Swedish Environmental Protection Agency) 2021 2030 -21% compared to reference scenario -24% compared to reference scenario Jonson et al. (2015) 2016 2030 Same NOX

emissions (Baltic and North Sea) -26% compared to reference scenario -29% compared to reference scenario Winnes et al. (2015) (Transport and Environment (T&E)) 2021 2040 + 21% compared to 2010 (Baltic and North Sea) -58% compared to 2010 (Baltic and North Sea) Source: Transport Analysis (2016)

Parsmo et al. (2017) studied the impact of an extended NECA17_{where more sea areas than the Baltic} Sea and the North Sea are also assumed to be part of the North European NECA. The assumed

extension of the NECA area does not affect the NOX emissions in the Baltic Sea area (that is addressed in their study) but reduces the modelled costs per kg of NOX abated, as the investment costs per engine work become lower.

Compliance

The technology for monitoring the compliance to IMO’s Tier regulations has to be developed further and due to inherent challenges, it may remain even more of an indicative nature than SO2 monitoring (HELCOM, 2018a).18_{As mentioned above, HELCOM adopted Recommendation 19/14 in 1998 in} 17_{In the base-case, only the top five percent of ships (ferries) are assumed to operate about 5,500 hours in the}

Baltic Sea (and stand for about 30 percent of the total operational time in the Baltic Sea); the number of hours in the Baltic Sea is110 hours per year for bulk carriers and general cargo ships. In the extension case, Parsmo et al. (2017) include 5,500 operating hours for all ships.

18_{The compliance of ships with MARPOL Annex VI is documented in the International Air Pollution}

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order to harmonize administrative fines for non-compliance with environmental regulations concerning ships.

2.2.2.2. Norwegian NO

X

-fund

In Norway, a tax on NOX emissions caused by domestic shipping companies and other industries was

introduced in 2008. The NOx tax was complemented by a NOx fund, which is a non-governmental

initiative driven by NHO (Næringslivets Hovedorgaisation). Firms that join the NOx-fund pay a NOx

-charge that is proportional to their volume of NOx emissions and they are exempted from paying the NOX tax (Hagem et al., 2012). The NOX-fund has been in continuous operation since 2008 and the current agreement lasts until 2025. In 2020, the charges are NOK 16.50 per kg of NOX for the offshore industry and NOK 10.50 per kg of NOX for other NOX-taxable activities (incl. domestic shipping), while the NOX-tax is NOK 22.69 per kg of NOX. The charges in the NOX-fund cannot exceed the NOX tax rate (NHO, 2019).

The revenues of the NOx-charges are delivered back to the participating firms, through the funding of NOX-reducing measures (NHO, 2019). The Norwegian NOX-fund is in contrast to the Swedish NOx-charging system for fixed installations not a Refunded emissions payment (REP)where firms polluting above average make net payments to firms polluting below average.19_{Within the Norwegian NO}

X -fund the most cost-effective measures are identified and jointly funded by the companies that pay the NOX-charge. Examples for investments that have been supported within the NOX-fund are:

investments in SCR (Selective Catalytic Reduction) and other NOX reducing measures as well as the switch to LNG, the introduction of battery-driven and hybrid ferries and retrofits to be able to use onshore power in ports. The largest share of the NOX-fund’s support has been granted in the shipping sector (NHO, 2019).

The abatement measures carried out with the support of the NOX-fund, including those that have been decided upon but not yet implemented, have reduced NOX emissions (as planned) and GHG emissions by approximately 400 000 tonnes (Swedish Transport Administration, 2018a).

2.2.2.3. Californian cap-and trade-system for NO

X

and SO

X

California applies a cap-and-trade system to control the volume of NOX and SOX emissions from different sources, (United States Environmental Protection Agency, 2020). The system provides incentives for industrial firms to invest in clean technologies and innovation. Creating tradable permits is a way of a) creating property rights to the environment and b) putting a price on emissions to provide economic incentives to reduce emissions. Policy makers determine the cap, which is the socialy optimal level of aggregate emissions and the total quantity of permits in the system, which are allocated among the firms within the system. This implies that the cap ensures that the total emissions are kept to a pre-defined level. The permits are possible to trade with other firms in the system. Firms that have abatement costs lower than the permit price will likely choose to abate, while firms that have abatement costs higher than the permit price will likely choose to purchase permits and postpone abatement measures. Hence, the trading mechanism allows the reduction of emissions in a cost-effective way, which means that the emissions are reduced first where it costs least to reduce them. Nikopoulou et al. (2013) analysed the application of the Californian cap-and-trade system for reducing SOX and NOX emissions in the North European SECA. The authors assessed the financial viability of seven different abatement options: switching to low-sulphur residual fuel, MDO, MGO and LNG, installing open loop scrubbers for SOX control and installing a SCR system (Selective Catalytic 19_{An advantage of REPs, compared to a tax, is that they often have less political resistance because firms}

covered by the scheme have to pay less (and some can even make money). Taxes often have a higher political resistance since they imply both abatement costs and tax payments for the companies.

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Reduction) or a HAM-system (Humid Air Motor). Using a sample of 37 ships, the NOX and SOX emissions and the revenues generated within the cap and trade system are calculated. The authors find that a cap and trade system would be highly efficacious in providing a relatively inexpensive source of finance for investments in technologies that imply lower SOX and NOX emissions, as well as giving incentives for such investments without financial requirements from the public budget. The exact results depend on several assumptions in the calculations, i.e. regarding the abatement costs in 2012.

2.2.2.4. Policies in addition to Tier III-regulations in the North European NECA

Yaramenka et al. (2017) performed a cost-benefit analysis (CBA) and estimated the potential for NOX- reductions for policies that go beyond the NECA-regulations. The study was carried out on behalf of the Air Pollution and Climate Secretariat (AirClim) and based on three scenarios a) BAU, b) a NECA in the Baltic Sea and North Sea from 2021 and c) a NECA and levy and fund from 2021. They calculate that the introduction of a levy and fund on top of the NECA would result in an additional accumulated € 3,400 million of net benefits by 2030 and conclude that the levy and fund would be “an effective complement to NECA, with a potential to bring noticeable health and environmental benefits shortly after its enforcement”. The CBA uses technology costs, that are assumed to be constant between 2020 and 2040 and does not consider costs in the public sector and economic development. Parsmo et al. (2017) analysed the effectiveness of policies for NOX abatement in the North European NECA, that can be implemented in addition to the Tier III-regulations. The aim is to identify effective policies that achieve larger and more rapid reductions of the NOx emissions in the Baltic Sea than expected from the NECA regulations starting in 2021. Costs for Tier II- ships in 2012 are used as a base and the model described in Winnes et al. (2015) is applied. The shipping companies’ perspective is used to model the investment decisions. The volume of NOX emissions in 2012 is taken from Jalkanen et al. (2016) and the BAU 2030 scenario from Kalli et al. (2013). Legal aspects are not considered. Regarding abatement measures, the focus is on switching to LNG and installing SCR. Regarding policies, a NOX fund according to the Norwegian model (based on a NOX fee of € 1 per kg of NOX and a subsidy rate of 60 percent) is calculated to be the most effective additional policy, followed by a NOX-tax and financial support for LNG-engines (applying a zero interest rate) and speed

limits that reduce fuel consumption. Applying a CO2-tax or environmentally differentiated port fees

(assuming a 20 percent discount for LNG-ships) is calculated to be less effective. Environmentally differentiated fairway dues are not analysed.

2.2.2.5. Suggested policies and measures

In 2012, the Swedish Shipowners Association suggested the introduction of a cap and trade system, similar to the Californian system, which allows shipping companies to trade SOX and NOX emissions with industrial installations in the coastal region of Europe on the basis of voluntary participation (see section 2.2.2.3).

The Roadmap Fossil Free Sweden (Skärgårdsredarna, et al., 2019) suggest investigating a Swedish NOx fund, similar to the Norwegian NOX fund. According to the Roadmap, the NOX fund could be funded partly or totally by industry.

2.2.3. Reduction of GHG emissions

GHG emissions from shipping can be reduced by applying energy efficiency measures (see section 2.2.3.1), monitoring and data collection (see section 2.2.3.2) and specific economic policies (see section 2.2.3.3). General policies and measures to reduce air emissions from shipping are presented in section 2.3.

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2.2.3.1. Energy efficiency measures

The main objective of the regulatory mechanisms in Chapter 4 of the MARPOL Annex VI on energy efficiency standards for ships is to reduce GHG emissions from international shipping via improved ship design and operations (IMO, 2019c).

Energy Efficiency Design Index (EEDI)

The Energy Efficiency Design Index (EEDI) for new ships aims at promoting the use of more energy efficient equipment and engines. Since 2013, the EEDI sets ship-specific requirements on the carbon intensity of propulsion (expressed in terms of CO2 per capacity-mile, e.g. per tonne- mile). This is accompanied with a set of emission standards, which are tightened every five years in order to reduce the carbon intensity of the vessels. Ships entering the fleet from 2025 and onwards are expected to achieve efficiency improvements of up to 30 percent, compared to ships built before the adoption of the EEDI (IMO, 2011;2015). The EEDI is a performance-based regulation that leaves the choice of technologies to use for the design of a specific ship to the industry itself.

From the beginning (2013), the EEDI regulations comprised tankers, bulk carriers, gas carriers, general cargo ships, container ships, refrigerated cargo carriers and combination carriers. In 2014, the scope was extended and LNG carriers, vehicle carriers, RoPax and cruise ships were included as well. This means that about 85 percent of the CO2 emissions from international shipping are incorporated under IMO’s EEDI regulations.20

Ship Energy Efficiency Management Plan (SEEMP)

The Ship Energy Efficiency Management Plan (SEEMP) is applicable to all ships. SEEMP is a management tool and establishes a mechanism for shipping companies to improve the energy efficiency of a ship during its lifecycle. It urges the shipping companies at each stage of the plan to consider new technologies and practices when seeking to optimise the performance of a ship. Examples are improved voyage planning, more frequent propeller cleaning and the introduction of waste heat recovery systems. The SEEMP also provides an approach for companies to manage ship and fleet efficiency performance over time using, for example, the Energy Efficiency Operational Indicator (EEOI) as a monitoring tool. The IMO adopted voluntary guidelines for the use of an EEOI for ships (IMO, 2009). The EEOI sets out a) what the objectives of the CO2 emissions indicator are, b) how a ship’s CO2 performance should be measured and c) how the indicator could be used to promote low-emission shipping.

Global Industry Alliance to Support Low Carbon Shipping

The Global Industry Alliance to Support Low Carbon Shipping has started developing a guide to alternative fuels with a timeline to 2050 in order to facilitate a realistic assessment of these fuels, their potential for shipping, barriers to uptake and areas requiring further research and development

(GIMEEP, 2018).

Voluntary cooperation between the port and the shipping sector

A draft resolution of the Marine Environment Protection Committee (MEPC) encourages voluntary cooperation between the port and the shipping sector to facilitate the reduction of GHG emissions from shipping (IMO, 2019b).

20_{IMO’s Energy Efficiency Design Index (EEDI) regarding the vessels’ fuel consumption and}

emissions is expected to lead to a downsizing of engines and a lightening of the structures of newly-built vessels and, thereby, an increased demand for icebreaking services. This issue is, for example, studied in Finland, a country with a high volume of icebreaking services on offer

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Estimated potential of energy efficiency measures

The potential impacts of different energy efficiency measures on the reduction of GHG emissions have been estimated in several studies. Lindstad et al. (2015) calculated that the GHG emissions from EU-related shipping can be reduced by up to 36 percent by 2030 (compared to a reference scenario) if known abatement measures are applied. The measures with largest potential are slender hull (10-30 percent, depending on ship category), slow steaming (2-18 percent, depending on ship category, except RoPax and LNG/LPG tankers) and the use of LNG, biofuel or hydrogen (H2) fuel (6-11 percent, depending on ship category). It is obvious that the different energy efficiency measures cannot be considered as additive measures. See details in Table 5.

Table 5. Estimated GHG emission reduction potential of different measures.

Measures CO2 saving potential (% compared to 2030

reference)

Solar cells 0.2 but not applicable to all ship categories Efficient lighting 1.5-3% depending on ship category

Profit sharing21 _{2% for bulk carriers, general cargo and tankers}

H2 fuel cell for aux power during sailing 2-4% depending on ship category Ballast water reduction 2.5% for all ship categories

Waste heat recovery 3.5% for all ship categories except tankers On shore power supply (OPS, cold ironing) 3-7%

Optimized propeller 5% for all vessel categories

Wind power 5% but not applicable for all vessel categories Advanced route planning 5-10% depending on ship category

Hybridization 5-10% depending on ship type

Biofuels (as drop in 10%) 6% for ship categories

LNG as a fuel 8% for all ship categories

H2 fuel cell for aux power during sailing and in

port 7-11% depending on ship category

Slow steaming 2-18% depending on ship category,

not applicable for RoPax and LNG/LPG tankers

Slender hull 10-30% depending on ship category

Source: Lindstad et al. (2015).

21_{“Profit sharing is only an option for vessel categories which have flexibility regarding planning and logistics”,}

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Bouman et al. (2017) performed a review, based on 150 studies, distinguishing six groups of measures with high potential for reducing GHG emissions: 1) hull design, 2) economies of scale, 3) power and propulsion (incl. energy saving devices), 4) speed, 5) fuels and alternative energy sources and 6) weather routing and scheduling. The authors find that the potential reductions vary significantly between the reviewed studies. According to Bouman et al. (2017), a combination of policies and measures based on existing technologies is assumed to be able to reduce the GHG emissions from shipping by over 75 percent by 2050.

A study performed on behalf of the European Commission, by Faber et al. (2019), listed short term (operational) measures for reducing GHG emissions from shipping and estimates the impacts of these measures on annual CO2 emissions, relative to a BAU-scenario for 2030 (see Table 6). The abatement measures with the highest emission reduction potential are estimated to be different speed reducing measures (13-34 percent), CO2 intensity standards (21 percent) and operational efficiency standards (5-43 percent).

Table 6. Estimated impact of operational measures on CO2 emissions relative to BAU 2030.

Source: Faber et al. (2019) Speed reduction

Traditionally, speed reduction is motivated by shipping companies’ cost savings or profit

maximization. Speed is reduced, without any regulation, to adapt to business cycles and fuel prices. Slow steaming at the operational level has been addressed a lot in in the literature. One example is Faber et al. (2012) who describe the direct benefits (fuel savings), external benefits and direct costs (additional costs for more ships) as well as indirect costs (less development of fuel saving

technologies). Another example is Psaraftis & Kontovas (2014) who develop models that optimize ship speed for several routing scenarios. Against the background of climate goals, a growing interest in the relationship between speed and emission reductions has become apparent.

Measure Estimated reduction of

emissions Strengthening the SEEMP: mandatory goal setting/periodic efficiency

assessment 0%–2%

Strengthening the EEDI for new ships 1%–3%

Strengthening the SEEMP: mandatory retrofits of cost-effective

technologies 2%–4%

Existing Fleet Improvement Programme 2%–4%

Applying the EEDI to existing ships 1%–6%

Operational efficiency standards: AER 20% below 2008 5%

Speed reduction: cap average speed at 2012 level 13%

Required to meet the 2030 level of ambition on the CO2 intensity 21%

Operational efficiency standards: AER 40% below 2008 21% Speed reduction: cap average speed at 20% below 2012 level 24%–34% Operational efficiency standards: AER 60% below 2008 43%

Policies and measures to reduce air emissions from shipping : recommendations for Swedish stakeholders

Policies and measures to reduce

air emissions from shipping

Recommendations for Swedish stakeholders

Inge Vierth

VTI notat 24A-2019

VTI notat N24A-2019

Policies and measures to reduce air

emissions from shipping

Recommendations for Swedish stakeholders

Preface

Quality review

Kvalitetsgranskning

Table of Contents

List of abbreviations

Summary

Sammanfattning

1.

Introduction

1.1. Policies and measures to reduce air emissions from shipping

1.2. Purpose and approach

2.

Identification of relevant policies and measures

2.1. Introduction

2.2. Reduction of specific emissions to air

2.2.1. Reduction of SO

emissions

2.2.1.1. SECA regulations

2.2.1.2. Suggested policies and measures

2.2.2. Reduction of NO

emissions

2.2.2.1. Tier and NECA regulations

2.2.2.2. Norwegian NO

-fund

2.2.2.3. Californian cap-and trade-system for NO

and SO

2.2.2.4. Policies in addition to Tier III-regulations in the North European NECA

2.2.2.5. Suggested policies and measures

2.2.3. Reduction of GHG emissions

2.2.3.1. Energy efficiency measures