Reduction of NOx and SOx in an emission market - a snapshot of prospects and benefits for ships in the European SECA
The study examines different alternatives for reducing NOx and SOx emissions at sea and evaluates them in a future NOx and SOx European emissions market, where ships can voluntarily participate by providing credits, as proposed by the Swedish Shipowners Association.
The two abbreviations NOx and SOx stand for nitrogen and sulphur oxides, two chemical components deriving during combustion and which are harmful to the environment. Transportation is responsible for about half of the NOx and SOx emissions in Europe. More grams per kWh are emitted from mobile sources than from stationary sources due to available technologies and space on board.
It is imperative to reduce NOx and SOx to sustainable levels. This will allow water reserves and soils to start recovering throughout Europe. Coordination and regulation is needed on a local, national and European level as pollution is transboundary. Among the different approaches, are environmentally differentiated charges (taxes, discounts and dues), consortium benchmarking, environmental subsidies to support investments on clean technologies and the credit-based approach (emissions trading).
According to the credit-based approach, the large combustion installations in a geographical area are capped in terms of their maximum annual emissions. Emissions are quantified in tons and counted in credits. If an installation emits less than its allocated credits, it can trade the difference in the emissions market. The result is that the same reductions in tons are achieved overall but through a market mechanism, which balances costs between sectors. All different approaches have their pros and cons but the brilliance of the credit-based system is that it initiates a company’s involvement as profits await those installations which can achieve over-reductions.
This study examines the costs and benefits for ships participating voluntarily in NOx and SOx cap-and-trade program in EU.
• The study samples 37 ships with different operational and technical characteristics in terms of their annual NOx and SOx emissions
• A worksheet is fed with information such as, the revolutions per minute, the total main engine output when steaming, the engine type, the fuel type, the annual steaming time and the average utility of engine power in order to calculate annual fuel consumption and annual NOx and Sox emissions with and without the various alternatives
• Virtually installs different cleaning technologies or switches fuel and costs each alternative per ship
• Counts tradable reductions per ship
• Counts revenues from trade per ship according to an average price estimate from the emissions market
• Evaluates all alternatives in a 5 year time frame
• Examines the environmental performance of every alternative
The expenditure for installing cleaning technologies are relatively small, compared to annual fuel costs, thus all cleaning technologies are understood as an accessory. Among the sampled technologies, the Selective Catalyst Reduction system (SCR) is slightly in advance concerning the rate of returns. By average one installation can support a second within five years. Humid Air Motor (HAM) technology has a slightly slower rate with pay back at three years, although is comes at an advantage beyond the time frame of the study, since it bears no operational costs. Sea-water scrubber comes with higher costs per ton than the emissions market estimate but nevertheless, it can provide with a solution for reducing sulphur in sulphur emission control areas (SECAs) with much lesser overall fuel costs than in switching into distillates.
Low sulphur residuals (maximum 1,5% sulphur content) do not provide any trading volumes but are treated as the baseline for comparing purposes. Distillates increase costs disproportionably to emission reductions to an extent that cannot be overlooked. Natural gas achieves the largest gains from emission markets and lesser annual fuel costs but an increase in new ship builds (for other vessels than gas carriers) shows that shifting to natural gas needs some kind of support. The author believes that the emissions market could take the place of a subsidy. Gas infrastructure on land (refilling stations appropriate for shipping) will determine the sea traffic, which can potentially utilise natural gas but further study is needed on this.
A credit-based approach gives incentives to sectors with low abatement costs to invest on cleaning technology and provide inexpensive credits in the emissions market. The largest recipients of cost savings will be land installations with high abatement costs, such as energy related sectors, which shall be able to inexpensively comply with European regulation and sustain flexible production levels. Furthermore, any participation of non-capped sectors is expected to supply the pool with inexpensive credits. For shipping, it is strategically beneficial not so much for the margin of profit but because it motivates shipping companies to invest on cleaning technologies, during a period of pressure for further environmental regulations.