EUROPIA Comments on the Draft Recommendation for Second Reading

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1 EUROPIA Comments on the Draft Recommendation for Second Reading of the Council common position for adopting a Directive in the European Parliament and of the Council amending Directive 1999/32/EC as regards the EUROPIA on behalf of the oil industry, a major stakeholder in the marine fuels quality debate, supports the EU Commission initiative to engage in a European strategy to reduce air pollution from ships through amendment of Directive 1999/32/EC. EUROPIA believes that any strategy to reduce air pollution from ships should complement the strategy to reduce air pollution from land based sources and share with it the following key principles: The use of sound science. Reliance on established environmental objectives. The provision of cost-effective control measures. Against this background EUROPIA: Supports the recommendations contained in the Council Common Position to amend the directive 1999/332/EC. These are consistent with the provisions of IMO MARPOL Annex VI. Does NOT support the Rapporteurs proposal to introduce more severe constraints on the sulphur content in the second phase and opposes specifically the proposals contained in amendments 10 and 15. Specifically:- The reduction of the sulphur limit for marine fuels used in SECAs to 0.5% in 2010 and outside SECAs in The extension of the existing SECAs to all European waters. Further land based measures to control sulphur emissions are more cost effective in delivering environmental improvement than a further reduction in the The demand for 0.5% sulphur marine fuels will lead to an increase in CO2 emissions from European refineries. The higher costs of low-suphur marine fuels may result in the undesirable modal shift in goods transport from sea to land, resulting in further CO2 generation. Supplies of sufficient quantities of low-sulphur bunker fuels may not be assured.

2 EUROPIA Comments on the Draft Recommendation for Second Reading of the Council common position for adopting a Directive in the European Parliament and of the Council amending Directive 1999/32/EC as regards the (12891/2/2004-C6-0248/ /0259(COD)) Introduction EUROPIA on behalf of the oil industry, a major stakeholder in the marine fuels quality debate, supports the EU Commission initiative to engage in a European strategy to reduce air pollution from ships through amendment of Directive 1999/32/EC. EUROPIA shares public concern about the health and environmental effects of pollutants. The oil industry has made, and continues to make, considerable efforts to reduce the pollution potential of fuels and emissions from its production sites and is committed to assist legislators in making cost effective decisions about pollution reduction targets. EUROPIA believes that any strategy to reduce air pollution from ships should complement the strategy to reduce air pollution from land based sources and shares with it the following key principles: The use of sound science. Reliance on established environmental objectives. The provision of cost-effective control measures. In this context EUROPIA notes that emissions per se are not the best indicator for the contribution of a particular source to a given environmental problem. This is particularly relevant in cases such as this where acidification involves long range transport of air pollutants. This Paper represents the oil industry views on the Draft Recommendations for Second Reading by Rapporteur Satu Hassi. The key points of the oil industry position are:

3 1. On the Strategy If only emissions from ships are considered in the strategy, inappropriate conclusions could be drawn over their environmental significance. Other aspects such as the geographical distribution of emissions and the location of the environmental problems should also be considered. This is especially applicable to ship emissions, as their environmental effects are linked to the long range transport of air pollutants. Both the shipping and oil industries operate in an international environment with a global and open market. We support fair competition and are concerned about any political measure that could disturb markets and competitiveness. Therefore, our industry believes any measure regarding the quality of marine fuels should be taken in the frame of an international global agreement the IMO being the appropriate forum for discussion in this case. The oil industry remains committed to the environmental quality driven approach which is designed to support legislative measures that have clear environmental benefits and are cost effective. In this regard the industry supports the concept of SECAs (SO x Emission Control Areas) as defined in Annex VI of the MARPOL convention. The oil industry believes that any extension of the current SECAs, or any more stringent product specification measures within an existing SECA (the North and Baltic Seas), must be consistent with the criteria of Annex VI and based on appropriate study. Such an assessment could be easily accommodated in the CAFE (Clean Air For Europe) programme allowing ship measures to be compared to further land-based controls. The Integrated Assessment Modeling underpinning the National Emissions Ceilings Directive highlights the importance of the geographical location of an emission source relative to areas which could exceed their environmental targets. It demonstrates that neither an extension of current SECAs, nor more stringent sulphur constraints, is justified from an acidification point of view. In light of this, the oil industry supports the overall objective of the strategy of reducing emissions from ships where they contribute substantially to environmental and health problems in the EU and their abatement is cost effective when compared to land based sources.

4 2. On the Draft Recommendations of the Second Reading EUROPIA supports: The recommendations contained in the Council Common Position to amend the directive 1999/332/EC. These are consistent with the provisions of IMO MARPOL Annex VI. The provision that enforces the use of 1.5% sulphur content marine fuels in the already recognised SECAs (the North Sea, English Channel and Baltic Sea), according to the provisions of MARPOL Annex VI. The provision that sets 1.5% as the maximum sulphur limit for marine diesels. This will bring the specifications in line with the international specifications ensuring their wide availability. It also aligns the sulphur content with that required for use in SECAs. The further consideration to be given to complementary cost effective solutions:- such as providing ship-owners with an incentive to reduce air pollution from ships through technological innovation and market based instruments. EUROPIA does not support the Rapporteurs proposal to introduce more severe constraints on sulphur content in the second phase and opposes specifically the proposals contained in amendments 10 and 15: The reduction of the sulphur limit for marine fuels used in SECAs to 0.5% in 2010 and outside SECAs in The extension of the existing SECAs to all European waters. There is no justification for more stringent measures than those outlined in the Council Common Position. Further land based measures to control sulphur emissions are more cost effective in delivering environmental improvement than further reduction of the sulphur content. Analysis of the cost effectiveness of various measures in the framework of the Commission s CAFE programme shows that land based measures yield a better cost/benefit ratio than a further reduction of sulphur content in marine fuels and the extension of SECAs to less sensitive areas. The demand for 0.5% sulphur marine fuels will lead to an increase in CO2 emissions from European refineries. To produce the required quantities of low-sulphur marine fuels, European refineries will need to use

5 deep residue hydrodesulphurisation processes. Operation of these processing units requires additional energy and hydrogen and will result in the generation of incremental CO2. The higher costs of low-sulphur marine fuels may result in the undesirable modal shift in goods transport from sea to land. The cost of producing 0.5% sulphur marine fuels has been quantified by the Commission at approximately 70/tonne. At today s prices this represents a ca.50% increase in the cost of fuel to the shipping industry, something which is already its largest operating cost component. According to an IMO Secretariat paper (MEPC 45/8) a shift of container freight from ship to road transport can result in a five-fold increase in CO2 emissions and will increase the environmental pressures of land transport. Supplies of sufficient quantities of low-sulphur bunker fuels may not be assured. A further reduction in sulphur content requires increased quantities of low sulphur crude to be processed. This will make the EU even more dependent on scarce non-eu sources and will increase security of supply concerns. Production of 0.5% sulphur bunker fuel via residue desulphurisation presents significant technical and economical challenges. Producing these low sulphur products is at the very limit of technological capability. It will require a high level of investment and, for some refiners, a better business proposition may be to eliminate the production of bunkers (today a by-product of the principal refining process) altogether and produce additional volumes of the more valuable gasolines and diesel instead. For further information, please contact: M. Suenson (Direct line: / February 2005

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