CLEANER SHIPPING. focus on air pollution, technology and regulation

CLEANER SHIPPING focus on air pollution, technology and regulation

Table of content Air pollution from shipping page 3 Adverse effects page 5 Technical solutions page 12 Current regulation page 20 Further regulation page 25 Danish competences page 29 Recommendations page 30 Further information page 31 ISBN: 978-87-92044-28-X Text: Kåre Press-Kristensen and Christian Ege Layout: Designkonsortiet, Hanne Koch Print: Ecoprint, printed according to the principles of the Nordic swan ecolabel Pictures: Danish Shipowners Association and Maersk Line Edition: 1 st edition, 1 st printing June 2011 The publication can freely be read and downloaded: www.ecocouncil.dk The publication is free and can be ordered through the Danish Ecocouncil against payment of postage and costs of expedition. Citation, copying and other use of the publication is permitted under citation of the source. The publication is financially supported by The Danish Maritime Fund, Danish Energy Net Conservation Fund and the Danish Ministry of Education (Tips- and Lotto Funding). Published by Blegdamsvej 4B, 2200 København N Denmark Tlf. (+45) 33 15 09 77 info@ecocouncil.dk www.ecocouncil.dk

AIR POLLUTION FROM SHIPPING About 90 percent of the global cargo is transported by ships and shipping is thereby the platform of the increasing global trade. However, shipping emits about 3 percent of the global CO 2 -emission and is thereby contributing to global warming. The majority of shipping uses bunker oil (heavy fuel oil) as fuel. The sulphur content in bunker oil can be as high as 4.5 percent. In special SECA-areas (Sulphur Emission Control Areas), including the Baltic Sea and Danish inland waters, a maximum of 1 percent sulphur content is allowed. For comparison, the sulphur content of diesel oil is 0.001 percent. Consequently, the bunker oil used by ships can contain 1,000 times more sulphur than cars crossing the bridge between Denmark and Sweden. When burned, carbon and sulphur in the bunker oil is oxidised to CO 2 and sulphur oxides (mainly sulphur dioxide, SO 2 ). At the same time, the content of nitrogen (N 2 ) in the combustion air is oxidized to nitrogen oxides (NO X ) in the engine of the ship. However, a complete combustion does not occur. Consequently, flue gas from ships contains carbon monoxide as well as vapours and particles consisting of unburned oil composites. High sulphur content increases the amount of particles in the flue gas. The most significant pollution composite in regards to air pollution from shipping is CO 2,SO 2, NO X and fine particles (PM 2.5 ) Combustion of bunker oil in ships thereby generates the same pollution components as vehicles, power plants, waste incineration etc. However, most of the sulphur is removed from diesel for land based transport and both SO 2,NO X and particles are effectively cleaned from the flue gas of all larger power plants in Denmark. For comparison, only a very weak pollution control is implemented in regards to the flue gas from ships. On top of the above mentioned air pollution, ultrafine particles (PM 0.1 ) and carbon monoxide from the flue gas could pose a risk for dock workers and be a local air pollution problem in areas with many cruise ships. Bunker oil is actually a waste product from refineries. When all the light hydrocarbons, which is used for jet fuels, gasoline and diesel etc. is distilled from the crude oil, the remaining parts are used as bunker oil for ships and asphalt. The bunker oil is extremely thick and has a high content of sulphur. The bunker oil is heated and put under high pressure before it can be combusted in the ship engine. Today bunker oil is combusted at sea without any means of flue gas cleaning. 3

Since SO 2,NO X and particles can be transported over large distances air pollution from shipping has significant impact on environment and health. According to Centre of Energy, Environment and Health (CEEH) about 50,000 premature deaths and socio-economic health costs of approx. 55 billion euros per year are caused by air pollution from shipping. On top of this comes nature destruction. Yearly around 100,000 ship passages occur in the waters surrounding Denmark. Large container ships only move 8-12 meters per litre bunker oil. Consequently, huge amounts of bunker oil are burned in Danish waters resulting in serious air pollution. Air pollution with SO 2 and NO X from shipping in waters surrounding Denmark is larger than pollution from Danish land based sources. Estimations from CEEH shows that each year the air pollution from shipping in the North Sea and the Baltic Sea causes 4,000 lost years of living, approx. 250,000 respiratory illnesses and approx. 400,000 days of decreased activity due to illness in Denmark. The socio-economic costs are estimated to about 0.5 million euros each year. This publication focuses on air pollution with CO 2, SO 2,NO X and fine particles from shipping, technical solutions, existing regulation of air pollution from shipping and possibilities for further regulation. The aim is to inspire decision makers and other key stakeholders to implement further regulation of air pollution from shipping to the benefit of climate, public health and nature. Finally, the publication is well suited for teaching purposes. Shipping also causes other serious environmental challenges e.g. fauna pollution with invasive species, the risk of oil spills, environmental issues due to uncontrolled ship dumping in third world countries etc. However, these issues are not included below since the focus is air pollution. 4

ADVERSE EFFECTS The significant pollution from shipping is mainly due to the fact that shipping is international and often occurs in international waters and is thereby regulated by international legislation. The easy reflagging of ships provides the opportunity to freely choose under which flag ships are sailing. If one nation tries to regulate shipping through national environmental legislation shipowners can just reflag their ships to nations with less strict environmental legislation. International shipping legislation is decided by the shipping organisation of the UN: International Maritime Organization (IMO). Theoretically, EU could decide environmental regulation for ships using ports in EU no matter which flag the ships have. However, EU has not yet used this type of action. Consequently, the member states of EU have to rely on decisions in the IMO or to enforce further regulation (see page 25). Only recently, the IMO have decided to reduce air pollution from shipping. However, the decided regulation (see page 20) is far from optimal from an environmental point of view. The regulation can be considered the best possible compromise between the conflicting interests in the member nations of the IMO. Table 1 provides an overview of the most significant air pollutants, adverse effects and externality health costs in Europe from shipping in international waters on the northern hemisphere. Table 1 Primary CO 2 SO 2 NO X particles Direct health effects X X X Global warming X (X) 1) Acidification of the oceans X (X) 2) (X) 2) Acid rain in terrestrial ecosystems X X Eutrophication X Harmful secondary particles X X Damage cost (DKK/kg pollutant) 3) 4) 11.33 8.53 18.27 Damage costs (DKK/ton bunker oil) 5) 680 597 27 Table 1: Adverse effects and externality health costs due to air pollution from shipping in international waters. 1) Some particles (black carbon particles) are deposited at the inland ice in Polar Regions and accelerate ice melting. 2) Of minor importance compared to the acidification of the oceans caused by increasing CO 2 concentrations. 3) Only health effects. Damage to nature is not included. Reference: Centre of Energy, Environment and Health. 4) It is impossible to find a reasonable externality cost for CO 2 due to the large uncertainties related to the consequences of global warming. 5) The emissions from combustion of 1 ton of bunker oil is estimated to be approx. 3,200 kg CO 2, 60 kg SO 2,70 kg NO X and 1.5 kg primary particles. 5

Figure 1 Dry cargo 6 % Other 3 % Cargo (Ro-Ro) 13 % Dry cargo 7 % Other 2 % Cargo (Ro-Ro) 16 % Tanker 20 % Tanker 22 % Container 26 % Container 20 % Passenger (Ro-Ro) 32 % Passenger (Ro-Ro) 33 % Figure 1: Emissions of CO 2 and SO 2 in 2011 distributed among ship types in waters surrounding Denmark. In 2011 the total emission of CO 2 and SO 2 was 7.8 million tons and 41,000 tons respectively. Reference: National Environmental Research Institute of Denmark Table 1 shows externality costs (based solely upon health costs) from pollution with SO 2,NO X and primary particles. Estimating an externality cost from CO 2 is far more complicated and seems impossible for the time being since the direct, and especially the indirect, consequences of global warming are impossible to predict in details. One possible way is only to focus upon the predicted direct consequences of global warming i.e. reduced harvest, diseases, climate refugees, building and reinforcement of dikes, sewage systems etc. However, the indirect consequences (massive changes of society as we know it today) will probably dominate the costs of global warming. Thereby it does not make much sense to estimate a cost based upon the predicted direct consequences. Consequently, it is not possible to conclude whether green house gasses or health effects caused by air pollution from shipping is most important. Action has to be taken to reduce all pollutants. The main problem is that shipping does not pay the externality costs related to damage on health and nature from air pollution. As seen from table 1, the overall health externality costs related to combustion of 1 ton of bunker oil are approx. 1,300 euros. On top of this comes nature damage and costs related to CO 2 pollution. For comparison, the price of bunker oil is approx. 450 euros per ton for shipping companies - they only pay for the bunker oil and not for damages caused by pollution. Figure 1 shows the emission of CO 2 and SO 2 in 2011 from shipping in waters surrounding Denmark distributed on different types of ships. It is clear that the emission of SO 2 from different types of ships generally follows the trend of the CO 2 -emission. The same trend is observed for NO X and particles since all pollutants can be directly related to combustion of bunker oil. 6

Carbon dioxide The global emission of CO 2 from shipping is yearly about 1 billion tons, i.e. about 3 percent of global emissions. However, CO 2 emission from shipping is not included in the Kyoto-protocol or any other international regulation. Consequently, CO 2 emission from shipping is still not accounted or included in any global agreements to reduce global warming. Danish shipping companies transport 10 percent of world trade. Thus, the emission of CO 2 from Denmark would be almost doubled if the emission of CO 2 from Danish shipping companies were included in the Danish climate accounting. On the other hand, the emission of CO 2 from international shipping to and from Danish harbours would only add an emission of 2.5 million tons CO 2 per year to the Danish emissions and thereby increase the national CO 2 emission by approx. 5 percent. The CO 2 emission from shipping in the waters surrounding Denmark is about 7.8 million tons CO 2 per year and would thereby increase the Danish CO 2 emission by approx. 15 percent if included in the national CO 2 accounting. It is not obvious how the emission of CO 2 should be accounted but it is important to include the shipping in international agreements. Thereby the emission of CO 2 will be accounted which makes regulation of CO 2 from shipping possible. Besides global warming, the increasing atmospheric concentration of CO 2 increases acidification of the oceans (carbonic acid, H 2 CO 3 ) which has lethal consequences for marine ecosystems e.g. the unique and extremely species rich coral reefs. Sulphur dioxide The emission of SO 2 from shipping in waters surrounding Denmark is approx. 41,000 tons pr. year. The emission is thereby four times larger than the overall emission from land based Danish sources. In the atmosphere most SO 2 from the flue gas is converted to sulphate (SO 2-4 ) e.g. by creation of sulphuric acid (H 2 SO 4 ) which could create acid rain and damage sensitive ecosystems. In addition, SO 2 is a health hazardous gas. However, the primary health effect related to SO 2 from shipping is hazardous secondary particles formed by atmospheric reactions between SO 2 and other pollutants (mainly ammonia and organic compounds). The sulphur content in bunker oil is included in an IMO agreement. This will significantly decrease the sulphur content towards 2020 (see page 20). Figure 2 shows the estimated emissions of SO 2 from shipping in waters surrounding Denmark. The ship routes are clearly pictured. The emissions of CO 2, NO X and particles follow the same pattern. Figur 2: The emission of SO 2 in 2011 from shipping through waters surrounding Denmark. Reference: National Environmental Research Institute of Denmark Tonnes SO 2 7

Nitrogen oxides Nitrogen oxides (NO X ) from the flue gas mainly consist of nitrogen monoxide (NO) and to lesser extent of nitrogen dioxide (NO 2 ). The emission of NO X from shipping in water surrounding Denmark is approx. 173,000 tons pr. year thus significantly larger than the overall emission from Danish land based sources. In the atmosphere NO X can be converted to nitric acid (HNO 3 ) which could create acid rain and damage sensitive ecosystems. Furthermore, NO X increases the formation of health damaging ozone and a significant part of NO is converted to health damaging NO 2. However, NO X from shipping mainly contributes to health effects through hazardous secondary particles formed through chemical reactions in the atmosphere between NO X and other pollutants (primarily ammonia and organic compounds). Finally, NO X can be deposited in ecosystems and act as fertiliser thus destroying the unique nature of the oligotrophic ecosystems which are habitat for series of rare animals and plants. The emission of NO X from shipping is regulated by an IMO agreement which limits the emission of NO X from new ships (see page 20). Particles Primary particles (PM 2.5 ) are emitted as particles directly from the engine of the ships as unburned bunker oil. This differ the primary particles from the secondary particles, which is formed from e.g. SO 2 and NO X through chemical reactions in the atmosphere after emission of the gasses. The primary particles are health hazardous. Furthermore, the particles can be transported to Polar Regions, where black carbon particles deposit on the inland ice. Consequently, the ice becomes grey thus increasing the absorption of sunlight and hereby accelerating the melting of the ice which further increases the absorption of sunlight. Hence, this is a self-perpetuating process. According to new research it has been documented that black carbon particles significantly facilitate the melting of ice and temperature increases in Polar Regions. Table 2 shows estimated emissions of SO 2,NO X and particles from the total international shipping in the northern hemisphere and shipping in the North Sea and the Baltic Sea in 2011. For comparison is shown the emissions from shipping in waters surrounding Denmark and emissions from Danish land based sources of pollution. Table 2 Primary SO 2 NO X particles The northern hemisphere (ton) 1,870,000 3,355,000 250,000 The North Sea and the Baltic Sea (ton) 205,000 955,000 20,000 Waters surrounding Denmark (ton) 41,000 173,000 4,000 Land based Danish sources (ton) 10,000 130,000 25,000 Table 2: Emission of SO 2,NO X and primary particles (PM 2.5 ) in tons from international shipping in the northern hemisphere and from shipping in the North Sea and the Baltic Sea. For comparison emissions from shipping in waters surrounding Denmark and from land based Danish sources are shown. The emissions are estimated for 2011. Reference: National Environmental Research Institute and Centre of Energy, Environment and Health. 8

From table 2 it is seen that pollution with SO 2 and particles from shipping in the northern hemisphere is 10-12 times larger than in the North Sea and the Baltic Sea, while pollution with NO X is only approx. 3.5 times larger. This is due to the regulation of the sulphur content of the bunker oil in SECA-areas which among others include the Danish waters and the Baltic Sea (page 20). Finally, it is seen that the pollution with SO 2 and NO X from shipping exceeds the pollution from all Danish land based sources. The emission of primary particles from shipping in waters surrounding Denmark is approx. 4,000 tons pr. year only making up around 15 percent of the overall particle emissions in Danish areas. Table 3 shows estimated health effects in Denmark and Europe in 2011 caused by pollution with SO 2, NO X and particles from shipping on the northern hemisphere and in the North Sea and the Baltic Sea. The table shows that air pollution from shipping on the northern hemisphere is causing approx. 3.3 times as many health damages in Europe as the pollution in the North Sea and the Baltic Sea. Furthermore, the table shows that air pollution from shipping causes several hundred thousands years of lost living and many millions of illness days in Europe. Finally it is seen that air pollution from shipping in the North Sea and the Baltic Sea causes around 75-80 percent of the total health damages in Denmark from shipping. Table 3 Shipping on/in: The northern hemisphere The North Sea and the Baltic Sea Effects in: Denmark Europe Denmark Europe Years of lost living 5,300 490,000 4,000 150,000 Cases of lung cancer 75 6,500 60 2,000 Number of respiratory illness 1) 327,500 27,500,000 257,600 8,425,000 Number of heart failure 35 2,750 25 870 Number of heart diseases 60 5,500 50 1,680 Illness days 2) 500,000 43,700,000 400,000 13,400,000 Table 3: Estimated health effects for Denmark and Europe in 2011 caused by pollution with SO 2,NO X and particles from shipping on the northern hemisphere and in the North Sea and the Baltic Sea. 1) Covers many different types of respiratory illnesses with different severity. 2) Days with limited activity due to health effects related to air pollution. Reference: Centre of Energy, Environment and Health. 9

Table 4 Europe (billion euros) Total SO 2 NO X Primary particles (billion euros) The northern hemisphere 21 28 4.6 53.6 The North Sea and the Baltic Sea 3.5 10 0.7 14.2 Table 4: Estimated total socio-economic costs of health damages (billion euros in 2006-prices) in Europe in 2011 due to pollution with SO 2,NO X and particles from shipping in the northern hemisphere and in the North Sea and the Baltic Sea. Reference: Centre of Energy, Environment and Health. Table 4 shows the total socio-economic costs in Europe due to health effects caused by air pollution from shipping on the northern hemisphere and in the North Sea and the Baltic Sea. From table 4 it is clear that air pollution from shipping yearly has gigantic socio-economic costs in Europe. NO X pollution causes the greatest socioeconomic costs in relation to air pollution from shipping. Furthermore, it is seen that pollution with NO X constitute a relatively large part of the costs from shipping in the North Sea and the Baltic Sea compared to shipping in the northern hemisphere. This is partly due to the lower sulphur content in bunker oil in the Baltic Sea (and inner Danish waters) which is regulated as a SECA-area (see page 20) For comparison the socio-economic costs in Denmark due to air pollution from shipping are around 0.4 billion euros per year from shipping in the North Sea and the Baltic Sea and 0.6 billion euros per year from shipping in the northern hemisphere. The health costs are (as expected) dominated by shipping in the surrounding waters. The overall cost from air pollution from land based pollution sources in Denmark is 0.65 billion Euro per year. Consequently, air pollution from shipping causes about the same damage in Denmark as the total land based air pollution sources. However, in this comparison the serious health effects from ultrafine diesel particles are not taken into account. The comparison should therefore be used with care. 10

Climate winner but environmental loser Compared to shipping, the emission from cargo transport by train has 2-5 times higher CO 2 emission per ton while cargo transport by truck has 5-15 times higher CO 2 emission. Consequently, shipping is a favourable transport in regards to global warming. However, shipping emits above hundred times more SO 2 and particles compared to modern trucks per ton cargo and above 10 times more NO X per ton cargo. Therefore shipping is a serious environmental problem in regards to health and nature. From a clear-cut air pollution perspective shipping is therefore not a favourable transport for the time being. But shipping contains a series of advantages in terms of less noise pollution, less traffic accidents, less tearing of roads etc. A significant part of global cargo transport would never take place if cheap shipping was not available. Therefore it does not make sense just to compare ship emissions with emissions from other transport options. No transport is in any case to prefer from a narrow environmental point of view. However, global transport does have a number of advantages and as long as ship transport is as cheap as today it will continue to grow. The last 25 years global cargo transport has doubled and it is still rising fast. Since shipping constitutes far the largest part of global cargo transport a quick solution would be to lower the environmental and climate impact of shipping. This could make shipping the green transport of the future. Luckily, many technical solutions can minimise air pollution from shipping and most technical solutions have low reduction cost compared to further reduction from land based pollution sources. This is due to the fact that significant efforts to reduce land based air pollution have already been taken, while almost no effort to reduce air pollution from shipping has been taken. 11

TECHNICAL SOLUTIONS Many efficient technical solutions can minimise the emission of CO 2,SO 2,NO X and particles from shipping. As shown in this chapter, CO 2 emissions from shipping can be lowered by 25-50 percent by combining existing technical solutions and the emission of SO 2,NO X and particles can be reduced more than 80 percent per ton of cargo. implement technical solutions since the costs of health and nature damage is paid by society and not by the shipowners. Thus, it is urgent to create clear economic incentives to reduce pollution from shipping. This can be done by further regulation (see page 25). Only thereby the health and nature benefits can be realised. The reduction costs for most technical solutions are estimated to be more than 10 times lower than the health costs of the air pollution. Hence, the investments are very profitable from a socio-economic point of view since society saves (earns) more than 100 euros every time 10 euros are invested in technical solutions. As an example, it will cost 0.5-0.8 euros to reduce one kg NO X from ships with SCRsystems according to AirClim (Marked-based instruments for NO X abatement in the Baltic Sea, 2009). For comparison, the health costs are 8.53 euros per kg NO X (table 1). Society thereby earns around 8 euros per kg NO X removed from ships by SCR. However, today shipowners have no incentives to There are four technical solutions: 1) Fuel consumption can be reduced. 2) Ships can use cleaner fuel. 3) The pollution from the engine can be reduced. 4) The flue gas can be cleaned. It is important to stress that not all the described technical solutions are additive. Thus, the effects can not just be summed up. Furthermore, it is not all types of solutions that fit all type of ships. The largest reductions can be achieved on new ships. 12

Reduced fuel consumption Fuel consumption can be reduced directly through several operational actions e.g. better use of capacity and logistic (route optimisation), combined with better maintenance of hull, propeller(s) and engines, along with optimal sailing with respect to weather and the physical characteristics of the ship. Furthermore, scheduled arrivals can avoid ships waiting for permission to enter harbour. Finally, the speed of the ships has great influence on the fuel consumption. By lowering the speed it is possible to achieve significant fuel savings. However, lowering the speed will require more ships since the transport time increases. But still a significant net fuel saving is possible. The potentials from operational actions are utilised as far as the earnings from fuel savings allow. Consequently, further operational actions will be taken if bunker oil prices increase. In a complete ideal market economy, shipowners would pay for the health and nature damages (externalities) from air pollution. Just the health costs would quadruple the price on traditional bunker oil (cf. page 5) and thereby create incentives to further use of operational actions (to gain fuel savings) and to limit the pollution by development and use of cleaner fuel, better engines and air pollution control technologies. But since shipping is an international transport it has been impossible to introduce the polluter pays principle so far. However, the marked price on bunker oil has increased from 20 to 50 percent of the overall transport cost over the last 10 years. This has made shipping companies reduce speed (slow steaming) to save fuel. This underlines that higher prices will result in operational actions (savings). Furthermore, speed reduction increase flexibility (speed can be increased in case of delays) and thereby increases the probability of scheduled arrival and fast harbour access. 13

By minimising water, wave and wind resistance of the hull through design changes, new types of paint and by releasing air bubbles under the hull (air lubrication) it is possible to achieve further fuel reductions. Furthermore, windmills on ships may both produce electricity and reduce the wind resistance. This can be combined with optimisation of the engine (e.g. waste heat recovery) and the propeller/rudder (optimal design) in relation the actual ship. According to FORCE Technology, the mentioned operational improvements can reduce the fuel consumption by 15-30 percent for existing ships while more than 30 percent reduction is possible for new ships. Finally, series of more speculative options are available for shipping e.g. kites, sails, Fletner Rotors, solar panels etc. Reference: FORCE Technology 14

Cleaner fuel By use of cleaner fuel the pollution can be significantly reduced. The main focus is on liquid natural gas (LNG) or low-sulphur bunker oil (0.1 percent sulphur). Besides, the use of biofuels/biogas can in the long run be an important way to reduce greenhouse gas emission. In table 5 potentials from use of cleaner fuels are shown. There is a dispute about the effects of LNG since there are very different opinions on how much methane (CH 4 ) that leak unburned from 2-stroke and 4-stroke engines (the greenhouse gas potential of CH 4 is 25 times higher than CO 2 ). Likewise, the reduction of SO 2 dependent on how clean the gas is and how much traditional bunker oil is used as auxiliary fuel (usually around 5 percent unless a pure gas engine is considered). Finally, there is a great difference between NO X reductions for 2-stroke and 4- stroke engines. The values for reductions should therefore be used with caution due to the uncertainties. LNG has great potential to reduce pollution from shipping. However, several challenges are attached to LNG. One is the technical challenge regarding engine, pressure tank and safety. Another is the infrastructure (LNG supply in harbours). A project was initiated by the Danish Maritime Authority in 2011 focusing on safety and infrastructural changes in regards to use of LNG in the Baltic Sea, the North Sea and the British Channel. However, LNG is already today an environmentally friendly alternative for ferries and LNG tankers. LNG will be even more favourable when the maximum limit for sulphur content in the SECA-areas is lowered to 0.1 percent in 2015. Finally, large CO 2 reductions can be achieved in the future by replacing LNG with Liquid Biogas (LBG). Table 5 Engine CO 2 SO 2 NO X Particles Liquid natural gas (LNG) 2-stroke 20-25 % 90-95 % 20-25 % 35-40 % 4-stroke 0-25 % 1) > 95 % 2) 80-90 % > 40 % Low-sulphur bunker oil (0.1 % sulphur) 0 % 90 % 3) 5-10 % 50 % Table 5: Reduction of pollution by the use of cleaner fuels. It should be underlined that uncertainty is attached to the reductions by use of LNG and the values should thereby be used with care. 1) Dependent on amount of unburned CH4 released from the engine. 2) Dependent on sulphur content and possible auxiliary fuel/lubrication oil. 3) Compared to bunker oil with 1 percent sulphur. The reduction for SO2 and particles are larger, if compared to traditional bunker oil (outside SECA) with higher content of sulphur. Reference: MAN Diesel & Turbo and Clipper Ferries 15

Emissions of CO 2 and NO x can be reduced by engine technology Reference: MAN Diesel & Turbo Bunker oil with 0.1 percent sulphur (today the content is 1 percent) will be required in SECA-areas from 2015 but not in the international waters (see page 20). Still, air pollution from international waters will therefore give rise to serious health and environmental damage. Consequently, a more general regulation regarding low-sulphur bunker oil would in the long run lower the pollution. However, at the moment it seems difficult to find the sufficient refinery capacity to produce enough low-sulphur bunker oil just to satisfy upcoming demands in the SECA-areas. Better engine technology During the last 40 years the consumption of bunker oil pr. container pr. sea mile has been reduced approx. 80 percent through development of larger engines (for increasingly larger ships) with still increasing engine efficiency. This development is expected to continue to a certain degree, although in more attenuate fashion, as older and smaller ships are replaced with new and larger ships with still more efficient engines. Several important inventions can reduce air pollution from engines further e.g. systems for utilisation of waste heat (waste heat recovery, WHR) and low-no X valves for 2-stroke engines reducing the emission of NO X by 10-20 percent and additionally reducing the particle emissions significantly. Exhaust Gas Recirculation (EGR) where some of the flue gas is recirculated through the engine is a well documented engine improvement to reduce NO X emission. EGR can reduce the emission of NO X by 80 percent from 2-stroke engines according to MAN Diesel & Turbo. For comparison the reduction by EGR on 4-stroke engines is 35-50 percent. 16

Cleaning the flue gas SO 2 from the flue gas can be efficiently removed in a scrubber where SO 2 is washed out of the flue gas using sea water. SO 2 is converted to harmless sulphate (SO 2-4 ) in the scrubber, which can be discharged with the scrubber water at sea. However, the scrubber water can contain several toxic tar compounds that will cause adverse effects if discharged in coastal areas. Consequently, the scrubber water is recirculated (under addition of sodium hydroxide) in coastal areas. The scrubber usually removes more than 95 percent SO 2 and 50-60 percent of the primary particles according to Alfa Laval Aalborg. Some scrubbers have even shown removal rates of 70-80 percent of the primary particles (Venturi scrubber). Thereby efficient scrubbers can achieve the same SO 2 reduction as low sulphur bunker oil and are thereby a technical alternative to low sulphur fuels. Reference: Alfa Laval Aalborg Emission of SO 2 and particles can be reduces by scrubber technology 17

NO X from the flue gas can be efficiently removed by several technologies. The most promising for 4- stroke engines is SCR (Selective Catalytic Reduction). The SCR system automatically adds a precise amount of urea to the flue gas. Ammonia (NH 3 ) is released from urea and reacts with NO X in a catalytic process converting NO X and NH 3 to harmless free nitrogen (N 2 ) and steam. Up to 90 percent removal of NO X and 30-35 percent removal of the primary particles are achievable by SCR systems. In addition, SCR systems reduce noise significantly. Today full scale SCR systems on 4-stroke engines have shown promising results. SCR systems will probably be efficient for 2-stroke engines as well, if the technology can compete with EGR systems (see page 16). Finally, primary particles in the flue gas can probably be removed in particulate filters as known from heavy vehicles. Laboratory tests have shown 60-85 percent removal. The particles are continuously burned in the filter (by addition of an additive) and thereby transformed to CO 2 and steam. It has not been possible to find detailed results from full scale tests with particulate filters. This is probably due to the fact that the high sulphur content in real life flue gas causes serious technical challenges. However, by combining particulate filters with scrubbers an almost complete removal of sulphur and particulate particles should be possible. Particle filters have, as well, a potential for reducing the more acute health effects of primary particles for the crew and dock workers. The NOX emission can be minimized by SCR technology Reference: DANSK TEKNOLOGI 18

Combining technical solutions As mentioned, the effects of the described technologies are not additive. Thereby it is not possible just to sum up. Table 6 shows the effects of three different combinations of technical solutions. Table 6 LNG LNG + WHR LNG + WHR + EGR Reduction of CO 2 23 % 32 % 31 % Reduction of SO 2 95 % 96 % 97 % Reduction of NO x 24 % 25-35 % 85-95 % Reduction of PM 2.5 37 % 45 % 61 % Table 6: Effects of combinations of technical solutions compared to a traditional container ship. LNG: Liquid natural gas, WHR: Waste heat recovery and EGR: Exhaust gas recirculation. Reference: Estimated from key values provided by MAN Diesel & Turbo. 19

CURRENT REGULATION Table 7 2007 2010 2012 2015 2020 Sulphur content Non-SECA (Oceans) 4.5 % 3.5 0.5 1) SECA (Coastal areas) 1.5 % 1 % 0.1 % Table 7: IMO-regulation of the sulphur content in bunker oil. SECA: Sulphur Emission Control Areas. 1) If the supply of bunker oil with 0.5 percent sulphur is insufficient in 2020 the regulation will be enforced in 2025. Reference: The International Maritime Organisation Table 7 shows the present IMO-regulation of the sulphur content in bunker oil. Ships can choose to clean the flue gas for SO 2 as alternative to using bunker oil with lower sulphur content. For instance, above 95 percent of the SO 2 can be removed in a scrubber. Consequently, the scrubber enables the same SO 2 -reduction as low sulphur bunker oil. Thereby the present loophole in the 2020 regulation seems meaningless i.e. there is no reason to postpone the 0.5 percent sulphur regulation five years. Not even if the supply of low sulphur bunker oil is insufficient because the regulation can be achieved with scrubbers. As an alternative, the regulation can be achieved by using LNG instead of the low-sulphur bunker oil (see table 5). Waters surrounding Denmark are SECA-areas. Consequently, the SO 2 pollution from shipping is expected to be reduced by 91 percent from 2007 to 2020. The decrease is percentage-wise less than the reduction in sulphur content (93 %) since an increase in shipping is expected (increase of 3.5 percent yearly) in the waters around Denmark. The Danish Centre of Energy, Environment and Health has estimated that this reduction in SO 2 pollution will only reduce the total health effects from shipping by 10-15 percent in Denmark. This is due to the fact that most health effects from shipping around Denmark are caused by pollution with NO X which is expected to increase slightly towards 2020 due to an expected increase in shipping. 20

Figure 3 2007 2020 2.50 < 2.25-2.50 2.00-2.25 1.75-2.00 1.50-1.75 1.25-1.50 1.00-1.25 0.75-1.00 0.50-0.75 < 0.50 Figure 3: Concentration of SO 2 in Denmark in 2007 and 2020. Reference: National Environmental Research Institute Figure 3 shows the concentration of SO 2 in Denmark in 2007 and 2020. It is evident that shipping has a crucial significance on the concentration of SO 2 in 2007. Likewise it is evident that the IMO-regulation causes large reductions in 2020, where the SO 2 pollution is almost invisible. Figure 4 shows the estimated effect of the regulation on SO 2 from shipping in the northern hemisphere compared to the baseline (no regulation on SO 2 from shipping) and the land based emissions in Europe (EU27). From the figure is seen that shipping emission on the northern hemisphere would have exceeded the total land based emissions in Europe (EU27) in 2020 if no IMO regulation (or other regulation) had been implemented. Furthermore, it is seen that the 2015 regulation in SECA-areas only has minor influence on the total SO 2 emission on the northern hemisphere underlining that the SECAareas mainly have local effects upon emissions. Figure 4 1,000 tonnes SO 2 emissions 2010-2020 4000 3500 3000 2500 2000 1500 1000 500 0 2010 2015 2020 Figure 4: Estimated effect of the IMO regulation on SO 2 from shipping on the northern hemisphere. To comparison the baseline (no regulation on SO 2 ) and the land based emissions in Europe (EU27) are shown. Reference: The Air Pollution & Climate Secretariat. Shipping IMO regulation Shipping baseline Land based sources (EU27) 21

g/kwh Figure 5 18 16 TIER I TIER II 14 TIER III 12 10 8 6 4 2 0 0 500 1000 1500 2000 2500 rpm Figure 5: : IMO-regulation of the emissions of NO X from shipping. Tier I: Ship engines (above 130 kw) installed on a ship built after 1. January 2000. Tier II: Ship engines (above 130 kw) installed on a ship built after 1. January 2011. Tier III: Ship engines (above 130 kw) installed on a ship built after 1. January 2016. Only valid in NECA-areas (NOX Emission Control Areas). Reference: International Maritime Organisation. Figure 5 shows the IMO-regulation of NO X emissions. However, the strict 2016 regulation is only valid for new ships in NECA-areas (NO X Emission Control Areas). Note, that it is the age of the ship that determines the NO X pollution from the engine. A new engine on a ship build before 1 st of January 2011 can thereby pollute more than a new engine on a ship build after 1 st of January 2011. Thus, the regulation motivates shipowners to use old ships which (all other things being equal) have a higher fuel consumption and thereby a higher pollution than newer ships. From an environmental point of view the NO X regulation should be independent of the age of the ship. Finally, ship engines built between 1990 and 2000 has to be upgraded to fulfil Tier I requirements. Figure 6 compares the estimated effect of the regulation on NO X from shipping on the northern hemisphere with the baseline (no regulation on NO X from shipping) and the land based emissions in Europe (EU27). From the figure is seen that shipping emission on the northern hemisphere will increase and be close to the total land based emissions in Europe (EU27) in 2020 even though the IMO regulation has been implemented. The baseline shows that the IMO regulation has very limited effects on the NO X pollution from shipping. 1,000 tonnes NO x emissions 2010-2020 8000 7000 6000 5000 4000 3000 2000 1000 Figure 6: Estimated effect of the IMO regulation on NO X from shipping in the northern hemisphere. In comparison the baseline (no regulation on NO X ) and the land based emissions in Europe (EU27) are shown. Reference: The Air Pollution & Climate Secretariat. 0 2010 2015 2020 Shipping IMO regulation Shipping baseline Land based sources (EU27) 22

Figure 7 2007 2020 > 10.00 9.00-10.00 8.00-9.00 7.00-8.00 6.00-7.00 5.00-6.00 4.00-5.00 3.00-4.00 2.00-3.00 < 2.00 Figure 7: The concentration of NO 2 (indicator for the NO X pollution) in Denmark in 2007 and 2020. Reference: National Environmental Research Institute. From 2007 to 2020 a minor increase in the NO X emission from shipping in waters around Denmark is expected, even though IMO is expected to recognise the waters as NECA-areas and thereby be included in the hardest IMO NO X regulation from 2016. The increase is due to the fact that the hardest regulation is only valid for new ships and due to an expected increase in shipping towards 2020. Thereby the air pollution with NO X will be responsible for 80 percent of the health effects in Denmark related to shipping in 2020. At that time, air pollution from shipping in waters around Denmark will cause more health damage than the overall damages from all Danish land based air pollution sources. However, the new IMO regulation does have a significant effect since the emission of NO X in waters around Denmark would have increased by 15 percent without the new IMO regulation. A reduction of primary particles as a direct effect of the IMO sulphur regulation is expected. Thereby is expected that the pollution with primary particles from shipping will be reduced by approx. 55 percent in waters surrounding Denmark from 2007 to 2020. Figure 7 illustrates the concentration of NO 2 in Denmark in 2007 and 2020. The concentration of NO 2 can be used as a direct indicator for the NO X pollution. The figure shows that the regulation from the IMO does not have great impact on the NO X pollution from shipping. On the other hand, regulation of land based NO X sources (through e.g. EU s NEC-directive) has a significant effect on the NO 2 pollution. 23

Table 8 CO 2 SO 2 NO x Primary particles 2011 (tons) 7,850,000 41,000 173,250 4,000 2020 (tons) 9,250,000 5,800 177,600 2,650 Difference (%) + 18-86 + 2.5-34 Table 8: Emissionen of CO 2,SO 2,NO x and primary particles from shipping in waters surrounding Denmark. Reference: National Environmental Research Institute. Table 8 shows emissions of CO 2,SO 2,NO X and primary particles from shipping in waters surrounding Denmark in 2011 and after full implementation of IMO regulation in 2020 (SECA- and NECA-areas). can still contain 100 times more sulphur in 2015 than diesel today. Compared to trucks, new ships in NECA-areas in 2016 can emit 5-10 times as much NO X pr. kwh engine performance. As mentioned above, the emission of NO X increases due to increasing shipping activities in waters surrounding Denmark. This increase exceeds the effect of IMO s NECA-areas. Consequently, NO X pollution will still be a serious health challenge in 2020 unless further regulations are implemented to reduce NO X emissions from shipping. The environmental regulation from the IMO is a big step forward. However, shipping is still subject to a very weak regulation compared to land based transport. Bunker oil in the hardest regulated SECA-areas Even the hardest IMO-regulation in SECA- and NECA-areas will thereby not ensure that shipping becomes green transport. And the general regulation of shipping emissions outside these areas is much weaker. Consequently, the health effects from air pollution caused by shipping are expected to be almost unchanged towards 2020. This is mainly due to the very weak regulation of NO X from the existing fleet. Thus, there is an urgent need for further regulation of air pollution from shipping. 24

FURTHER REGULATION The regulation of shipping (and thus the air pollution from shipping) is decided by the IMO and applies globally. This is justified by the easy reflagging of ships to other nations and the legal challenges faced when regulating pollution in international waters. The IMO has spent very long time to establish the current environmental regulation. This is mainly due to the many different interests represented in the IMO. If IMO-regulation is not tightened significantly, further regulation outside the IMO is necessary to reduce the adverse effects of air pollution from shipping. This could be done by market based regulation or regional regulation (through EU/USA). Below, three options for further regulation are discussed: 1) Further IMO regulations 2) Market-based regulations 3) Regional regulations Compared to 2011, the existing IMO regulation reduces the SO 2 emissions per tonne transported goods by approx. 90 percent in 2015 in SECA-areas and by approx. 90 percent outside SECA-areas from 2020 (possibly 2025 cf. table 7). This significant SO 2 reduction will automatically give a significant (but smaller) reduction in the emission of primary particles. In the short run it is unlikely that the IMO will do further regulation in terms of SO 2 and particle emissions from shipping. Instead it is much more important to ensure that the decided IMO regulations are actually implemented on time. Already, a significant lobby activity for postponement of the deadlines is taking place. However, it is necessary to reduce the SO 2 and particle emissions further if shipping is going to be the green transport of the future. Luckily, the technical solutions are ready as mentioned above. In addition, it is of vital importance to get the CO 2 emission from shipping included in international agreements to build a basis for reducing the CO 2 emissions from shipping. This can be done by implementing a global tax on conventional bunker fuel (see below). Finally, there is an urgent need for a much harder regulation of NO X pollution from shipping since the regulation decided in the IMO are too weak. The regulation can not even counterbalance the NO X pollution from the increasing shipping - not even in the hardest regulated NECA-areas. Consequently, the NO X pollution will increase towards 2020 and be responsible for almost the same number of health effects in 2020 as all air pollution from shipping today. Even though, several technical solutions are ready (LNG, EGR and SCR) which can reduce NO X pollution more than 80 percent. On basis of this is only focused on further IMO regulation of CO 2 and NO X in this publication. However, for marked-based and regional regulation are focused upon regulation of all air pollutants since these two regulation forms are independent of the IMO regulation. Further IMO regulation There are several ways to regulate CO 2 emissions from shipping. First, it is important to regulate the design of new ships (so they travel further per ton of fuel). This will reduce the energy consumption and thereby the pollution with CO 2 (as well as SO 2, NO X and particles). In addition, a tax could be implemented on bunker oil and the yield could be used for climate projects in developing countries, reducing the CO 2 emission (compared to baseline i.e. additional reductions). This will, at the same time, increase the price on bunker oil and thereby motivate shipowners further to save fuel which would reduce the CO 2 emissions as well. 25

Denmark has proposed this (energy efficient design of new ships and a tax on bunker oil) in the IMO and in the process up to COP17 in Durban in the end of 2011. If decided in Durban this could form the basis of guidelines to a coming IMO agreement. However, several important developing countries in IMO are against an agreement since they believe it would be implementing a binding agreement to reduce the CO 2 emission from developing countries. The proposal to implement taxes on bunker oil is on standby so far. Mainly because of disagreement about how the revenue should be distributed and which tax model should be used. There is an increasing support for the Danish tax proposal. However, important developing countries (e.g. China, Brazil, India, South Africa and Saudi-Arabia) make it difficult to find an agreement. The IMO regulation of the NO X pollution (figure 5) should as soon as possible be revised to require a reduction of 80 percent NO X for all Tier III engines and earlier in NECA-areas from 2016. The 80 percent NO X reduction should apply to all ships in all waters from 2020. Market-based regulation First step in a market-based regulation of air pollution is to create transparency in the market leading to full information about air pollution from shipping. This can be done by labelling ships from A to E. The labelling should be based on air pollution reductions compared to a baseline pollution e.g. determined on basis of how much a similar average ship pollute in 2012. The baseline value and the reductions must be documented by an independent and recognised auditing. The label could be issued by an organisation designated by the IMO and the World Wildlife Fund. Table 9 shows suggested air pollution reductions compared to a baseline for different labels. Consequently, to achieve a D-labelling a ship would have to reduce its emission of CO 2 by minimum 30 percent, SO 2 and NO X emissions by min. 80 percent and particle emission by min. 50 percent. As seen from table 6 this can be achieved in 2-stroke engines by using LNG, WHR and EGR. By further using a mix of the technical solutions which reduce the fuel consumption (page 13) or biofuels/biogas a C-label is achievable. On the other hand, achieving a B-label would require a combination of biofuel/biogas with a very low content of sulphur combined with several technical solutions. This is on the edge of what is possible today. A-labelling would require new technology. The labelling should be voluntary, like the FSC-label and Fairtrade (former Max Havelaar ). Through labelling requirements, global companies can create a demand for cleaner shipping. First, the management could make a CSR policy requiring that the Table 9 A B C D E CO 1) 2 > 80 % > 65 % > 50 % > 30 % > 20 % SO 2 > 99 % > 99 % > 95 % > 80 % > 80 % NO X > 99 % > 99 % > 95 % > 80 % > 30 % Particles > 99 % > 95 % > 70 % > 50 % > 30 % Table 9: Suggested air pollution reductions (compared to a baseline) for different ship labels. 1) For the reduction of CO 2 must be included adverse climate effects from engine emission of unburned methane and CO 2 and methane emissions from the fuel lifecycle. 26