Travelin' Clean - LNG-as-Bunker-Fuel Winning Converts as Shipping Industry Eyes Future CO2 Rules

Back in January, when the International Maritime Organization implemented more stringent limits on sulfur emissions for large, ocean-going vessels, the vast majority of shipowners and charterers complied with the new rule — commonly referred to as IMO 2020 — by switching to very low sulfur fuel oil or gasoil. A few others stuck with old, higher-sulfur bunker but installed scrubbers to remove sulfur from the engine exhaust. A third option — fueling ships with LNG — is now gaining traction, in part because it could help shipping companies deal with future IMO mandates on reducing greenhouse gas emissions. Orders for new-build LNG-powered vessels and LNG bunker ships are rolling in, and plans for port infrastructure to support LNG bunkering are being implemented. Today, we begin a series on the growing use of LNG in global shipping.

Our regular readers know that the IMO, a specialized agency of the United Nations, in recent years has been implementing ever-tightening rules to reduce allowable sulfur-oxide emissions from the engines that power the 50,000-plus tankers, dry bulkers, container ships, and other commercial vessels plying international waters. As we explained in Against the Wind, in January 2012, the global cap on sulfur content in bunker (marine fuel) was reduced to 3.5% from the old 4.5% (orange bar with dashed green oval in Figure 1), and on January 1, 2020, the sulfur cap was reduced to a much stiffer 0.5% (orange bar with dashed red oval). There were — and still are — even tougher standards for sulfur already in place in the IMO’s Emission Control Areas (ECAs), which started with Europe’s Baltic and North seas, then was adopted in areas within 200 nautical miles of the U.S. and Canadian coasts, with more to follow. In July 2010, the ECA sulfur limit in marine fuel was reduced to 1%, from the old 1.5% (teal bar with dashed purple oval), and in January 2015, the limit was ratcheted down again to a very stringent 0.1% (teal bar with dashed yellow circle) — a standard that remains in force within the ECAs.

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