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A Common NOx-Fund for the Baltic Sea

A Common NOx-Fund for the Baltic Sea. Per Kågeson. NOx-emissions from maritime transport. Globally ca 25 Mton 2007 = 30% of total NOx European waters (2000) 3.7 Mton Baltic Sea 370 000 – 384 000 ton (2004-2006) Under business-as-usual ca 600 000 ton 2020

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A Common NOx-Fund for the Baltic Sea

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  1. A Common NOx-Fund for the Baltic Sea Per Kågeson

  2. NOx-emissions from maritime transport Globally ca 25 Mton 2007 = 30% of total NOx European waters (2000) 3.7 Mton Baltic Sea 370 000 – 384 000 ton (2004-2006) Under business-as-usual ca 600 000 ton 2020 Tier II and Tier III (NECA) will cut compared to BAU but reduce below current levels only by 2030

  3. Effects of NOx Eutrophication of land and sea Contributes to acidification Contributes to the formation of ozone, a greenhouse gas that in addition is harmful to crops and human health

  4. Provide incentive to pre-existing ships Tier III (NECA) will come into force in 2016 and applies only to new builds – full fleet compliance around 2045 Risk that the incremental cost of compliance will slow down renewal of the pre-existing fleet Risk that some companies will order new ships to be delivered just prior to 2016 in order to avoid Tier III

  5. NOx abatement technologies

  6. Technologies that can meet Tier III SCR (use of urea increases the variable cost) Combination of EGR and DWI (raises fuel consumption) LNG New concepts such as CSNOx?

  7. Important to achieve flexibility and equal treatment Pre-existing ships vary with regard to: conditions onboard remaining life share of journeys within NECAs Technologies that do not fully meet Tier III can also contribute towards lower emissions

  8. Economic instruments for flexibility Differentiated fairway and port dues Emissions trading Base-line and tradable credits Charge or tax on specific NOx emissions NOx-differentiated kilometer charging

  9. Differentiated fairway and port dues Current Swedish incentive is too low Only about 40 ships enjoy reduced fees for NOx and many of them received investment grants Most coastal States lack fairway dues Port dues are subject to negotiations – with poor transparency High degree of differentiation may affect port profitability

  10. Emissions trading May cover only ships or both ships and land-based sources Stationary land-based sources have already cut emissions substantially – trading with ships less relevant today than 10-15 years ago A joint scheme would require revision of several EU directives

  11. Baseline and tradeable credits Every ship would be given NOx credits equal to a baseline value (g NOx/kWh fuel) Ships with emissions above the baseline would have to buy credits from vessels that emit less than allowed May be difficult to identify a baseline that balances supply and demand at a reasonable price

  12. Tax or charge Could be applied to level of specific emissions or to real emissions taking distance into account Revenues may be recycled to the industry or used for any other purpose Norway has created a NOx Fund that helps financing NOx reducing measures

  13. A common charge that takes distance into account A charge on NOx emitted from ships in the Baltic Sea (limited by the Kiel Canal and a line from Vinga to the Skaw) Based on real emissions as measured or on fuel consumption multiplied with specific emission per ton or on a default value at based on distance and the assumption that a certain percentage of engine capacity is used during the voyage

  14. Participation and administration All ships above 400 GT carry bunker delivery notes A common Baltic Sea registry based IMO numbers A common administration AIS may be used for monitoring ship movements Random Port State control

  15. Legal aspects (I) Declaring emissions and paying the charge required for voluntary calls at participating ports Ships in innocent passage are not affected Supports early compliance with Tier III and incentivizes older ships to undertake cost-effective abatement measures Competitively neutral and recycling of revenues

  16. Legal aspects (II) Interpretation of UNCLOS open to potential dispute Half a dozen earlier examples of Port States restricting access to ports to ships meeting certain requirements No nation or ship owner has filed a protest against any of them (nor against the Swedish fairway due for not reflecting true costs)

  17. Abatement costs, medium size vessels (Entec 2005)

  18. Finding the right level of the charge The current differentiation of Swedish dues correspond to less than €100/ton NOx The Norwegian tax is NOK 4 000/ton = €490 (at the time of the report) €500 per ton possible level for a Baltic Sea charge

  19. Potential reduction of emissions If 80% of the ships use the abatement measures that are cost-effective for them, overall emissions may decline by 250,000 ton in 2015 (based on the assumption that the charge enters into force as of 1 January 2013)

  20. Opening the door for LNG The combined effect of SECA and NECA requirements and a possible Levy on CO2 emissions (or emissions trading) may open the door for LNG in short-sea shipping However, uncertainty with regard to future requirements may make many shipowners hesitate

  21. Thanks for listening!Per Kågesonkageson@kth.se

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