Shipping is the most carbon-efficient mode of transportation, producing fewer gas emissions than transportation by air or road. However, there is a need in the marine shipping industry to reduce the environmental impact, which will especially benefit populations living close to ports and coasts.
As we all know by now, the International Maritime Organization (IMO) is enforcing global regulations to reduce sulfur oxides in marine fuels. The goal is to improve sustainability and make maritime transportation more eco-friendly.
The current amount of sulfur oxides allowed is 3.5%, but by January 1st, 2020, the limit will drop to 0.5%. Within the logistics industry, there is much debate about strategies to comply with these new regulations.
How The Industry Will Respond
The market is still reviewing solutions to meet the IMO deadline. Some shippers believe the change is too costly to have such an early deadline, but it is a reality the industry will have to face sooner than later. Within the last few months, the IMO made it very clear that they will not be delaying the deadline.
Ships will either have to use fuel with sulfur levels below 0.5% or invest in systems, such as scrubbers, that clean gas exhaust. By 2020, only a relatively small percentage of ships globally are expected to have scrubbers. This means most ships will have to use fuel with lower sulfur levels.
The new regulation requires compliance from the shipping industry, but the refining industry must inevitably pay attention, as well. Refiners don’t want to have an excess of either heavy fuel oil (HFO) or low-sulfur oil because it could go unsold. Right now is the start of bidding season and shipping lines do not want to face losses either.
As 2020 is quickly approaching, the “wait and see” game is coming to an end. Both refineries and ships are weighing their options. They both need to find the most cost-effective and commercially sustainable option to suit their operations.
Because of the potential extra fuel cost, carriers are budgeting for the 2020 change. All this could potentially pump up freight rates, which would make goods more expensive for the consumer.
Nearly every solution has drawbacks, but what will keep the industry running smoothly is innovative, experienced leaders. Although there is no quick fix, the best leaders will be able to formulate creative solutions that both comply with new guidelines and benefit the bottom line.