Sea Change - a global cap on sulfur

As part of the International Convention for the Prevention of Pollution from Ships (MARPOL), the IMO's members agreed to a global 0.5% cap on sulfur content per volume for 2020. This is less restrictive than European and North American ECAs, but would make Hong Kong and the Chinese mainland's current regulations redundant.

In the short term, a global cap may be a more promising avenue for saving lives. Regulation that creates a level playing field for all sidesteps many of the difficulties that individual ports and countries face in regulating shipping. For example, ports may avoid overly strict regulation for fear of sending traffic to competing ports. Nearby countries may also share responsability for major waterways, making effective ECAs difficult to impose for individual countries. A global cap avoids both these problems.

A 2009 study estimated that a global 0.5% sulfur limit would have begun saving as many as 46,000 lives per year if it had been implemented in 2012, with roughly half of the avoided deaths in Asia.

We're gearing up for the battle

—Bill Hemmings, Director of Aviation and Shipping at NGO Transport and Environment

But there's a catch: the shipping industry pushed for a loophole to be written into MARPOL which gives the IMO the power to delay the measure until 2025. The IMO has until 2018 to make a decision about whether the industry is ready for a stricter global sulfur cap.

Neither governments or industry dispute the effect of dirty fuels on human health. What's up for debate is the timing, fuel availability and the price of adapting refineries. "It's cost." says Dr. Corbett, "The maritime industry for the last 70-plus years has devoted its innovation and technology for engines and propulsion systems to be able to take advantage of the least costly energy resources that were available to them, these were these residual petroleum products."

The fuel price hike which may follow tighter regulation could also be difficult for the shipping industry to absorb. The Baltic Dry Index, an economic indicator that tracks the going rate for shipping, hit an all-time low earlier this year (more likely due to the industry's oversupply of ships than a slowdown in the world economy). With prices so low, shipping companies are struggling to make a profit.

Maersk Line, the world's largest shipping company, reported a decline in first-quarter earnings year-on-year for 2016. In a press release, it attributed the company's difficulties to the "global rate war in container shipping" and challenging market conditions. Signe Bruun Jensen, Maersk's Head of Sustainability, said in an email that Maersk supports global regulations mandating low-sulfur fuel but acknowledges that, "Introducing a stricter vessel emission rule will bring challenges for shipping lines in a difficult market."

According to Mr. Jensen, the North American and European ECAs cost the company about $200 million extra per year. The company was valued at about $185 billion by market cap at the time of publication.