Documents considered by the Committee on 12 October 2011 - European Scrutiny Committee Contents


6 Sulphur content of marine fuels

(a)

(33034)

13016/11

+ ADD 1

COM(11) 441


Commission Communication on the review of the implementation of Directive 1999/32/EC related to the sulphur content of certain liquid fuels and on further pollutant emissions reduction form maritime transport
(b)

(33028)

12806/11

+ ADDs 1-2

COM(11) 439


Draft Directive repealing Directive 1999/32/EC as regards the sulphur content of marine fuels

Legal base(a) —

(b)Article 192(1) TFEU; co-decision; QMV

Documents originated15 July 2011
Deposited in Parliament19 July 2011
DepartmentTransport
Basis of considerationEM of 19 August 2011
Previous Committee ReportNone, but see footnotes
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information awaited

Background

6.1 Emissions of nitrogen oxides and sulphur dioxide from sea going ships can be harmful to human health and the environment (being in the latter case a cause of acidification), and their relative significance has been increasing in light of the reduction achieved in recent years in land-based emissions. As a result, various measures have been taken to address this problem at both international level through the International Maritime Organisation (IMO) and by the EU, notably by seeking to reduce the sulphur content of the relevant fuels. In the former case, Annex VI to a Protocol to the International Convention for the Prevention of Pollution from Ships (the MARPOL Convention) has sought to set a global sulphur limit of 4.5% for heavy fuel oil burned on ships, with a lower limit of 1.5% in designated Control Areas (including the Baltic, North Sea and English Channel), whilst, within the EU, Directive 1999/32/EEC set sulphur limits of 0.2% for certain fuels, including marine gas oils and diesel oils used by ships in inland waterways and territorial waters.

6.2 However, a Commission Communication[28] in November 2002 noted that, although the Control Areas under the MARPOL Convention would significantly reduce acidifying emissions, other aspects were not sufficiently stringent, and moreover that the number of countries which had so far ratified the Protocol was considerably fewer than that required for it to come into force. It therefore recommended that Member States should ratify the Protocol as soon as possible, and that the EU should continue to press within the IMO for tougher measures to be taken to reduce emissions. It also put forward a draft Directive which would amend Directive 1999/32/EEC by introducing a 1.5% sulphur limit for marine fuels used by all seagoing vessels in the North Sea, English Channel and Baltic Sea in line with the provisions in the MARPOL Convention; introduce such a limit for marine fuels used by passenger vessels on regular services to and from any EU port; ban the sale of marine diesel fuels having over 1.5% sulphur; amend the existing provisions for marine gas oils used by seagoing and inland vessels so as to require marine fuels used by ships at berth in all EU ports to contain 0.2% of sulphur or less, and to ban the sale of marine gas oils having more than 0.2% sulphur. These measures were subsequently enacted in Directive 2005/33/EC.

The current documents

6.3 The Commission has now brought forward these two further documents—(a) a Communication on the operation of Directive 1999/32/EEC and on ways of further reducing pollution from maritime transport, and (b) a draft Directive, which proposes further amendments to that Directive in the light of developments since 2005, particularly in relation to the MARPOL Convention.

COMMISSION COMMUNICATION

6.4 The Commission says that the contribution of emissions from maritime transport to air quality problems in the EU continues to increase, that this extends beyond coastal regions, and that the Thematic Strategy on air pollution[29] in 2005 concluded that sulphur emissions from shipping would exceed those from all land-based sources in the EU by 2020. It notes that, although the earlier amendments to Annex VI of the MARPOL Convention had finally come into effect in 2005, the parties subsequently agreed in 2008 further reductions in the sulphur content of fuels. As a result, the current limit of 4.5% applicable in all areas is to be reduced to 3.5% from 1 January 2012, and to 0.5% by 1 January 2020 (though, if a review of the availability of such fuel to be carried out in 2018 shows that ships would be prevented from complying with the new limit, the implementation date could be deferred to 1 January 2025): likewise, the current limit of 1.0% in Emission Control Areas would be reduced to 0.1% from 1 January 2015.

6.5 In each case, the Convention provides for the reduction in emissions to be achieved by other means, such as exhaust gas cleaning systems ("scrubbing") or alternative clean fuels such as liquified natural gas. States which are parties to the Convention are required to promote the availability of compliant fuel, and, where a ship which fails to comply with the fuel oil standard can demonstrate that, despite its best efforts (without deviating from its intended voyage or unduly delaying its voyage), no such fuel oil was available for purchase, a state has discretion to determine the appropriate action (which may include not taking control measures against the ship).

6.6 The Commission says that these new provisions represent a major step in reducing emissions from the shipping sector, and can be expected to lead to a decrease of 90% in sulphur dioxide emissions in Emission Control Areas, and of more than 75% in other sea areas bordering the EU, with there also being a significant reduction in emissions of particulates. It adds that the benefits arising from improved health and reduced mortality within the EU are expected to range from €15-34 billion a year in 2020, whereas the costs would range from €2.6-11 billion, the precise amount depending upon the extent to which the alternative compliance methods are used. Either way, however, the Commission points out that the high ratio of benefits to costs reflects the effectiveness of tackling marine sources, as compared with those which are land-based where considerable reductions have already been achieved.

6.7 In the meantime, the Commission notes that implementing these measures, and in particular the alternative means of complying with the new standards, will require capital investment by both the private and public sectors, and that it may be necessary to provide financial incentives. It notes that, in the short term, support is already available under the current financial perspective through mechanisms such as the Trans-European Transport Networks (TEN-T) and the Marco Polo II Programme,[30] and that investments targeting research, development and innovation to reduce emissions from ships and to promote energy efficiency could be financed through the European Clean Transport Facility. It also suggests that Member States' funds could be used, for example to develop onshore infrastructure.

6.8 As regards the medium to longer term, the Commission says that it is developing a multi-dimensional action approach which would address in an integrated manner the environmental challenges facing the waterborne transport sector, and which would explore regulatory measures, green ship technology and alternative fuels, adequate green infrastructure, economic and funding instruments, research and innovation, and international cooperation. It adds that these measures will be put in place following the adoption of the White Paper[31] outlining a Roadmap to a Single European Transport Areas, the new TEN-T policy, and guidelines based on further consultations with stakeholders, including Member State authorities.

6.9 Finally, the Communication discusses briefly the case for additional measures to reduce emissions, such as an extension of the sulphur Emission Control Areas and the introduction of new Control Areas for nitrogen oxides. However, it says that the Commission is not in a position to propose this formally prior to agreement being reached internationally through the IMO.

DRAFT DIRECTIVE

6.10 The aims of the proposed Directive expressly include aligning it with IMO rules on fuel standards (including the standards applicable outside Control Areas) and on emission abatement methods. However, there are a number of areas where the Commission's proposal deviates from the international measures contained in the revised Annex VI:

  • the proposed Directive does not replicate the provision relating to non-availability of fuel;
  • it refers to the fact that, based on the IMO's review of fuel availability, the effective date for the application of the 0.5% global fuel standard will be 1 January 2020 or 1 January 2025, but does not explicitly state that the effective date contained in the Directive will be the same date as that agreed upon by the IMO;
  • the proposal contains a provision relating to passenger vessels which goes beyond the regulations contained in Annex VI, in that it introduces a 0.1% sulphur limit for those passenger ships navigating outside Control Areas which operate on regular services to or from any EU port (though the operative date would be delayed by 5 years—ie to 1 January 2020—in order to avoid potential problems with fuel availability).
  • the proposal contains a further additional provision, empowering the Commission to specify the frequency of sampling, the sampling methods and the definition of a sample representative of the fuel examined, and to adapt the method for determining the sulphur content and the fuel verification procedure to the newest international technical standards.

6.11 The proposed Directive contains some provisions relating to combustion plants and combustion in refineries which would have the effect of avoiding "double regulation" by removing from its coverage those plants of greater than 50 MW rated thermal input which are subject to the current large combustion plants Directive (2001/80/EC) and to the industrial emissions Directive (2010/75/EU) which will replace it from 1 January 2016, as well as updated provisions for any combustion plants not subject to those Directives. The proposal also seeks to address concerns that the new standards might lead to a shift from maritime back to land-based transport, and the Commission will be closely monitoring the impacts of the shipping sector's compliance with the new fuel quality standards.

The Government's view

6.12 In his Explanatory Memorandum of 19 August 2011, the Parliamentary Under-Secretary of State at the Department for Transport (Mr Mike Penning) notes that the Commission considers its proposal is in accordance with the principle of subsidiarity, bearing in mind the global dimension of shipping and the cross-border impact of air pollution, which require common rules in order to ensure the effective implementation and application of the international fuel standards across Member States. He says that, although the Government maintains its right as a sovereign state to implement in national law the provisions of the MARPOL Convention to which it is a party, it agrees that EU intervention is justified in accordance with the principle set out in Article 5 of the Treaty on European Union.

6.13 More generally, he says that the Government strongly supports the outcome of the revision of Annex VI because this will significantly reduce emissions of sulphur oxides from ships (as well as nitrogen oxides and particulate matter) and consequently improve UK air quality. He adds that the UK has also consistently taken the view that the revised Annex VI represents a global compromise as a result of many hours of difficult negotiations, and would be most reluctant to unpick that agreement. It therefore welcomes the proposed Directive's adherence to the provisions for a staged introduction of stricter sulphur limits in fuel, noting that the environmental and health gains will be substantial, with the North Sea Control Area in particular continuing to be important in reducing the impact of shipping on air quality in the UK. Implementing these changes would also bring the maritime sector more into line with the other transport methods which have for several years been using low sulphur fuels to reduce emissions.

6.14 Nonetheless, the Minister says that the Government recognises there is serious concern on the part of some elements of the ferry and short-sea shipping industry at the cost impact of the revised sulphur limits, and is aware that some studies have indicated that a shift from maritime back to land-based transport might occur in parts of Scandinavia and around the Baltic (although it has not seen any evidence to suggest that this is likely to be the case in the UK). The Commission's intention to monitor the impacts of the shipping sector's compliance with the new standards is therefore welcome. He also welcomes the recognition in the proposal of alternative compliance methods which are at least as effective as sulphur limits in fuel in reducing emissions, and he points out that the inclusion of this provision in the revised Annex VI was largely the result of strong negotiation by the UK.

6.15 However, the Minister says that the Government is deeply concerned that the proposal does not replicate the provision in Annex VI relating to non-availability of fuel, as this represents the removal of one element of a hard-won compromise package, without which the shipping industry would not have been content with the standards contained in the revised Annex. In particular, he suggests that, if ships are liable for non-supply of fuel overseas, a substantial number of detentions of vessels trading from Asia and Latin America can be expected, and make it likely that the shipping industry will resist implementation. He adds that the UK understands this was a deliberate omission, since, when officials raised the matter, the Commission said that it wished to provide legal certainty in order to increase implementation, and that any suggestions which raised doubts about availability of fuel were unhelpful. The Government will therefore clarify the likely consequences of this omission with UK industry stakeholders, and will raise the issue with other like-minded Member States.

6.16 The Minister also says that:

  • the Government is concerned that the proposal does not explicitly state that the effective date for the application of the 0.5% fuel standard contained in the Directive will be the same date as that agreed by the IMO in the light of its review of fuel availability, and it sees no merit in having an effective date in the EU which deviates from the internationally agreed date determined in the IMO;
  • the Government will consider the proposal to apply the 0.1% sulphur limit to those passenger ships navigating outside Control Areas which operate on regular services to or from any EU port: although this goes beyond the revised Annex VI, it is essentially a tightening of an existing provision in the relevant EU Directive, the Commission's rationale being that this makes a link between the requirement for passenger ships operating inside and outside Control Areas, and represents an additional health and environmental safeguard (on the grounds that passenger ships operate mostly in ports or close to coastal areas and therefore have a greater adverse impact than other ships);
  • the Government has serious concerns with the Commission being given the power to specify the frequency of sampling, the sampling methods and the definition of a sample representative of the fuel examined, and adapt the method for determining the sulphur content and the fuel verification procedure, believing that there is little evidence of widespread non-compliance with the current regime, and that the proposal could result in a significantly increased regulatory burden, at a time when the Maritime and Coastguard Agency is not resourced or equipped to carry out any form of routine fuel sampling and testing;
  • the Government is pleased that the provisions relating to combustion plants and combustion in refineries will avoid "double regulation" of such plants.
  • the Government would prefer a transposition period of 18 months, rather than the 12 months proposed.

6.17 The Minister goes on to observe that, although the Commission's impact assessment contains sufficient evidence to conduct a reasonable benefit-cost analysis, there are a number of detailed points which need to be clarified. He also says that the assessment does not attempt to monetise the potential risks associated with a switch to low sulphur diesel, including possible technical issues, and nor does it cover any benefits other than those to human health (such as reduced damage to agriculture, forests and buildings). Also, the Commission's approach to valuing air quality differs from that used by the UK, so that the benefit cost ratios may vary in the impact assessment which the Government will be producing in due course.

6.18 The Minister also comments that the Commission's overall cost benefit figures (quoted in paragraph 6.6 above) include annual costs of between €57 and 300 million arising from the 0.1% fuel standard for passenger ships operating on regular service outside the Control Areas, with the corresponding monetised health benefits being put at between €102 and 339 million. Finally, with specific reference to the UK, he says that the Scottish Government provides support for lifeline ferry services, particularly between the mainland and the Northern Isles (Orkney & Shetland), and that implementing the Directive for this service would cost the Scottish Government around £4,250,000 through increased subsidy costs.

Conclusion

6.19 Although this draft Directive would in large measure give legal effect within the EU to reductions in sulphur emissions from ships agreed internationally, and appears likely to produce significant environmental and health benefits, it is also clear that it gives rise to a number of concerns, particularly in those areas we have highlighted where it goes beyond the measures contained in Annex VI to the MARPOL Convention (and could therefore disturb what the Minister refers to as a hard-won compromise).

6.20 We note that the Government proposes to pursue these issues, and that it also intends to provide an Impact Assessment setting out the costs and benefits so far as the UK is concerned. We think it would be sensible to await this further information before taking a definitive view on how these documents should be handled, but we are in the meantime drawing them to the attention of the House.





28   (24065) 14933/02: see HC 63-ix (2002-03), chapter 2 (22 January 2003). Back

29   (26900) 12735/05: see HC 34-xvi (2005-06), chapter 9 (25 January 2006). Back

30   This gives priority to projects aimed at the implementation and use of innovative technologies or operating practices which significantly reduce air emissions from ships. Back

31   (32639) 8333/11: see HC 428-xxvi (2010-12) chapter 3 (11 May 2011). Back


 
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Prepared 25 October 2011