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IMO update: Latest news on the 2020 sulfur cap

July 10, 2017 (4:22 mins)



After the latest meeting of the IMO's Marine Environment Protection Committee in London on July 3-7, S&P Global Platts editors Ned Molloy and Jack Jordan discuss what happened at the meeting and whether any clarity has emerged on how the 0.5% sulfur cap on marine fuels will be implemented in 2020.

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Podcast Transcript


IMO update: Latest news on the 2020 sulfur cap


Host: Welcome to the Platts Global Oil Markets podcast for July 10th, 2017. I'm Ned Molloy, managing editor for fuel oil.


In October the UN's shipping body the International Maritime Organisation finally bit the bullet and imposed a tougher 0.5% global marine sulfur emission limit from 2020, instead of delaying the move. The change is widely expected to be chaotic for the shipping industry, as well as causing some problems for refiners. Last week the organisation met again in London, and we've been trying to see whether there would be any more clarity on how the new sulfur cap is going to work.


With us is Jack Jordan, our editorial lead for bunker news, who was attending the meeting on July 3-7. Jack -- how was it, and have there been any more big announcements for the bunker industry?


JJ: I think what the bunker industry was mostly looking out for would have been any progress on how the new rules are going to be implemented in 2020. The IMO doesn't have a navy to enforce its rules, and it doesn't have any refineries to produce the new fuels that are going to be needed, so it really needs to give guidance to other organisations about how the transition can be made.


If you're a shipping company or bunker supplier waiting for some answers on how your concerns about 2020 are going to be addressed, you'll have been disappointed by last week's meeting. There was undoubtedly some behind-the-scenes work going on to develop a view of how the system could work in 2020, but no big announcements.

Host: So was the meeting largely inconclusive when it comes to issues around the sulfur cap?

JJ: I think that's broadly true. We had the big announcement in October -- which one delegate described last week as 'a leap of faith' -- and now there needs to be some more detailed work done out of the public eye.


There was some hope that the IMO might implement the sulfur cap with a transitional period for a couple of years after 2020 where non-compliance wouldn't result in prosecution, and others have previously argued that further study of bunker availability will be needed, but nothing along those lines was agreed at the meeting.


I think the biggest thing the IMO could do would be to give some clarity about how enforcement of the cap could be done. At the moment it's going to be the flag state where a ship is registered that has to enforce whether or not it's burning the right kind of fuel when it's in the high seas, away from territorial waters.


It looks to me like the flag states don't have any credible plan for high seas enforcement, and some of them aren't even showing much interest in the problem. That's going to mean a lot of ships can get away with still burning the same high sulfur fuel oil in the middle of the ocean in 2020, if they choose to ignore the rules.


But some in the bunker industry have been looking into whether more power could be given to port states visited by vessels over enforcement. If you could give countries like the US more power to check vessels leaving their waters for whether they have enough compliant fuel on board for their entire journey -- and to detain them and fine their operators if not -- you could solve a large part of the non-compliance problem. And at the moment we're seeing estimates that as much as 20% of bunker demand could be from non-compliant use of fuel oil in 2020, so it's a big part of the market we're talking about.


Host: And are there any other issues the IMO has been focusing on?


JJ: At the meeting the biggest topics of conversation were changes in ballast water management regulations, and the need to come up with a plan to reduce carbon emissions from shipping. They're trying to come up with an initial carbon strategy by next year, and they want to finalise that by 2023 once they've gathered some data from the industry.


We've already seen some shipping industry bodies calling for a relatively conservative plan, just keeping shipping's carbon emissions below 2008 levels for now before cutting from that level from 2050 onwards by a percentage to be set by the IMO.


Some politicians in the European Union have been arguing for shipping to be included in its emissions trading scheme if the IMO doesn't have a similar system operating in a few years' time. And the IMO has hit back at that, saying regulators imposing their own systems at a regional level would undermine its attempts to find a global solution.


Host: Thanks Jack. For further bunker-related news and analysis, visit Platts.com. Thank you for listening, and join us next time for the Platts Global Oil Markets podcast.






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