EU Sulphur Targets Costly For UK Shipping Sector

LONDON - European Union targets to reduce sulphur emissions from the shipping sector will lead to huge costs for the British marine industry and reduce the country's competitiveness, a report by UK engineering consultancy AMEC said on Monday.

Last year, EU environment ministers backed tough new limits for shipping fuel, which will be phased in across EU waters as part of efforts to cut pollution from toxic chemicals.

From 2015, the maximum sulphur content of shipping fuels will be cut by 90 percent to 0.1 percent in restricted Sulphur Emission Control Areas, which include some of Europe's busiest waters, versus 1 percent now.

The report, commissioned by trade association the UK Chamber of Shipping, recognised the need to reduce sulphur emissions for environmental and health reasons but said the speed at which shipping operators needed to implement changes would be costly and reduce Britain's competitiveness.

To meet the EU targets, ships have three options.

They can either use low-sulphur fuel which costs at least $300 a tonne more than the heavy fuel oil currently used; fit unproven technology to reduce sulphur from heavy oil or use liquefied natural gas (LNG) as a fuel, which is feasible for new builds but not for most of the existing UK fleet.

For ships which cannot yet use LNG or are not willing to invest in unproven technology, sea route operators would need to increase ticket prices by up to 20 percent for passengers and up to 29 percent for freight to offset the cost of low-sulphur fuel, the report said.

This could threaten some shipping routes, forcing them to be reduced or shut down altogether, and put more than 2,000 jobs at risk in Britain and Europe.

Increased ticket prices for sea routes could also mean more freight is moved by road, which would emit more carbon dioxide emissions.

"The wider impact is hard to quantify but these regulations will make the UK less competitive, making us a less attractive country for international investors - at the worst possible time for the UK economy," said David Balston, Director of Safety and Environment at the UK Chamber of Shipping.

According to the European Commission, shipping companies will face extra costs of 2.6 billion to 11 billion euros ($3.2-$13.6 billion) to switch fuels or to fit exhaust filters that would scrub out the sulphur in marine fuel oil.

But the new limits could also result in up to 30 billion euros of public health savings.

Reporting by Nina Chestney; editing by James Jukwey (c) Thompson Reuters