New Global Emissions Rules Boost LNG as Shipping Fuel

Published November 12, 2018

New international rules governing maritime air emissions set to go into effect in less than 18 months are raising the prospect of using liquefied natural gas (LNG) as a fuel for oceangoing cruise ships and freighters.

The International Maritime Organization (IMO), the United Nations agency charged with developing rules for the safety and security of shipping and the prevention of water and air pollution from ships, has established new rules reducing the maximum amount of sulfur permitted in shipping fuels from 3.5 percent to 0.5 percent beginning in 2020.

Many of IMO’s 175 member nations have been pressing the shipping industry for years to cut its carbon dioxide emissions 50 percent below 2008 levels by midcentury. In April 2018, IMO agreed to the target, developing the low-sulfur emission rule as the most efficacious way of meeting the goal.

The changes are prompting some ship owners and ports around the world to begin switching from conventional marine fuels, such as heavy fuel oil and lighter marine gasoil, to LNG, which emits as much as 20 percent less carbon dioxide than conventional marine fuels. In addition, using LNG instead of conventional marine fuels should reduce emissions of nitrogen oxides and sulfur oxides by 90 to 95 percent.

The IMO has no independent policing power, though failure to comply with the organization’s rules could subject ship owners to fines levied by IMO’s individual member states.

Changeover Beginning

In anticipation of the new rules, some shipping companies and ports have already begun making moves to meet the lower emission standards.

The maritime consulting firm DNV GL reports some major cruise lines and freight shippers have ordered 125 LNG-powered ships and a further 119 vessels are already in operation. Large cruise ship companies ordering LNG-powered ships include Carnival, MSC Cruises, and Royal Caribbean. Freight shippers ordering new LNG ships include Volkswagen AG and France’s CMA CGM, the fourth biggest cargo shipping company in the world, which has ordered nine mega LNG-powered vessels for delivery by 2020.

By 2020, DNV GL expects another 400 to 600 LNG-fueled vessels—cargo ships, container ships, cruise ships, and tankers—to be in operation, accounting for only a small portion of the worldwide fleet of roughly 60,000 ships.

High Costs, Quick Deadline

Among the barriers to the large-scale replacement of traditionally powered ships with LNG-powered ones are the short time period before the new rule kicks in and the high cost of building LNG vessels.

There is not enough ship construction capacity to replace the entire 60,000 conventional marine fuel oil powered fleet with LNG ships by 2020. In addition, LNG fuel tanks aboard ships are about twice the size of tanks for conventional fuel, altering ships’ designs and limiting their cargo capacity. On the whole, LNG-fueled ships are more expensive to construct and maintain than their marine fuel powered equivalents.

There is also inadequate infrastructure for storing LNG and refueling LNG-powered ships at present. LNG requires dedicated facilities to store natural gas at the extremely low temperatures needed to maintain its liquid form and be loaded onto ships. Ports in the Mediterranean Sea, including Barcelona, Gibraltar, and Malta, are building infrastructure to serve as refueling stations for LNG ships.

In the short term, at a cost of approximately $10 million per vessel, most shipping companies plan to meet the new IMO rules by retrofitting ships with scrubbers that remove sulfur from the exhaust fumes. This is less expensive than replacing an entire ship, and it will satisfy IMO’s new rules, but it will do nothing to reduce carbon-dioxide emissions, the purported purpose of the rule.

Despite those disadvantages, the recent rise in global oil prices, coupled with the abundance of cheap natural gas made possible by the fracking boom in the United States, means LNG is becoming increasingly price-competitive as a shipping fuel. As a result, DNV GL forecasts by 2050 only 47 percent of the energy used for shipping will come from oil-based fuels, with various types of gas fuels, biofuels, and electricity powering the remaining 53 percent of oceangoing vessels’ energy use.

‘Unwarranted’ CO2 Focus

Carbon dioxide is not causing dangerous global warming, so IMO should not be forcing the shipping industry to reduce emissions of it, says Jay Lehr, Ph.D., director of science policy at The Heartland Institute, which publishes Environment & Climate News.

“Having these climate-change mandates enforced along shipping lanes is completely unwarranted, because the threat of global warming from greenhouse-gas emissions is, in fact, nonexistent,” Lehr said. “Vacation cruise lines may adopt LNG ships as a clever marketing ploy aimed at people who might occasionally make a cruise line decision based on fears of global warming.

“For some shippers, LNG might be the best option,” Lehr said. “Others may choose to stick with traditional marine fuels and install scrubbers or pay fines, if countries decide to levy them. Neither will have any effect on the climate.”

Virtues and Costs

Natural gas has many virtues as a shipping fuel, says Jordan McGillis, a policy analyst at the Institute for Energy Research.

“Natural gas is a versatile fuel with a range of possibilities for transportation fuel and beyond,” said McGillis. “A wider embrace of LNG as a transportation fuel will reduce emissions of greenhouse gases and particulate matter in global shipping lanes.

“It will come at a cost, however, because the additional space onboard required for LNG fuel tanks will come at the expense of space for cargo,” McGillis said. 

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.