IMO Regulation And Its Effect On Sea Freight
If you are involved in ocean freight, you have definitely heard of IMO regulation. This new term that came to life in 2019, refers to a regulation that will be forced starting from the beginning of 2020.
The IMO 2020 will introduce important changes to the sea freight industry. Therefore, in this article, we will tell you everything you need to know about this new regulation and its impact on ocean transportation.
Definition of IMO 2020
IMO 2020 is a regulation stated by the International Maritime Organization that indicates that starting from January 1, 2020, the sulfur emissions of all maritime vessels must be limited to 0.5\ m/m (mass by mass), down from the current 3.5\ m/m.
Shipping vessels use bunker oil as their main source of energy. Bunker oil, also known as heavy fuel oil (HFO), is the remaining of cruel oil after it goes through a process called distillation. Bunker oil contains sulfur which is emitted into the air by shipping vessels polluting the atmosphere. The aim of this regulation is to diminish ocean pollution causes by shipping lines to satisfy rising pressure from environmental activists.
Oceans are extremely large and vast, it is impossible for states to have control over them. Thus, implementing this regulation will be very complicated and challenging. Historically, there have been many attempts to limit pollution caused by shipping vessels. For example, we can mention the 1973 MARPOL Convention. There have been also various annexes that deal specifically with air pollution from maritime vessels.
Explanation of IMO 2020
Understanding the IMO 2020 regulation is quite easy. You just need to keep in mind that starting from the 1st January 2020; the sulfur limit for shipping vessels will be decreased from 3.5\ m/m will to 0.5\. This implies to all areas but Emission Control Areas (ECA).
For ECA, the sulfur concentration limit is 0.1\ m/m. All carriers operating within these areas should comply with this measure. ECA has strict rules about sulfur emission and they include the Baltic Sea, North Sea, several areas off the coasts of the US and Canada, and the US Caribbean Sea.
Alternatives For Bunker Oil
Starting from 2020, shipping vessels should start looking for an alternative for Bunker oil, also known as heavy fuel oil (HFO). However, the new source of energy should comply with the IMO 2020 regulation. In other words, any source of energy that contains a concentration level of sulfur that exceeds 3.5\ m/m won’t be acceptable. Below you will find the acceptable sources of energy.
- Liquefied Natural Gas (LNG): It is considered the best alternative for heavy fuel oil. It is characterized by extremely low sulfur concentration. It can reduce sulfur concentration by 90\. Thus, newly constructed vessels are designed to work specifically with LNG. Opting for LNG as fuel will allow you to operate within ECA without restrictions.
- Scrubbers: Scrubbers are cleaning systems of exhaust gases. Installing such a system on a vessel will allow it to continue working with heavy fuel oil but it will reduce its sulfur emission.
- Marine Gas Oil (MGO): This is the best marine fuel quality available in the market. It contains the lowest sulfur concentration. However, it is way more expensive than the two previous alternatives.
How To Prepare For IMO 2020?
Although it looks that IMO 2020 concerns only shipping vessels, its impact will definitely reach shippers whether they are importers and exporters. Alternatives for Heavy fuel oil are expensive and if the shipping vessels are going to pay more money for fuel, they will definitely raise rates.
Therefore, while waiting for the implementation of this new regulation, try to be updated with all surcharges announcement and if you want to make some money, try to book your shipments before the regulation is put into practice.
The IMO 2020 regulation will probably be the most important regulation of 2020. It will definitely please some environmental activists but it will definitely lead to another increase in freight rates especially ocean freight rates.