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December 13, 2007

Burning Bunker Fuel: The Shipping Industry's Dirty, Not-So-Secret Shame
    by Anne Moore Odell

Friends of the Earth is extremely concerned about the greenhouse gases and other pollutants ships spew into the atmosphere. The UN agency working on the issue stands behind the shipping industry's efforts to comply with international protocols. -- As the world grows ever more interconnected, the dirty truth is that many of those connections are made by huge, environmentally damaging cargo ships. Current global demand for shipping is extremely high and growing, as raw goods are being shipped into labor-rich countries and finished consumer goods are being shipped to capital-rich countries.

Visit the
Prospectus Ordering CenterLarge ocean going ships, including cruise ships, release more sulfur dioxide than all land transportation combined states a recent report from the International Council on Clean Transportation (ICCT). ICCT further reports that in 2005, ships produced 27% of the world's total nitrogen-oxide emissions, which contribute to smog and global warming.

The shipping industry's primary culprit is the bunker fuel used to propel the ships. Bunker fuel, also known as residual fuel, is literally a thick sludge that is left at the bottom of the barrel after refining petroleum. When bunker fuel is burned, it releases many air-born pollutants, including SO2. When bunker fuel spills, it creates an environmental nightmare.

For investors in publicly traded shipping companies, information about the environmental impact of these companies is difficult to obtain. Of the publicly traded shipping companies traded in the US that contacted, only Nordic American Tanker Shipping returned a request for information, and then pointed to their website which includes their annual report for investors, and, in part, addresses the environmental risks of shipping.

Investors in shipping might face risks due to changing regulations. Currently, there are no shareholder actions in shipping regarding the air emissions that is aware of. This could be, in part, because most shipping companies are all doing what they need to do legally under current federal and international laws.

Some local, state, and federal governments have addressed the pollutants released from ships by creating policies that prohibit burning bunker fuel in ports or within their designated waters. While this strategy reduces local air pollutions levels, it does not address greenhouse gas emissions released during long voyages, as ships outside of protected waters revert to burning the very dirty, very cheap bunker fuel.

The International Maritime Organization (IMO) is the United Nations Agency that oversees the shipping industry with 167 international governments and three associate members taking part. talked to Natasha Brown, External Relations Officer for IMO.

According to Brown, the IMO has an action plan to reduce emissions of greenhouse gases from ships, particularly carbon dioxide (CO2), which are not covered in the current Annex VI of MARPOL. MARPOL is a maritime environmental protection convention that was created by the UN in 1973 and has been updated several times since.

IMO is cooperating closely with international shipping and other relevant UN bodies, in particular the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat, to ensure that the issue of shipping pollution is tackled on an international level, thereby avoiding unhelpful unilateral action on a regional or national level.

"Even as the Annex VI is being reviewed and work on GHG emissions continues, it is true to say that significant reductions in harmful emissions from ships and increases in fuel efficiency have been achieved over the past decades through enhancements in the efficiency of engine and propulsion systems and improved hull design," said Brown.

Brown continued, "Larger ships and a more rational utilization of individual vessels have also contributed significantly to reducing the amount of energy needed to transport a given unit of cargo." Despite greater efficiencies, dramatic increases in shipping activity continue to challenge this industry in terms of total emission levels.
IMO is currently undertaking a review of the existing MARPOL Annex VI, which sets limits on sulfur oxide (SOx) and nitrogen oxide (NOx) emissions from ship exhausts; prohibits deliberate emissions of ozone-depleting substances; provides regulations for emissions of volatile organic compounds (VOCs) from tankers; and puts a global cap on the sulfur content of fuel oil.

Under the Annex, the Baltic Sea and the North Sea are sulfur emission control areas (SECAs), within which the sulfur content of fuel oil used onboard ships must not exceed 1.50% m/m. Alternatively, ships must fit an exhaust gas cleaning system.

When IMO's newest revision is completed, the Annex will also cover particulate matter. This is especially important as the bunker fuel contains heavy metals that collect at the bottom of the crude fuel towers where bunker fuel is drawn.

The review is being undertaken by IMO's Marine Environment Protection Committee (MEPC), through the Sub-Committee on Bulk Liquids and Gases (BLG), and is expected to be completed in 2008. The committees are also attended by international and non-governmental organizations, representing the cross-section of stakeholders with an interest in shipping, which range from international shipping industry bodies to environmental lobby groups.

A Cross Government/Industry Scientific Group of Experts, established by IMO in July 2007, has reviewed the impacts on the environment, on human health and on the shipping and petroleum industries of applying any of the proposed fuel options to reduce SOx and particulate matter generated by shipping and the consequential impact on other emissions, including CO2 emissions from ships and refineries.

The final report of the Group will be completed in mid-December 2007 and submitted to the MEPC. The report's conclusions will be taken into account by the MEPC, which will take the decisions on what should be included in the revised Annex VI to MARPOL. It is anticipated that the revised Annex VI would enter into force in 2010.

"There is no doubt that shipping is a clean, green, environmentally-friendly and very energy-efficient mode of transport, "Brown told "Nevertheless, IMO continues to work on further reducing harmful emissions from shipping, a transport industry vital to world trade and development. "

Given the magnitude of the emissions from ships, other strongly disagree with Brown. For example, Friends of the Earth (FOE) reports that although ships are more energy efficient than other types of commercial transportation, there is much work to be done in the shipping industry, starting with burning cleaner fuels, especially in ports, where, FOE reports, residents have higher cancer risk from exhaust from ships.

FOE was one of the first groups that called for replacing bunker fuel with the cleaner, albeit only slightly cleaner, "distillate marine fuel." FOE in November 2007, however, called for the total ban of bunker fuel.

"With the recent bunker fuel spills in the San Francisco Bay and the Caspian Sea, and with climate change, a perfect storm of pollutants, it was at this time that FOE moved from a fuel switch to a bunker fuel ban," said Teri Shore, Campaign Director for FOE.

FOE is working with the Federal government to set stricter air quality standards for ships. It is also lobbying the IMO for stricter emission caps and the move to cleaner fuels. In 2006, FOE lobbied the IMO to cap sulfur on marine fuels at 1.5% sulfur as compared to the current 4.5% and a cap of .5% in SECAs currently at 1.5%, starting in 2010.

FOE paints a bleak future for the shipping industry. Even if the shipping industry does switch to cleaner fuels, the growing demand for goods means more ships. This would offset the gains made by burning cleaner fuels, FOE reports.

Yet there are signs of progress from within the shipping industry itself. Shore points to the world's largest shipping company, Denmark-based Maersk, who has recently switched to burning distillate marine fuel in all their engines when in California waters.

Intertanko, the international organization representing independent oil tankers, has also proposed that all ships move to burning marine distillate fuels by 2010. The US, Sweden and the Netherlands support this move

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