Is non-compliance a financial incentive? Why the 2020 sulphur cap needs tough enforcement

Is non-compliance a financial incentive? Why the 2020 sulphur cap needs tough enforcement
Mr. Svend Stenberg Mølholt, COO, Monjasa Group

Non-compliance with the 2020 global sulphur cap is a firm option on the table for consideration, confirms Mr. Svend Stenberg Mølholt, group chief operating officer at Monjasa. As the global 0.5% sulphur cap nears, shipowners and operators are considering which route of compliance makes the greatest operational sense. During a press briefing in Copenhagen, Mr. Stenberg Mølholt told journalists that while low-sulphur fuel, marine scrubbers, and LNG, are the most common options to assess, simply not complying has not been ruled out.

The reason for this is that the financial incentive for non-compliance is more significant than ever, admits Mr. Svend Stenberg Mølhol, whose company owns, operates, and supplies fuel to ships across Northern Europe. Given that there is a lack of clarity on punishments and fines handed out to ships found breaking the 0.5% sulphur content, there is no real incentive to comply when it may simply be cheaper and easier to not.

Even in Denmark, one of the most government controlled countries in the world, Mr. Stenberg Mølholt confirms that “the biggest fine we have issued to date for a non-compliant ship is around US $60,000”. The hefty price tag attached to the purchase and installation of marine scrubbers, which can be anything around US $5-6m, or the conversion of ships to LNG propulsion, around US $6-7m, means that getting stamped with a small fine is worth the risk and significantly less costly than investing in one of the aforementioned options.

Mr. Stenberg Mølholt believes that the industry needs to be made clear of the consequences of non-compliance to avoid taking this easy option post 2020. Satellites can be used to track ships on their compliance status, but “if the governance is not strong enough and the fines are not big enough then there is little point”.

Mr. Stenberg Mølholt says that while there are sniffers and Port State Control (PSC) inspections in place, “we have no links in Denmark today between a sniffer and a fine, and we are probably one of the most government controlled countries in the world.” It is not just about tracking ships to see if they are compliant; it must be about the consequences of not complying.

There is discussion in the IMO that a ban on the carriage of high sulphur fuels on-board a ship, unless it is equipped with a scrubber, should be enforced. At present, ships are allowed to carry that fuel as long as they do not burn it. However, if the IMO continues to allow ships to carry this fuel, without a scrubber on-board, and they do burn it while in open waters, these non-complying industry players will contribute to an uneven playing field. This not only adds to the environmental problems associated with heavy fuel oil, but also puts those who have complied at a significant disadvantage, exacerbated by a minimal fine that costs less than the cost of compliance.

Monjasa urges the shipping industry to make non-compliance clearer to everyone. “We are working with Danish Shipping and with the authorities on how to make this practically possible because it is not clear enough that the incentive to meet those requirements is very small, unfortunately.”

Mr. Stenberg Mølholt suggests that an operational network that enables operators and owners to comply with these standards must be in place. This includes taking the bunker supplier into the compliance system and giving the IMO the tools they need to enforce compliance. One such example is the through the carriage ban of heavy fuel oil on all ships, unless a scrubber is on board and in operation.  According to Monjasa, this gives the PSC officers a straightforward way of identifying which ships are permitted to carry the fuel, and therefore which ships are compliant and which ships are not.

However, for this to happen in the first place, an effective PSC process has to be in place. Monjasa believes that this is where an implementation committee comes into play, to train PSC staff to achieve a global and unified implementation procedure of the global sulphur cap and other regulatory requirements. According to Monjasa, this is of utmost importance in creating a level playing field in shipping.