Effectiveness of international regulation of pollution controls: the case of the governance of ship emissions Interim Report

Executive Summary ES1. This interim report of a continuing study examines the effectiveness of international regulations on ships' sulphur emissions, based on observation of ship inspections in the UK and Sweden and on interviews with regulators, inspectors and industry stakeholders. ES2. There is currently a 'culture of compliance' in the industry, with the proportion of ship detentions as a percentage of Paris MoU inspections falling from 9% in 2001 to just 3% in 2010. But in this highly competitive industry, operator compliance depends crucially on the perception that one's competitors are also compliant – the 'level playing field'. ES3. Only fragmentary lab-test evidence of compliance levels is available. On the one hand, some commercial laboratories have made available summaries of the test results from large numbers of samples sent to them for commercial purposes. These results are mainly valuable as an indicator of the proportions of off-spec fuel being supplied as bunkers, rather than as an indicator of regulatory avoidance, since ship operators practising regulatory avoidance are unlikely to send samples for testing. On the other hand, some authorities (such as the Swedish Maritime Administration and the Dutch Water Police) are collecting quasi random fuel samples for testing, but the numbers of such samples are small and some of the sampling may be intelligence-led. In the first quarter of 2011, 3.8% of samples, collected in Western Europe and the Baltic and sent to one large commercial lab testing agency, proved to have non-compliant sulphur levels. Most of these samples were only marginally off-spec, and there were considerable local differences, with only 1.5% of Rotterdam samples being off-spec. Test results on 149 samples collected by the Swedish Maritime Administration (partly quasi randomly and partly during Port-State inspections) showed only 4% were non-compliant (allowing for a margin of error of +/-0.05%). Overall, the available test evidence is insufficient to estimate compliance levels across the ECAs as a whole. ES4. If regulatory avoidance is occurring, it may be linked to the very great cost savings to be made from operating with low-cost, high-sulphur fuel at a time when shipping industry profits and freight rates are low. The imminent arrival of the new North American Emission Control Area (in August 2012) will ensure a continuing very large price differential between compliant and non-compliant fuel in the medium term. The considerable financial incentives associated with using non-compliant fuel suggest the need for particularly robust enforcement …