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The Demise of the Fair Winds Charter

Hong Kong’s voluntary Fair Winds Charter aimed at reducing air emissions in port officially expired at the end of the year. It is unlikely to be renewed.

Regulations mandating emission control measures in port, and thus negating the need for the Charter, are late, but still eagerly anticipated. For Arthur Bowring, managing director of the Hong Kong Shipowners Association (HKSA), they will create a fair competitive environment that doesn’t penalize shipowners making an effort to reduce SOx emissions.

The legislation for Hong Kong was supposed to be ready for January 1,” says Bowring. “The container industry especially is highly competitive, and if you’ve got carriers paying $2 million more each year for the pleasure of switching fuel, they’re not going to last long in business. So it’s important to maintain a level playing field between the carriers in Hong Kong. That’s why we want the legislation, but we do also want the initiative to spread up into the rest of the Pearl River delta to keep the playing field level for Hong Kong as a port.”

The Charter, reaffirmed for another year in February 2014, involves many of Hong Kong’s leading carriers and cruise liners and was initially brought about through the leadership of OOCL and Maersk. It is jointly sponsored by the HKSA and the Hong Kong Liner Shipping Association.

“The Hong Kong Shipowners Association and the Hong Kong Liner Shipping Association have for many years been deeply involved in the reduction of emissions from shipping, both in global negotiations and in local voluntary efforts. Locally, the Fair Winds Charter was developed by the industry in 2010, taking effect from 2011, as the world’s only truly voluntary scheme to reduce shipping emissions at berth and at anchor.”

In 2012, the charter was partially supported by the government with a three-year incentive scheme that means owners can claim around 40 percent of the cost of switching fuel.

Over time the shipping lines signed up to the charter have changed. “Some of the original members are no longer doing it because it’s made them too uncompetitive. They are waiting for the legislation,” says Bowring.

However, there have been some new companies coming in and some taking advantage of the arrangement without publically supporting the charter. “There is a fair amount of reluctance to be identified publically supporting the voluntary emissions cut. One reason for that, we believe, is because some carriers are concerned that if they are shown publically to be supporting Hong Kong, then other places might well demand they do the same thing, and that could really affect their bottom line tremendously.”

An infographic on the back page of the South China Morning Post at the end of last year sparked renewed focus on the shipping industry’s air emissions. Titled “A Heavy Toll” the infographic showed that approximately 50 percent of Hong Kong’s SOx emissions, 32 percent of NOx emissions and 37 percent of particulate matter came from the marine industry in 2012. The statistics may give the impression that the shipping industry is not aware of the effect of emissions on human health and is not doing anything to reduce them. This is not the case, Bowring says.

The industry fully supports, and is working with, the government in the development of the new regulation, he says. He cites statistics gathered last year that indicate that while only 13 percent of carriers were switching fuel, sulfur emissions around the port area were reduced by 8 percent.

In October last year, nearby Shenzhen in mainland China stated its intention to follow Hong Kong’s voluntary efforts with an incentive scheme, and to work with Hong Kong towards an application to the IMO by 2018 to create an emission control area for the Pearl River Delta.

China is home to seven of the world’s busiest container terminals, and Shenzhen became the third largest container port in the world in 2013. Most of the ocean-going vessels calling at Shenzhen burn heavy fuel oil. It is estimated that about 66 per cent of Shenzhen’s sulfur dioxide emissions, 14 per cent of nitrogen oxide, 6 per cent of fine particulates come from port and ship sources.

Shenzhen is planning to take the Hong Kong model a step further. It will refund 100 percent of the extra fuel costs if 0.1 percent or less sulfur fuel is burnt and 75 percent if it is less than 0.5 percent. However, the government is still developing the necessary framework to achieve these incentives.

It also plans to promote the use of shoreside power. Unlike Hong Kong, this can be fairly easily achieved as a lot of the terminals are relatively new, and many have been set up with cold ironing facilities.

There is some talk of making shoreside power available in Hong Kong too.

“Hong Kong’s efforts to reduce emissions from shipping are well recognized and appreciated by Beijing, and we understand that Shanghai is considering adopting emission control incentives, initially based on Hong Kong’s voluntary scheme, for the Yangtze River Delta,” says Bowring, but he believes countries further afield are also watching Hong Kong with interest.

He sees a significant difference between the regulations being developed in Hong Kong and those in, for example, Europe. In Europe, there is a fine attached to not switching to low sulfur fuels in designated areas. It’s not a particularly heavy fine, says Bowring, and may not provide a strong financial incentive for trying to avoid the system.

In contrast, the new regulations being developed for Hong Kong make deliberate non-compliance a criminal act for both the carrier and the ship’s master. A convicted master could face six months in jail and a $200,000 fine.

“We think it is a very effective sanction, and it is one that Europe is quite interested in,” says Bowring.

Meanwhile, the voluntary Charter continues on a business-as-usual basis, until the legislation is implemented. This is anticipated to be in the next six months.

“Shipping carries more than 90 per cent of world trade and, on a ton-km basis, is the most efficient and environmentally friendly form of transport. It is our intention to continue to reduce the environmental footprint of this essential industry sector,” says Bowring.

The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.

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