The report entitled “Alternatives to heavy fuel oil use in the Arctic: Economic and environmental tradeoffs” shows that the Arctic shipping fleet would achieve significant financial and environmental benefits if it moves from the use of HFO to alternatives such as liquefied natural gas (LNG) or distillates between 2020 and 2025.
The report, commissioned by the European Climate Foundation, a member of the Clean Arctic Alliance, compares the economic and environmental trade-offs of switching from HFO to distillate or LNG for ships in the Arctic, following recent concerns that the transition to low-sulphur fuels, distillates, or LNG will be more costly than continuing to use HFO.
HFO is referred to as a “residual fuel” because it is the leftover residues from the crude oil refining process. HFO is tar-like sludge that breaks down extremely slowly in cold Arctic waters and is close to impossible to clean up in the event of a spill. While HFO powers 44% of the ships currently operating in the Arctic, it accounts for more than 75% of the fuel onboard those ships, according to ICCT figures.
On the other hand, LNG is less expensive than HFO and evaporates if spilled. However, ships must undergo conversion to use LNG, which requires substantial capital investment. The price of distillate fuel is higher than HFO but it is less expensive to clean up in the event of a spill.
“HFO may be cheap, but it’s seven times more expensive to clean up than distillate fuel. It seems prudent, therefore, to seriously consider eliminating HFO in the Arctic,” Bryan Comer, a Researcher for the International Council on Clean Transportation’s Marine Program and Co-Author of the Report, pointed out.
“The takeaway is that any short-term financial benefits of burning HFO in Arctic waters are completely outweighed by the economic and ecological risks of using it,” Comer added.
What is more, the report also discusses the ecological and societal benefits of switching from HFO or residual fuel blends to alternative fuels, which would include reduced air emissions that contribute to human-induced climate warming, including black carbon.
The report’s authors conclude that “prohibiting the use and carriage of HFO… offers a short-term solution that immediately reduces the risks associated with the use and carriage of HFO as a marine fuel.”
In addition, authors estimate the cost to eliminate the use of HFO or any residual fuel whatsoever in the Arctic by the year 2020 and beyond are only about USD 10 million (across the entire fleet), compared to the costs of cleaning up an HFO spill. Such costs have routinely exceeded USD 100 million per incident.
The costs of marine spills, depending on cause and extent, are generally paid for by ships’ insurers, P&I clubs or liability conventions. The funds are provided by shipowners and cargo owners.
“Moves to mitigate the risks of using HFO in the Arctic will be on the table at this July’s gathering of the IMO’s Marine Environment Protection Committee,” Sian Prior, Lead Advisor to the Clean Arctic Alliance, said.
“The shipping industry still has time to get ahead of the game, and start switching to cleaner fuels, before a complete ban is put in place,” Prior concluded.