The Sulphur Cap in Maritime Supply Chains

Environmental Regulations in European Logistics

Olli-Pekka Hilmola

• Publisher: Palgrave Pivot
• Year: 2018
• Print ISBN: 9783319985442
• eBook ISBN: 9783319985459
• Topic: Business
• Subtopic: Management
• Index: Business

This book examines the current and controversial topic of the sulphur cap in maritime supply chains, a new regulation set to be enforced in 2020. The author presents extensive research on three northern countries - Finland, Sweden and Estonia - and the effects they felt when these regulations were rolled out in 2015. These regional case studies are presented alongside extensive private sector data, annual reports and interviews to assess and forecast how the maritime supply chain will cope with rising costs and alternative approaches to environmental regulations. This book includes advanced regression analyses alongside interactive simulation models for the reader to evaluate new supply chain strategies and study the effects of these regulations.

© The Author(s) 2019

Olli-Pekka HilmolaThe Sulphur Cap in Maritime Supply Chainshttps://doi.org/10.1007/978-3-319-98545-9_1

Begin Abstract

1. Introduction

Olli-Pekka Hilmola¹

(1)

Kouvola Unit, Lappeenranta University of Technology, Kouvola, Finland

Olli-Pekka Hilmola

Email: [email protected]

Abstract

Transportation logistics and supply chains in general are facing increasing environmental demands. It could be argued that the sector is coming late to the demands for reductions in greenhouse gases (GHGs) and environmental emissions. For a long time it was enough for global policies that trade and economies grew. This is no longer the case. The transportation sector is responsible for a significant amount of emissions, and in Europe, they are still on track for long-term growth. Most troubling among these modes of transportation is truck transportation. The main challenge in maritime supply chains is not the amount of CO₂ emissions, but that of sulphur and nitrogen emissions, and the concentration of these emissions to a limited amount of major sea ports.

Keywords

GHGEmissionsTradeTransportationShipping

End Abstract

Globalization and trade growth have created the platform for actors in the logistics sector to grow and internationalize. Companies have become ever larger, and concentration to the only small number of global players, for example, in container shipping (United Nations 2017) and third-party logistics services (Bowman 2014), is already a fact. In addition, the market shares of the biggest companies are significant. These all changes have meant that margins of operation are becoming increasingly smaller, as competition is becoming more global and intensive.

Nowadays, talk about environmental emissions and prevention of climate change is prevalent everywhere. Previously, factories controlled emissions (e.g., by implementing emission trading systems), but dialogue about examining the various activities of transportation logistics between raw material mining and reaching the final customer, and eventually consumer, was rare. The same story applies to private car use: within the European Union and globally, emission cheating has been observed, along with massive corporate fraud, in diesel-powered cars, for example. As a result, fingers are now being pointed at the automotive industry (Oldenkamp et al. 2016; Li et al. 2018). However, the finger should also be pointed at politicians and citizens, since they continue to escape from reality with higher and more demanding vehicle emission standards, with the belief that further regulation will solve the outstanding problems (also partially concluded in Li et al. 2018). “Technology development will solve these issues,” many were thinking. However, the problems were actually solved by vehicle manufacturers taking shortcuts to success (where there are now a number of legal processes going on), which enabled much lower CO₂ and nitrogen emissions to be reported than what the reality was (Hotten 2015; Oldenkamp et al. 2016). Moreover, everyone believed that emissions were under control, even if diesel cars consumed nearly the same amount of diesel per distance driven as earlier models did (in real life). Air quality in European cities and roadsides also did not improve as much as expected (e.g., in terms of nitrogen oxides) by the implementation of tighter standards (Henschel et al. 2015). Should the behavioral and car usage systems have changed instead? Strategy drives structure, which in turn, gives the performance (results). Regulation itself is not the strategy, it is just legislation, which will be adapted to human and organizational behavior. For a long time, it has been known that diesel-powered car and truck engines are great problem in Europe, and should have a higher tax treatment than other alternatives (Mayeres and Proost 2001). In addition, studies exist from diesel car ban locations (like El-Zein et al. 2007), where the health of inhabitants has improved since the ban took place (the long-term effects were not that clear El-Zein et al. 2007).

One way of observing the argued situation in retrospective (transportation logistics environmental demands) is to analyze greenhouse gas (GHG) development in 28 countries in the European Union through official statistics (Fig. 1.1). It is true that from the base year 1990 (a time when still many countries were hugely polluting due to the Soviet legacy), GHG pollutions overall have developed favorably—in 2015, they were 22.1% below the base year. However, this is the trend in overall activity. Transportation is very different compared with the general trend, and in the last observation year (2015), its share of the total GHGs was 26.6%. Since 1990, transportation has grown in GHG emissions by 23%. The highest polluter in this sub-sector is road transportation , which in the last observation year (2015) represented 72.1% of all transportation emissions. Road transportation GHG emissions have also grown by 20% over the years, despite all activity, technology development, implementations and legislation process accomplished. International maritime transport produces 11.4% of GHG emissions from the transportation sector, and it has also grown by 22.2% during the period (1990–2015) in its emissions. The only positive segment of the transportation sector are the railways , which have been able to accomplish a 54.4% decrease in emissions. This is of course partially because of technological progress (i.e., more energy efficient traction and trains overall) and implementations (such as higher use of electricity as traction), but also partially because of declining raw material transportation (especially coal) from the early 1990s and the lost market share in freight and passengers (especially in former Eastern Europe). In real life, some companies have started to utilize railways at a larger scale in order to combat high transportation CO₂ emissions. For example, BMW has reported that nearly 60% of vehicles leaving the manufacturing plant are transported for first part of the journey by railways (BMW 2017).

Fig. 1.1

Annual greenhouse gas (GHG) emissions within 28 countries of the European Union during time period 1990–2015 (indexed from million tons CO₂ equivalent, where 1990 = 1.00)

(Source (data) European Commission 2018a)

Of course, some might argue that the situation is good, since overall GHG emissions in Europe are on the long-term decline. As a counterargument, it could be stated that overall, across the entire world, GHG emissions are still strongly increasing. Readers could go and check the oldest measurement point, that of Mauna Loa (Hawaii) and the development of CO₂ emissions in this Pacific observatory from the late 1950s to the present date (NOAA 2018). The growth is really impressive and leaves no question as to where the world is heading. All actions, agreements, meetings and panels have done very little to the global CO₂ levels: it is still clearly increasing. Perhaps the achievement has been that it has not increased at a much higher rate.

A similar kind of process as with the regulation of ‘private diesel cars’ is now underway in freight transportation within the European Union. Initially, countries opened a ‘wish box’ of great hopes of further integration and globalization, only to discover that transportation activity had increased considerably (due to the much higher rate of trade and the low inventory, as well as high order frequency systems such as just in time). Now the situation is such that, in Europe, different countries have road use payments for trucks, and taxation is increasing for diesel fuels at gas stations almost annually. In addition, there is already agreement regarding incorporating transportation in CO₂ emission demands for the year 2030. These CO₂ reductions are massive to Finland, Sweden, Denmark and Germany, for example (around 40% reduction needed in 2030 from the 2005 level; European Commission 2018b). The maritime sector is not alone in here—in the year 2015 within Europe, stringent sulphur regulation was implemented in emission control areas (Baltic and North Sea), where sulphur content of used diesel was set at a maximum of 0.1% (IMO 2018a; Hilmola 2015). In 2015, a low sulphur level was also required for coastal areas of North America (together with some parts of US Caribbean Sea; IMO 2014). Sulphur content was globally decreased from 4.5% to 3.5% (in the year 2012). In the same vein, China also implemented its own domestic sulphur emission control areas for three major sea port regions with cap of 0.5% (Liu et al. 2018); these started to be effective in some areas from the early part of 2016 and have enlarged in areal size in the years 2017 and 2018 (Hong 2017). Shipping is not like road transport , and its main problem is not CO₂ emission levels (3% from global CO₂ emissions; Stevens et al. 2015), since this is already very low compared with its absolute dominance in transported volumes (80% global modal share based on United Nations 2017). However, for a long time, shipping used inexpensive heavy fuel, which produced significant amounts of sulphur and nitrogen (Stevens et al. 2015; Lindstad et al. 2015). These in turn were, and still are, a very serious issue in populated areas due to their associated harmful health effects and, eventually, casualties. In North American coastal areas, implementation of de...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. General Economic and Trade Environment
• 3. Was Sulphur Regulation the Reason for Growth of Unitized Cargo Between Finland and Estonia?
• 4. Unitized Cargo: Growing Truck-Based Volumes at the Sea Ports of Estonia, Sweden and Finland
• 5. Maritime Supply Chains: How They Experienced the Regulation Change
• 6. Longitudinal Survey Findings from Northern Europe
• 7. Simulation of Different Supply Chain Strategies
• 8. Conclusions
• Back Matter