Parliament mulls IMO, maritime CO2, scrubbers

: Emissions, Oil products
20/10/29

The European Parliament's environment committee has voted for a "phase-out" rather than simple ban of open-loop exhaust scrubbers in the maritime sector. The committee also criticised international efforts to reduce greenhouse gas (GHG) emissions from the sector, with members calling for the EU to proceed with its own efforts.

The environment committee voted to slightly amend its opinion on measures for cleaner maritime transport so as to now call on the European Commission to propose a "phase-out and ban on the use of open-loop scrubbers as soon as possible". The committee also expressed "concerns" at the use of LNG.

The opinion approved today will feed into a report by the transport committee that also proposes banning the use of high-sulphur fuel oil (HSFO) with exhaust cleaning systems. In the transport committee, Danish liberal Soren Gade spoke out against a simple ban on scrubbers without a proper impact assessment. "Shippers have invested millions in scrubbers to comply with environmental legislation," Gade told the transport committee.

IMO efforts insufficient

After voting on its opinion on cleaner maritime transport, the environment committee joined others in criticising recent proposals put forward by the International Maritime Organisation (IMO) to cut the sector's GHG. The draft proposals are to be considered by the IMO marine environment protection committee (MEPC) on 16-20 November.

EU transport commissioner Adina Valean told the environment committee that she was "pleased" with the outcome of IMO talks, notably on the energy efficiency ship index and the carbon intensity indicator. But Valean will not rest until the IMO approves "concrete technical and operational measures" to deliver on the IMO's GHG reduction strategy, she said.

Rejecting the IMO proposals would have been a mistake, she said.

"We decided not to push for negotiations [at the IMO] to be postponed to an uncertain future date. And it is naive to hope that key players in the IMO will change their minds in six or 12 months. There is no time to wait," Valean said.

"I really ask you [the commission] to put more pressure on the IMO. Times have changed. Why should the shipping sector not be climate neutral in 2050?" Peter Liese, speaking for parliament's largest centre-right EPP group, said.

And Swedish socialist Jytta Guteland said it is "rather embarrassing" that the maritime sector has not contributed more to GHG cuts. She called for slow streaming, wind propulsion and logistics optimisation.

"Every year at the IMO, it is like we wi'll do it next year. It is not good enough," Guteland said.

German Green Jutta Paulus also criticised the IMO.

"We have no binding measures [at the IMO's MEPC]. Nothing that forces ships or companies to adhere to the measures to be taken," Paulus said.

"It is all the more important that the EU pushes ahead with its own measures. We have to move faster than the IMO," Paulus said.

Paulus is behind parliament's report adopted in September calling for the inclusion of maritime GHG emissions in the EU's emissions trading system by 1 January 2022, as well as cutting ships' annual average CO2 emissions by more than 40pc by 2030.

By Dafydd ab Iago

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24/12/26

Viewpoint: Unified CO2 market remains in distance

Houston, 26 December (Argus) — Washington state's carbon market enters 2025 on steadier ground than it stood on for much of the past year, but still faces hurdles before it is part of a larger North American market. Washington's cap-and-invest program has weathered a year of highs and lows between advancing its ambitions to link with the Western Climate Initiative and operating through much of the year under threat of repeal in the November state elections. The state Department of Ecology director Laura Watson began the state's quest to link with the WCI last year , as regulators looked to the larger, more liquid market to potentially temper the higher-than-expected prices over the first year of the market in 2023. Washington Carbon Allowances (WCAs) for December 2023 delivery surged as high as $70/t last year, according to Argus assessments. But the state has clinched several wins for its program this year. State lawmakers were able to pass a bill to smooth out several areas of potential incompatibility with the WCI earlier this year, along with California and Quebec agreeing to move forward into formal linkage talks in March . But a repeal effort, initiative 2117, seeking to remove the state's cap-and-invest program dampened prices and forward movement on linkage since January. WCAs for December 2024 delivery fell to the lowest price to date for the program at $30.25/t on 4 March, according to Argus assessments, as uncertainty over the future of the program quieted market participation. State voters backed the cap-and-invest program in November with 62pc against the repeal effort, but months of uncertainty has cost the state time and linkage progress as the WCI awaited the November results. Additionally, while Washington started its own linkage rulemaking in April to align the program with changes planned for the WCI, finishing it requires the joint market first finalize its own changes. The linkage logjam has left market participants feeling that the state's momentum is stalled for the moment, even as perception of the state's eventual joining remains a question of "when" not "if." Ecology says it remains in communication with the WCI members and is evaluating the impact of California's new rulemaking timeline. California has indicated over this year that it does not intend to focus fully on linkage until its current rulemaking is complete. Ecology estimates it will adopt its new rules in fall 2025, with the earliest the state could expect a linkage agreement in late 2025. Washington must still complete further steps required by state law before any linkage agreement can proceed, including an environmental justice assessment and a final evaluation of a potential joint market under criteria set by its Climate Commitment Act, along with public comment. California and Quebec must also conduct their own evaluations to comply with respective state and provincial laws. If this timing works out, Ecology would be part of joint auctions starting in 2026. Compounding the process is the potential threat posed by incoming president-elect Donald Trump, who is likely to try to reverse major environmental regulations and commitments. Trump sought ultimately unsuccessful litigation in his first administration to sever the link between Quebec and California in 2019. The administration pursued the case on the grounds that California's participation violated federal authority to establish trade and other agreements with foreign entities under Article I of the US Constitution, which sets out the role of the federal and state powers in commerce and agreements with foreign powers. Both California and Washington have undergone preparations in recent months to gird themselves for a legal fight with the incoming administration, and that may add further scrutiny to linkage for both states going forward, said Justin Johnson, a market expert with the International Emissions Trading Association. "I think that it will require them to be more vigilant about the process they use and making sure they dot their i's and cross their t's because I think that there will be some folks in the federal administration who would like to see that not happen," Johnson said. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Tariffs may curb US bunker demand

24/12/26

Viewpoint: Tariffs may curb US bunker demand

New York, 26 December (Argus) — US president-elect Donald Trump's plans to enact new tariffs, especially those targeting Mexico and Canada, may curb demand for US bunker fuel and ripple across international markets. The proposed 25pc tariffs on imports from Mexico and Canada could affect all products coming into the US from those countries, including the significant volumes of residual fuel oil from Mexico and Canada that US Gulf coast and east coast buyers import. This could lift prices of residual fuel oil sold for bunkering in US Gulf coast and east coast ports, prompting some ship owners calling there to instead fuel outside the US in more price-competitive ports. Depending on their routes, ship owners could shift some of their bunker demand to Singapore, Rotterdam, Fujairah and Panama. Mexico alone supplied 74pc of the residual fuel oil imported to the US Gulf coast and and 29pc to the east coast in the first nine months of the year, according to US Energy Information Administration (EIA) data ( see table ). Meanwhile, Canada supplied 7pc and 16pc of the fuel oil imported to the US Gulf and east coasts, respectively. The US east coast imported 46,730 b/d of residual fuel oil and produced 35,000 b/d in the first nine months of the year ( see chart ). By comparison, the US Gulf coast imported 48,909 b/d and produced 161,667 b/d. Prices of Canadian and Mexican residual fuel oil exports to the US are typically benchmarked against US Gulf and east coast residual fuel oil prices. Should Trump implement the 25pc tariffs, companies bringing Canadian and Mexican residual fuel oil to the US could bid lower to try to offset their tariff costs. Lower bids from US buyers could redirect some of the Mexican and Canadian residual fuel oil exports to buyers in northwest Europe, Panama and Singapore. Or if Canadian and Mexican producers are not able to find lucrative clients outside of North America, they may have to settle for lower profit margins for their residual fuel oil exports to the US. On the US west coast, Trump's campaign promise to impose tariffs of up to 60pc on imports from China has already prompted some shippers to front-load container cargoes. Potential additional tariffs could slow container ship traffic from China to the US' busiest container ship ports — Los Angeles and Long Beach in California. There is a lot of uncertainty around the extent of Trump's tariff plans, as some analysts view his threats as aimed at generating leverage for negotiations. But provided that they are put into place, the Mexico and Canada tariffs could push US east and Gulf coast importers to purchase more residual fuel oil from other countries like Algeria, Colombia, Iraq, Kuwait, Nigeria, Peru and Saudi Arabia. An increase in Chinese tariffs could prompt US west coast importers to shift their purchases to other southeast Asian countries such as Vietnam, Indonesia, Malaysia and Thailand. But once the dust settles from the geographical reshuffling, new trading networks may have been established, and the US bunker market could settle into a new normal. By Stefka Wechsler US Gulf and east coasts residual fuel oil imports, Jan-Sep 2024 '000 b/d East coast % of all countries Gulf coast % of all countries Mexico 13.6 29% 36.1 74% Canada 7.4 16% 3.3 7% All countries 46.7 100% 48.9 100% — EIA US Gulf and east coast FO imports, Jan-Sep ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US jet fuel demand to trail passenger growth

24/12/26

Viewpoint: US jet fuel demand to trail passenger growth

Houston, 26 December (Argus) — The upward trajectory of US jet fuel demand is likely to continue lagging the pace of rising passenger numbers because of recent capacity gains for multiple US airlines and the slow but steady improvement of aircraft fuel efficiency. More than 2.35mn travelers were screened weekly at US airports this year through the end of November, according to the US Transportation Security Administration (TSA) — a 6.2pc increase from the same 11-month period in 2019, before the Covid-19 pandemic curtailed domestic and international flights. Passenger screenings have exceeded 2019 levels consistently since the summer of 2023. Yet US jet fuel products supplied — a proxy for demand — remains stubbornly below pre-Covid-19 levels, despite the rise in traffic. Weekly jet fuel products supplied this year through 13 December was 1.66mn b/d, down by 6.5pc from daily demand in full-year 2019, according to US Energy Information Administration (EIA) data. This slower recovery in jet demand relative to rising passenger numbers may be driven by several factors, including airlines carrying more passengers than in the past, as well as steady improvements in aircraft fuel efficiency. More seats, more flyers Many US airlines have increased flying capacity, as measured by available seat miles (ASMs), since pre-pandemic levels, while load factor — the percentage of seats filled by passengers — has been stable to lower compared with 2019. United Airlines' 2024 third quarter ASMs were up by 14pc at 81.54bn compared with the same three months in 2019. United's load factor was down by 0.8 percentage points to 85.3pc in the same period. Rival US carriers American Airlines and Southwest Airlines similarly posted capacity increases of 14pc and 15pc, respectively, compared with the third quarter of 2019. American's load factor was unchanged at 86.6pc, while Southwest saw a decline of 2.3pc to 81.2pc. Airlines have also made fuel efficiency improvements in recent years. This is in part from the retirement of many older airplane models during the lean years of the pandemic, combined with delivery of newer, more efficient models in more recent years. Southwest Airlines' third quarter fuel efficiency improved by 1.5pc year-over-year, the company said in October. Southwest improved its fuel efficiency with the delivery of nine Boeing MAX 8 aircraft in the third quarter while retiring 15 older planes. The MAX 8's and MAX 9s have average fuel efficiencies of 96 and 101 seat miles per USG (sm/USG), respectively. That would make them 23pc and 30pc more efficient than older planes they may have replaced, such as the Boeing 737-800, with a 78 sm/USG. Other airlines are also refreshing their fleets with newer, more fuel-efficient planes. American Airline's mainline fleet at the end of the third quarter grew by 2.2pc from a year earlier to 971 aircraft. It took in 600 new aircraft from 2013 to 2023, including 31 new planes in 2023. United Airline's third-quarter fleet was similarly 3.4pc larger than a year earlier. But there are limits to this growing efficiency. Globally the average age of airline fleets has risen to 14.8 years, according data from the International Air Transport Association (Iata) — up from 13.6 years in 1990-2024. This is due largely to the steep dropoff in new plane deliveries as aircraft manufacturers struggled with supply chain issues and high costs from the pandemic. Boeing, a chief provider of planes for many US airlines, had a spate of production disruptions in 2024, including a multi-week strike this past fall, that slowed the delivery of newer aircraft. But even a trickle of newer models would gradually affect fuel efficiency, potentially continuing to hold gains in fuel consumption below the rate of passenger growth. By Jared Ainsworth Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: California dairy fight spills into 2025

24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US Gulf high-octane component prices to rise

24/12/24

Viewpoint: US Gulf high-octane component prices to rise

Houston, 24 December (Argus) — Cash prices of high-octane gasoline blending components in the US Gulf coast are likely to rise in 2025 after a year of declines as lower refining capacity starts to thin stocks. Alkylate and reformate cash prices and differentials have been lower over the course of 2024, in part from weaker refining margins. The lower margins are reflected in the region's crack spreads, which narrowed to $12.94/USG on 19 December from $18.67/USG a year earlier, as abundant supply in the region met weak demand . Inventories in the region have also been lower over the course of the year. Stocks in the region fell in November by 2pc from a year earlier to an average 29.75mn bl. US Gulf coast crack spreads have been declining steadily since 2022, according to the Energy Information Administration's (EIA) November Short-Term Energy Outlook, brought on by lower overall product demand, especially for gasolin e . But the EIA expects spreads to hold steady next year, even with a decrease in refining capacity, potentially supporting prices for high-octane components. The upcoming year will also bring a significant refinery closure to the region, which should reduce production and raise cash prices of components such as alkylate and reformate. LyondellBasell's closure of its 264,000 b/d Houston, Texas, refinery is scheduled to start in January. The refinery's fluid catalytic cracking unit (FCC), which converts vacuum gasoil primarily into gasoline blendstocks, is expected to be shut in February, followed by a complete end to crude refining by the end of the first quarter. US total refining capacity should fall to 17.9mn b/d by the end of 2025, according to the EIA, 400,000 b/d less than at the end of 2024, with the lower production leading to price increases. Although the LyondellBasell closing should eventually give crack spreads in the region a boost, some in the industry do not expect a return to pre-pandemic levels of refining margins in the immediate future. CVR Energy chief executive David Lamp said in November the company needed "to see additional refining capacity rationalization in both the US and globally" for crack spreads to gain ground. An increase in consumer demand for gasoline would also support a rise in cash prices and differentials for high-octane components. But the EIA in December forecast consumption nationwide would rise in 2025 by only 10,000 b/d, or 0.1pc, to 8.95mn b/d. By Jason Metko Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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