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ETC Conference Papers 2018

An Evaluation of the Environmentally Differentiated Fairway Dues in Sweden 1998-2017

Submitted by / Abstract owner
Tobias Lindé

Authors
Tobias Lindé and Inge Vierth, The Swedish National Road and Transport Research Institute (VTI)

Short abstract
The study evaluates the impact of environmentally differentiated fairway dues on emissions from shipping in Sweden. Few (many) vessels have reduced NOx (SOx) emissions because of the system, but the impact on reduced emissions is not insignificant.

Abstract
The aim of the study is to evaluate the impact of environmentally differentiated fairway dues on emissions from shipping in Sweden. In 1996 the Swedish Maritime Administration (SMA), the Swedish Shipowners’ Association and the Swedish Ports’ and Stevedores’ Association reached a tripartite agreement to reduce nitrogen (NOx) and sulphur oxides (SOx) emissions with 75% within five years. Following this, the SMA introduced environmentally differentiated fairway dues in 1998. Vessels with NOx emissions below a certain level could apply for a NOx reduction certificate which entitled reduced fairway dues. The installation of catalytic converters was subsidized between 1998 and 2001. Similarly, vessels with a low sulphur fuel content were subject to lower fairway dues. The fee based on the sulphur content was removed in 2015 when stricter sulphur limits were imposed in the Sulphur Emission Control Area (SECA) that comprises the Baltic Sea, the North Sea and the English Channel by the IMO and EU.

We compile annual data on the number of vessels with NOx and SOx reduction certificates that were issued during 1998-2016. This data gives a first indication of how effective the environmental differentiation was. When combined with data on vessel type and size and emission levels and fuel sulphur content before and after certification, the amounts of reduced NOx and SOx emissions can be estimated. With access to AIS-travel data of the certified vessels the reduced emissions could be estimated even more precisely. To explain why some shipowners take measures to reduce NOx emissions and some do not, we compare the costs for installing and running NOx reducing techniques to the subsidies in the first years and the potential reduction in fairway dues. Similarly, we compare the costs and benefits of abating SOx emissions to explain the number SOx certificates. We perform a rough analysis that compares the societal costs and benefits of the environmentally differentiated fairway dues.

The tariffs related to NOx and SOx emissions have changed over the years, but the results show some general patterns. The number of vessels with a NOx certificate increased steadily during the first years, reached a plateau around 45 vessels between 2005 and 2011 and has since decreased to 33 in 2016. Thus, it seems that only a minor share of the vessels calling Swedish ports have taken measures to reduce NOx emissions because of the environmentally differentiated fairway dues. Mainly passenger and RoPax vessels, that account for over 70% of the number of calls and around 20% of the vessel-km in Swedish waters, have acquired NOx certificates and these vessels are most likely to have savings from reduced fairway dues that cover the NOx abatement costs. Switching to low sulphur fuel is a relatively easier process than reducing NOx emission and this is reflected in the number of SOx certificates, which reached 1400 in 2000 and then decreased gradually to 500 in 2014 (the last year before the SECA).

The results suggest that the environmentally differentiated fairway dues provide enough incentives to reduce NOx emissions only for certain vessel types that call Swedish ports often, but for the policy instrument to have a larger environmental impact the economic incentives need to be larger for most vessel types. Ideally, environmentally differentiated fees should be related to the distance sailed or fuel consumed. The opportunities for the SMA to increase the economic incentives are limited as the SMA is dependent on the revenues and hence cannot reduce the fees too much for vessels with low emissions or increase the fees for those with high emissions (which might then shift to other transport modes or countries). One implication of the study so far is that the environmentally differentiated fairway dues in Sweden have not led to major reductions of the NOx emissions and that additional policy instruments are needed, whereas the SECA reduced the need for SOx fees.

Programme committee
Transport Economics, Finance and Appraisal

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