|September 06, 2013|
Carnival investing $180 million in clean-air technology
|Carnival Corp. is pouring more than $180 million into new technology to clean fuel exhaust on roughly a third of its fleet in an effort to meet strict air pollution standards off North American coasts that go into effect in 2015.|
The Miami-based cruise ship company will announce the plan Thursday along with the Environmental Protection Agency, which along with the U.S. Coast Guard and Transport Canada is supporting Carnival's efforts to develop and install dual filtration and scrubbing devices on 32 ships. The EPA will allow Carnival to use standard fuel at sea while it tests the equipment rather than forcing the company to burn cleaner but more expensive fuel on the ships included in the program.
The move could open the door for Carnival to return ships to ports that is has recently announced plans to abandon due to fuel costs, including Baltimore and Norfolk.
While Carnival hasn't yet identified all 32 ships to test the technology, they will come mostly from brands that spent a significant part of their time in waters around the U.S. and Canada: Carnival Cruise Lines, Holland America Line and Princess Cruises. Two Cunard Line ships will also be included.
"It means that we're going to be able to burn more economical fuel with a better environmental impact," said Tom Dow, the company's vice president of public affairs. "The outcome's better, the cost is less. But in order to get there, you've got to commit a significant amount of time and money and effort to develop these things."
Dow said the company's fast-paced plan --- installing more than 100 devices between 2014 and 2016 --- is meant to show the approach is commercially viable. While so proprietary now that Carnival wouldn't even reveal its development partner, the technology is eventually expected to be available to other cruise companies.
"There's no doubt that Carnival is going big and they're going fast, which I think demonstrates their faith in this technology solution," said Christopher Grundler, director of the EPA's office of transportation and air quality.
Carnival's plan is the latest --- and largest --- announced by North American cruise companies, which are working to ensure they can comply with International Maritime Organization requirements that limit the sulfur content in fuel near shore. The new standards limit large oceangoing ships to fuel that contains a maximum of .1 percent sulfur by 2015 in specified zones that extend up to 200 miles from North American shores. The restricted area off South Florida is significantly smaller because of its proximity to the Bahamas.
An earlier phase of the crackdown, which limited sulfur to 1 percent, went into place in August of 2012.
A few other zones exist worldwide, including in the Baltic and North seas, but popular cruise destinations such as Australia, Asia, Mexico, the Mediterranean and most of the Caribbean are not covered by such restrictions. (The area surrounding Puerto Rico and the U.S. Virgin Islands will get its own zone in 2014.) By 2020, a global standard that places a limit of .5 percent sulfur will be in effect.
The EPA says air pollution from large marine vessels damages the environment and causes public health problems.
By 2020, the agency says, compliance with the emission control area standards are expected to annually reduce harmful nitrogen oxides by 320,000 tons and sulfur oxides by 920,000 tons --- an 86 percent reduction. A decade after that, the agency forecasts that reductions associated with the emissions rules will prevent between 12,000 and 31,000 premature deaths.
"It would not be an understatement to say that the establishment of this zone around North America has been one of the most important environmental programs EPA has put into place in the last 10 years," Grundler said. For now, all cruise lines that sail in ocean waters covered by the Emission Control Area, or ECA, are in compliance, according to the EPA. Most are simply buying and burning lower-sulfur fuel, despite the additional cost.
The real challenge, cruise lines and observers say, will be in January 2015, when the standards become significantly more strict --- and the already high cost of compliant fuel could potentially increase.
"There's no silver bullets here," said Tony Peisley, a cruise industry analyst based in the UK. "The cruise industry, one way or another, it's going to cost them."
But the benefit, Peisley said, is that with the cruise and freight shipping industries affected, the motivation to find or develop cost-effective solutions is great. He believes the most likely and immediate option is in devices that "scrub" exhaust of the nasty parts.
"You can use the cheap rubbishy fuel that they've been using and this filters out all the emissions stuff," he said. "That has to be the solution if they're not going to use the more expensive fuel --- which they don't want to do."
Already, Norwegian Cruise Line has announced that it will install scrubbers on its two new Breakaway Plus ships, coming in 2015 and 2017. And Pride of America, which spends all its time in the ECA that surrounds Hawaii, is having scrubbers installed now with plans to use them by the end of the year.
"It's not something you just slap into place," said Dan Farkas, the Miami-based cruise line's senior vice president and general counsel. "They are huge."
Royal Caribbean Cruises Ltd., also based in Miami, has gotten the thumbs up from the EPA to average the low-sulfur emissions from eight ships with gas turbine-powered engines with ships that burn regular fuel. The company has also received exemptions to test scrubber technology on six ships, including the massive Oasis and Allure of the Seas.
Rich Pruitt, Royal Caribbean's associate vice president of safety and environmental stewardship, said the company is "bullish" on the prospects, but emphasized the massive and complicated undertaking to install scrubber devices on existing ships.
"It sounds easy until you start doing it," he said. "It's technically challenging."
While Carnival has previously announced in earnings calls that it planned widespread installation of scrubbers on its fleet, the company did not disclose that it was developing technology that had not previously been used on ships.
The devices will both remove sulfur from the exhaust but also filter out particulate matter and black carbon, the company said.
The EPA's Grundler emphasized that the program is still in a trial phase, thought the agency is optimistic based on early results from a trial on Cunard Line's Queen Victoria.
"If the first ships prove out very well, it would not surprise me if Carnival accelerated their schedule," he said. "Conversely, if it doesn't work out, the permit will have a provision to end this trial. This is very much a demonstration program."
During the three-year period, Carnival has agreed to use clean shore power or the lowest-sulfur fuel while in port. And the company must provide detailed reports to authorities as the program moves forward.
David Pettit, a senior attorney at the National Resources Defense Council who handles air quality issues, said that while he is skeptical scrubbers will provide the compliance solution, only the end result matters.
"Our bottom line is if they figure out something that works, and the emissions are under the limit, I don't care how they do it," he said.
The cruise industry has been working on solutions to meet restrictive emissions requirements coming up in 2015; all are complying with the first phase, which went into effect in August of 2012.
The area between the coast and the green lines shows the North American Emission Control Area, where cruise ships must limit the amount of sulfur in their fuel emissions. The area outlined in red is the U.S. Caribbean ECA, which goes into effect January 2014.