NOX Abatement in the Baltic Sea

• The background is the decision to establish a NOX Emission Control Area (NECA) in the region requiring ships to follow Tier III NOX emission regulations from 2021. To achieve further and more rapid reductions of NOX emissions than what is expected from the NECA, additional policy instruments have been discussed. The policy instruments analysed in this study are assumed to be additional to the NECA requirements. Our study describes changes of emissions and costs for existing ships with Tier II engines when upgrading for lower NOX emissions. Of the many existing technological alternatives to accomplish NOX reduction, this study focuses on liquefied natural gas (LNG) engines and selective catalytic reduction (SCR) for after treatment of exhaust gas. Emissions of NOX in 2030 are modeled for scenarios in which different policy instruments are assumed. The use of LNG and abatement equipment is modeled with the assumption that ship-owners choose the most advantageous option from a cost perspective. The most effective policy instrument found in this study is the refundable emission payment (REP) scheme. The reduction of emissions depends on the fee and subsidy rate applied. For example, a subsidy rate of 60% and a fee of 1 €/kg NOX is modelled to reduce the yearly emissions of NOX from shipping in the Baltic Sea in 2030 by about 53 ktonnes. A NOX tax will also have a significant effect on the NOX emissions, but in this case the costs for ship-owners are significantly higher. Applying a CO2 tax or environmentally differentiated port dues in the model are found to have less impact on the NOX emissions. Introducing slow steaming has a potential to reduce NOX emissions In another scenario the effects on emissions from a financial investments support for abatement technology or LNG engines are modeled. At an interest rate of 0 % emissions are reduced significantly. According to our model, an extended NECA, where also other sea areas than the Baltic and North Seas become NECAs, has no further impact on the NOX emissions in the Baltic Sea. However, since the abatement equipment is used for more hours in a global NECA it will reduce the abatement cost per kg NOX.

• In this report a number of policy instruments for controlling emissions of NOX in the Baltic Sea have been studied. Den här rapporten finns endast på engelska. Svensk sammanfattning finns i rapporten.

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