The focus for this chapter is the transition away from heavy oil based fuels used for maritime transportation towards the utilization of liquefied natural gas as a replacement. Current and forthcoming International Maritime Organization environmental regulations such as fuel sulphur content limits, nitrogen oxide emissions limits, and the creation of Emissions Control Areas in which stricter emissions regulations will be implemented are prompting a transition away from the highly polluting heavy oil based fuels traditionally used for maritime transport towards a cleaner burning and more environmentally responsible alternative (IMO, 2016). Among the practical available alternatives, liquefied natural gas is emerging as a preferred option due to several characteristics that give the fuel certain advantages in comparison to that of other alternatives.
The transition toward liquefied natural gas becoming the prominent fuel used for maritime shipping is likely to have a number of socio-economic costs, as well as benefits. These socio-economic costs will be manifest in the form of environmental, social, political and economic impacts that will be felt on a wide selection of stakeholders.
From an environmental standpoint, the transition to LNG has the potential to result in some positive environmental outcomes, such as diminished pollution levels, decreased risks of environmental disasters and mitigated climate changes consequences. However, the transition to LNG also poses the risks of resulting in some negative environmental outcomes. For instance, if the transition to LNG enables shipping levels in protected areas to become more viable and traffic and related industrial activity substantially increases in these areas, it could have a detrimental environmental effect as a consequence.
From an economic standpoint, the transition to LNG has the potential to spur economic activity and development in certain areas, while reducing it in others. The maritime industry will be confronted with substantial economic costs due to the transition as investments in technology and infrastructure will be required to conform and adapt, particularly in the early stages of the transition.
This chapter sets out the key governance challenges involved in managing the transition towards the use of LNG in shipping. For the purposes of this chapter, it focuses on the Arctic region as an invigorating context in which to appreciate the scale of the task confronted by the maritime industry.
Energy Transitions in Shipping Fuel: From Oil to…
At the dawning of the twentieth century, the potential of petroleum powered maritime transportation began to attract growing attention. A century after inventor Rudolf Diesel patented his revolutionary compression ignition engine in 1892; his design would be the predominant engine type powering the world’s merchant vessels (Griffiths, 1995). Petroleum offered several advantages over coal as a fuel for maritime transportation. Although engineers and innovators had been experimenting with the potential of petroleum as a maritime transportation fuel since around the turn of the twentieth century, significant advancements began to take place in the quest for naval improvements in the years prior to World War I. Naval strategists of the era began to view the utilization of petroleum as a fuel that could offer naval fleets advantages such as improvements in speed, a more practical refueling procedure, and a considerable reduction in weight that would thus allow for the installation of increased protective armor as well as additional armaments (Hugill, 2014). The transition to oil assisted the United States in being able to enhance its naval power in the Pacific as a result of being able to utilize oil reserves located in California as opposed to coal which was required to be shipped from supply sources located in distant regions due to the type of coal found in the western United States being regarded as unsuitable for use in steamship engines (Painter, 2012).
Another noteworthy advantage that transitioning to oil from coal offered naval fleets was a significant reduction in the number of crewmembers required to perform the fueling and related maintenance duties associated with the operation of ship engines. For instance, Goldrick (2014) notes that the reduction in manpower that petroleum fueled ships offered in comparison to coal-fueled vessels was a substantial advantage, considering that ships that relied on coal required crewmembers to perform critical functions such as feeding coal into the furnaces, removing ash and residue, and transferring coal between different bunkers, and that as a consequence around half of the onboard crew of a coal dependent vessel consisted of engineering related personnel. Obviously, such a significant reduction in required manpower combined with the other advantages made the transition from coal to oil an attractive strategy not only for planners concerned with naval applications but also for commercial maritime functions as well.
The transition to oil also allowed for noteworthy changes and advancements in ship design to take place. As Goldrick (2014) mentions advantages of oil over coal such as the storage of oil requiring less space inside of a ship, oil being more practical to transfer among storage areas by being easily pumped between tanks, the ability of oil tanks to utilize more of their capacity than coal bunkers could, and a reduction of maintenance concerns as details that allowed for changes and improvements in the way ships were designed as a result of the utilization of petroleum as opposed to coal.
We are now in an era of uncertainty with regards to the substitution of oil. Nuclear provides an interesting example. Beginning in the very early stages of nuclear technological development, the prospect of using nuclear energy for the purpose of maritime transportation was examined. For example, the United States Navy directed much of the early research related to nuclear technology (Hultman, 2011). Pressurized water reactors where initially designed in connection with the Unites States Navy, for the purpose of powering submarine propulsion in an effort to increase the amount of time it was possible for a submarine to remain submerged without refueling, and in 1955 the world’s first nuclear powered submarine, the USS Nautilus was launched (Oka et al.et al., 2014).
Following the pioneering developments of nuclear powered submarine applications, the use of nuclear powered maritime propulsion expanded to also be utilized by surface vessels and has since been adopted in such a capacity not only by major naval fleets throughout the world, but also for such applications as icebreaker vessels, the first of which was put into service by the USSR in 1959 (Hirdaris et al.et al., 2014). Russian nuclear icebreakers operating along the Northern Sea Route serve a crucial role in the economic development of the Arctic, and nuclear icebreakers have the important advantage over diesel petroleum powered icebreakers by being able to operate over significantly longer periods of time without the need for refueling (Bukharin, 2006).
Historic energy transitions provide many lessons that can serve as useful guidelines for policy makers facing the challenges of future energy transitions such as the transition towards LNG. Lessons from the transition from organic sources of energy to coal demonstrate the importance of sound environmental policy and regulation with effective enforcement and compliance mechanisms that are administered in a fair and just manner. international trade is a fundamental aspect of the transition towards LNG as a maritime propulsion fuel, particularly within the Arctic region, where the prospect of potential increases in trade and related development activity taking place within the region present the potential for significant impacts not only for the Arctic region but also well beyond.
Arctic and Maritime Governance
A particularly intriguing example of maritime governance in this transition to LNG or alternative fuels is the current issues taking place in the Arctic. Increasing pressures from forces such as climate change and globalization are driving a transformation in the Arctic and are attracting an increasing amount of interest in the Arctic from parties such as shipping, oil and gas exploration, commercial fishing and tourism that are likely to not only transform but also challenge the governance of the Arctic region (Young, 2012).
As a consequence of climate change the ice and snow cover of the Artic has been significantly subsiding and as a result the region has become increasingly more assessable and of interest to a collection of different activities (Smits et al.et al., 2014). Unfortunately, although most of the causes of climate change are almost entirely outside of the Arctic region, the Arctic is nonetheless, certainly on the front line of experiencing the dramatic impacts that are a result of climate change (Young, 2012). As Young (2012) points out, while the Arctic once aroused little international interest on the world stage, in light of recent development, it now is attracting a rapidly increasing amount of both political and economic attention from the international community. The emergence of this increased interest and associated activities pose not only numerous economic and geopolitical opportunities for the Arctic region, but also the potential for dire environmental and social consequences if the risks from this mounting interest in the development of the Arctic region is not carefully managed going forward.
The unique distinctive physical and political characteristics of the Arctic region have led to it having a rather intriguing arrangement of governance. A principal player in Arctic governance is the Arctic Council. The Arctic Council was established in 1996 by the Ottawa Declaration to manage sustainable development and environmental protection of the Arctic through coordination and cooperation among Arctic states as well as the indigenous peoples living in the Arctic region (Smits et al.et al., 2014). The membership of the Arctic Council consists of the eight states with territory located within the Arctic: the United States, Canada, Finland, Iceland, Norway, Russia, Sweden, and Denmark (Greenland), as well associations representing the indigenous residents of the Arctic region (Stokke, 2013).
An interesting feature of the Arctic Council is the ability of non-Arctic state stakeholders, such as other non-Arctic states and Nongovernmental Organizations, to apply for observer status with the Council (Smits et al.et al., 2014). Some examples of organizations that have applied for and been granted observer status by the Arctic Council include the non-Arctic states of China, the Netherlands, and Japan, as well as a number of nongovernmental organizations such as the World Wildlife Fund, while other organizations such as the European Union have been slow to gain observer statue despite having applied for and desiring it obtain it (Smits et al.et al., 2014). The increasing collection of organizations eager to obtain observer status with the Arctic Council, particularly powerful non-Arctic states and international organizations, is an indication of the status that the Arctic region has gained in political circles, and also demonstrates the important role the Arctic Council plays in the governance of the region (Smits et al.et al., 2014).
Nongovernmental organizations have the potential to play an extraordinary part in the governance of the Arctic. Although environmental nongovernmental organizations such as Greenpeace have struggled with low levels of support in the Arctic, particularly in Greenland, due to past endeavors such as anti-whaling efforts, they now have the ability to organize the population of the region and to also act as monitors of the regions oil and gas resource development, and therefore increase their influence and play an critical role in the governance of the Arctic region (Smits et al.et al., 2014).
Another aspect that makes the governance of the Arctic region unique and interesting is the relationship between Denmark and Greenland. For instance, while Denmark officially holds a membership seat on the Arctic Council, it is Greenland, who established Self-Government in 2009, that is actually the most active participant of the two when it comes to the Arctic Council, with Denmark usually supporting and following Greenland’s position on most issues (Smits et al.et al., 2014). However, the increased utilization of their natural resources, particularly those of the oil and gas sector, is seen by many as a means for Greenland to become financially independent and will certainly play a factor in the governance of Greenland and the Arctic region in the future (Smits et al.et al., 2014).
The Energy Imperative: Arctic Oil and Gas
Harsem et al.et al. (2011) point to three major factors that will influence the expansion of oil and gas development in the Arctic region as being climate change, economic and market conditions, and the level of government encouragement by Arctic states. Of all these factors, climate change is perhaps the one most associated with recent issues in the Arctic. Studies of climate models have indicated that global warming will be even more enhanced in high northern latitudes and it is also predicted that the Arctic will be the location of the most dramatic and rapid changes occurring over the next century (Ho, 2010).
While global warming and melting ice might facilitate the development of the Arctic’s oil and gas resources by making these resources easier to reach and exploit, climate change also presents a series of challenges to the development of Arctic oil and gas. An increase in the frequency and severity of extreme weather conditions resulting from climate change, such as hurricanes would have dire effects on oil and gas developments in the Arctic and present the possibility of devastating events ranging from costly production and transportation disruptions to disasters such as oil spills (Harsem et al.et al., 2011). These potential risks will certainly factor into the rate at which oil and gas development in the Arctic progresses. Nobel et al.et al. (2013) point to the recent purchases of offshore exploration leases in the Beaufort Sea of Canada by gigantic global energy firms such as Chevron, BP and Exxon Mobil as examples of the international attention that potential oil and gas developments in the region are rapidly increasing, but also point to the amplified need for a strategic approach towards impact assessment and planning before developments take place.
While climate change and melting ice are often presented as the main factor influencing increased interest in Arctic oil and gas developments, Bennett (2014) draws attention to arguments contending that it is rather energy prices and a desire to secure resources that has been the actual facilitators of the recent heightening of interest in Arctic oil and gas development. The Fukushima nuclear disaster leading to an increase in oil and gas purchases by Japan is an example presented by Bennett (2014) as one illustration of a recent event that has led to an increased interest in oil and gas development in the Arctic. Harsem et al.et al. (2011) assert that in the future, global economic conditions will be the most important determinant of oil and gas developments in the Arctic, and point towards the worldwide effects that the financial crisis of 2008 had on the price and demand of energy as well as energy related investments as evidence in support of this position.
Another aspect of the Arctic that is attracting increased international attention is the potential for increased utilization of Arctic shipping lanes. Future estimates indicate that the reduction of Arctic ice cap will open up new areas and increase the viability of the region to be increasingly used for international shipping (Liu and& Kronbak, 2010). According to Sakhuja (2014), the two most practical Arctic shipping routes are the Northern Sea Route and the Northwest Passage. Via the Arctic, large bulk carriers can significantly reduce the distance between Asia, Europe, and North America by navigating the Northern Sea Route or the Northwest Passage and the increased melting of Arctic sea ice poses the potential for an expanded navigation season along the routes (Hong, 2012).
Running between the Atlantic and Pacific along the Russian coast, the Northern Sea Route ranges between 2100 and 2900 nautical miles depending on the distribution of sea ice and the Northern Sea Route is part of the shortest connection between Northeast Asia and Northern Europe (Liu and& Kronbak, 2010). Examples presented by Hong (2012) of the potential reductions in sailing distances afforded by the Arctic routes include the sailing distance of a voyage between Rotterdam and Yokohama via the Northern Sea Route instead of the Suez Canal being reduced by 40 percent and the sailing distance of a voyage between Rotterdam and Seattle via the Northwest Passage instead of the Panama Canal being reduced by 25 percent.
The prospect of increased shipping activity along Arctic routes also presents a collection of concerns and considerations that must be addressed. Ho (2010) lists increased infrastructure investments and the establishment of expanded marine services focused on safety and environmental responsibility throughout the region, as steps that are necessary before the Arctic sea routes can be reliably used on a large scale. Liu and Kronbak (2010) discuss various construction and equipment standards such as hull thickness and structural support requirements that are necessary for ships to be qualified as an ice class vessel. Certainly these issues will be taken into consideration among others factors by the maritime community and determine how quickly the utilization of Arctic sea routes increases in the future.
As the interest in Arctic development activities increases, particularly the prospect of substantially increased shipping activity taking place in the Arctic, the need for specialized compulsory shipping regulations that address the unique challenges and concerns related to the Arctic becomes ever more essential. In recognition of the complicated challenges the Arctic region faces due to the increased interest in Arctic shipping, the International Maritime Organization has initiated the development of a mandatory international code of safety for ships that operate in Arctic waters, which would compliment guidelines and regulations that are already in place (Jabour, 2014). The Polar Code will address such issues as vessel design, construction and equipment, search and rescue procedures, training and environmental protection and will focus on specific risks associated with operating in Arctic waters (Hartsig et al.et al., 2012). The establishment of this code will play a crucial role in the future development of the Arctic region.
An analysis of previous energy transitions points to the ability of energy transitions to act as an instrument of economic development and growth. Future energy transitions, offer the possibility, just as past transitions have, to remove barriers and limits to economic growth. By offering the potential to free energy users form existing constraints related to energy use and dependence on particular sources, future energy transitions can provide new alternatives and prospects to society that can have meaningful global impacts for the future, not only in economic terms but also in political and social outcomes as well.
The nature of the Arctic region presents a unique set of challenges that stakeholders much face when engaging in development within the region. How well the different stakeholders cooperate and coordinate their efforts to address these challenges will play a large role in determining the success of efforts to increase development in the Arctic, and prepare for energy transitions in shipping and beyond. Kao et al.et al., (2012) point to the 2011 signing of the Agreement on Cooperation on Aeronautical and Maritime Search and Rescue in the Arctic, as representing an example of Arctic states reacting to these challenges. A lack of infrastructure, extreme weather conditions, ice and remoteness, make petroleum development activities exceptionally challenging and thus the risk of oil spills is of particular concern in the Arctic region (Knol and& Arbo, 2014). The bilateral oil spill response established by Norway and Russia is an example of an effective system of Arctic states cooperating to address concerns of risks of petroleum development related risks in the region (Sydnes and& Sydnes, 2013).
The development of the Arctic region itself presents, therefore, an opportunity to encourage an energy transition in shipping fuel. Its unique environment, both physical and political, can lead to environmental, economic and social imperatives which may drive the adoption of LNG. Future research should quantitatively investigate both the costs and benefits of such a transition.
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