New Shipping Emissions Regulations Will Increase Caribbean Food Costs

(Image Courtesy: St. Lucia Times)

The Caribbean is highly dependent on global trade and shipping, with the proportion of trade to GDP ranging from 90% for St. Vincent and the Grenadines to 104% for Guyana and 114% for Dominica (World Bank). High dependence on food imports has made the region extremely vulnerable to external factors such as weather and transportation costs. Given that the shipping industry is a facilitator of the import-driven lifestyles of Caribbean people, it is highly influential on prices and the availability of goods and food.

In response to growing concerns surrounding the massive carbon footprint of the shipping industry (the entire industry has a footprint the size of Germany or Brazil) the International Maritime Organization of the United Nations is implementing IMO 2020, legislation that will ban ships from using fuels with a sulfur content above 0.5% (compared with the current 3.5%) as of January 2020.

These regulations are projected to slash marine sector emissions by over 80% in international waters and prevent over 570,000 premature deaths between 2020 and 2025 due to respiratory ailments and cardiovascular disease. The legislation will also reduce the occurrence of acid rain, benefitting crops, forests, and aquatic species.

Legislation is needed to reduce emissions within the shipping sector; however, the regulation of emissions will likely translate to much higher costs of moving people, resources, and goods. Considerable trade exposure and close to 90% reliance on imported food makes the Caribbean particularly vulnerable to transport and fuel costs that are likely to skyrocket in the coming months.

Seabury Maritime’s Vice president, Nikos Petrakakos, has confirmed that IMO 2020 “is one of the most significant regulations impacting liner shipping in recent memory.”

The Caribbean Shipping Association predicts that IMO 2020 will pre-emptively increase operating costs by around 3% in 2019. 80% of ship owners are expected to switch from high fuel oil to marine gasoil at the cost of $60 billion— 55% more expensive than typical bunker oil— and the remaining 20% are expected to fit their vessels with scrubbers in order to continue to run high fuel oil. Given that fuel costs already represent more than 50% of operating expenses, the impact will be huge.

Once the new law goes into effect, higher fuel costs are expected to increase costs associated with port-to-port shipments by 20% in developed markets (ET2C). In the Caribbean region, where transport and insurance costs are already 30% higher than the world average and handling charges are two or three times higher than in similar ports in other regions of the world, (Food and Agriculture Organization) the impact on the end user is unavoidable.

(Source: Forbes)

Sea News, June 3