The impact of the energy efficiency design index on very large crude carrier design and CO₂emissions

This paper studies the impact of the energy efficiency design index (EEDI) on very large crude carriers' (VLCCs) CO2 emissions. In competitive sectors such as the VLCC market, this analysis must be performed over a market cycle adjusting a ship's steaming speed to the market rate and bunker cost. Our numbers indicated that, over a market cycle, imposition of EEDI will result in a slight increase in VLCC CO2 emissions, relative to no regulation at all. The problem is two-fold: (1) For VLCCs, EEDI effectively limits installed power. But at current and expected Bunker Fuel Oil prices, a non-EEDI VLCC owner uses all his installed power only in a full boom. For the great bulk of her life, a non-EEDI VLCC uses little or no more power than an EEDI-compliant ship. (2) In limiting installed power, EEDI induces owners to use smaller bore, higher revolutions-per-minute engines. These engines have a higher specific fuel consumption and, more importantly, require a smaller and less efficient propeller. This means the EEDI-compliant VLCC consumes more fuel when the market is not in boom, which is 90% of the time. In contrast, we find that a $50 per ton CO2 bunker tax will reduce VLCC CO2 emissions by more than 6% over a market cycle. Moreover, it will do so without forcing the world to devote 30% more resources to a greatly expanded, under-powered, overdriven VLCC fleet. Keywords: EEDIVLCCCO2 emissionsslow steaming Notes 1Like most things EEDI, these numbers are rubbery and constantly changing. There are proposals to correct this bias. 2As will be new, still unproven technologies that turn out to be truly effective. Perhaps the number 1 candidate in this category is air cavity. 3 greenship.org, a group that generally takes an optimistic view of the potential for vessel emissions reductions, studied a 35,000-ton bulk carrier to which they fitted just about every device applicable, and ended up with a 7% decrease in CO2 emissions Schack (Citation2010). 4It is well known that both the real owner in the spot market and a term charterer face essentially the same speed optimisation problem. See for example Devanney (Citation2009, Apprendix B) for a proof. Henceforth, I will shorten the klunky 'owner/term charterer' to 'owner' with the understanding that, for a term chartered tanker, the term charterer is the effective owner. 5In doing so, we held RPM constant, moving vertically downward in the layout diagram. It is possible that by reducing RPM and going to a little higher pitch, we could come up with a very slightly better fuel consumption for this power and speed. But any such improvement would be insignificant for present purposes. 6This is a manufacturer's figure based on a fuel NCV that does not exist, optimistic ambient and NOX conditions. We will correct for this in the actual voyage calculations. 7The RFR and the long-run average of the spot rates will be about 5 Worldscale points higher (assuming the same flat rate as we have) for $620 bunker cost than for $465 bunker cost. This is one of the reasons we biased our Standard profile towards the higher end. 8The long-run average Worldscale rate will be about 5 WS points higher in a $620 BFO cost world than a $465 BFO cost world. To be entirely correct, we should compare, say, WS50 and $465 BFO with WS55 and $620 BFO, but, as Table 9 shows, it wouldn't make that much difference. 9In economic jargon, the marginal societal value of VLCC capacity is at least 10 times higher in a boom than a slump. A tax adjusts efficiently to this changing valuation. EEDI does not. For a more complete discussion on this issue, see Devanney (Citation2010a). 10The EEDI-compliant ships will have a higher RFR representing the long-run market cost to society for the regulation.