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38 burden alone was $0.4 million to $3 million annually for all lating emissions from large diesel-powered, oceangoing ves- freight vessels. EPA also estimated that less than 6 percent of sels. Under this treaty, known as MARPOL Annex VI, ocean- the approximately 1,600 affected small entities involved in going vessels must limit NOx emissions from their main freight transportation would incur compliance costs exceed- propulsion engines. The treaty also sets a cap on the sulfur ing 1 percent of revenues.42 content of the fuel these vessels burn, and it includes a pro- Maritime trade associations have argued that EPA's eco- gram for designating special sulfur oxide Emission Control nomic analysis contained serious flaws. For example, the Areas (ECAs) where more stringent fuel controls apply. commenters said that EPA incorrectly assumed that vessel In October 2008, the Member States of the International owners and operators are already conducting some of the re- Maritime Organization (IMO) (including the United States) quired activities, either because they are standard industry adopted amendments to Annex VI that set even tighter in- practices or because they are already required by other regula- ternational standards for marine diesel engines and their tions. They also argued that the economic analysis understated fuels. Beginning in 2015, new and existing ships operating the compliance cost burden, because it did not adequately re- in ECAs will be required to use fuel with no more than 1,000 flect the diversity of affected vessels and their operations. In parts per million (ppm) (0.1 percent) sulfur, which repre- interviews, freight executives were more concerned about the sents a 98-percent reduction from today's global cap. Begin- paperwork and bureaucracy associated with the NPDES per- ning in 2016, new ships operating in ECAs must also have mitting regime than with the cost of performing the best advanced-technology engines designed to cut NOx emis- management practices identified in the permit. sions by roughly 80 percent. The new fuel standards will phase in over time, beginning with an interim fuel sulfur standard in 2010. Unexpected Impacts Although two ECAs have already been established in Eu- It is too soon to determine if the EPA's regulatory action is rope, there are currently none in North America. The EPA having unexpected impacts on the freight system. If the freight originally considered an ECA for the West Coast only. The industry's criticisms of VGP and EPA's economic analysis are United States and Canada have now proposed the designa- valid, the compliance costs for the industry will be higher than tion of the entire West, East, and Gulf Coast coastlines as a the agency expected. Compliance costs for discharge rules will North American ECA. The proposed ECA would extend 200 ultimately raise the cost of marine freight transport. The degree nautical miles from shore and would exclude western Alaska to which carriers can pass on these higher costs to shippers de- and the arctic coasts. If approved, the ECA could enter into pends on many factors, including the presence of competing force as early as 2012. modes. In some situations, compliance costs for discharge rules would lead to slightly higher costs for transported raw Policy Impacts commodities, intermediate products, and finished goods. If al- ternative modes, such as rail, offer competing service, marine If a North American ECA were created, oceangoing cargo vessel compliance costs could lead to a shift to these alternative carriers would have to purchase low-sulfur fuel, which is modes. more expensive than conventional fuel, or install scrubbers on their ships to capture the sulfur before it is emitted. EPA has noted that the economic impacts on ships engaged in in- International Air Emissions ternational trade are expected to be modest. EPA estimates Regulations for Vessels that operating costs for a ship in a route that includes about 1,700 nm of operation in the proposed ECA would increase Policy Description by about 3 percent, which would raise the cost of transport Oceangoing vessels emit large quantities of nitrogen oxides of a 20-foot-long container by about $18. Two researchers (NOx), sulfur oxides (SOx), and PM, all of which can contribute have examined the cost of reducing sulfur emissions off the significantly to air pollution problems in U.S. coastal cities. West Coast of the United States only under two scenarios The EPA does not have regulatory authority over foreign- for sulfur content and two scenarios for the ECA distance flagged vessels; emissions regulation can only be achieved (Table 4-3). through international treaties. In July 2008, President Bush In the research team's interviews with port officials, offi- signed the Maritime Pollution Protection Act, which cleared cials most often expressed concern about the effect that a re- the way for U.S. ratification of the international treaty regu- gional ECA (e.g., Pacific Coast) would have on the relative competitiveness of affected ports. They suggested that a re- 42USEPA, Economic and Benefits Analysis of the Final Vessel and General Permit, gional ECA would drive cargo to other, unaffected ports. Port December 18, 2008. officials expressed similar concerns about establishing an