Sulphur Regulations

Karl Turner Excerpts

Wednesday 18th June 2014 Westminster Hall

[Karl Turner (Kingston upon Hull East) (Lab)]

It is a pleasure, as always, to serve under your chairmanship, Dr McCrea.

I am pleased to have secured this debate on a pressing issue that could have serious consequences for jobs in my constituency and the rest of the UK. I have several concerns about the regulations and several questions that I would like the Minster to address. I am worried that the EU regulations, which come into force on 1 January 2015, could put at risk over 350 jobs in my constituency and 2,000 jobs in ports across the UK. I am concerned that the European Commission and the Government have not done enough to measure the impact of the directive on local economies such as that in Hull. I am grateful to the National Union of Rail, Maritime and Transport Workers and the UK Chamber of Shipping for their briefings on a topic that is clearly a concern for all. The UK Chamber of Shipping and the RMT have produced estimates on the impact of the implementation of the regulations, and it is unclear whether the Government have fully assessed the evidence and are satisfied that the regulations will not dramatically undermine the shipping industry. I hope the Minister can provide some assurances that the Government have properly investigated the evidence and additional costs associated with the regulations.

I am persuaded that in an attempt to do all that we can to protect jobs, shipping companies should be given more flexibility to implement new rules in a way that does not undermine jobs. What does the Minister think of that? I will, however, add a cautionary note for the shipping industry. I am conscious that it has had several years—I believe since 2008—to prepare for the changes and substantial amounts of tax relief, in the form of tonnage tax, to aid transition. I hope that the additional costs are not used simply to reduce the payroll bill and that the industry does not use existing loopholes in legislation to meet additional costs by recruiting low-cost crew at non- UK ratings. However, the Government have a role to play in the transition and I solicit the Minister’s views on the possibility of providing mitigating support to maritime businesses to ensure stability in the shipping sector.

The Humber is the UK’s busiest trading route and positive things are happening in the estuary. Companies such as Siemens and Associated British Ports are investing millions into Hull, and there is no doubt that affordable shipping between Hull and Europe is imperative to this investment. That is why we need certainty that nothing will undermine our local shipping industry and the economic development of our ports. We need our ports to be open for business and to ensure that exporters are not priced out of using ferries sailing out of Hull.

Over the coming years, shipping and freight to the Humber will be more important than ever. I am therefore worried by a report in the Financial Times, in which Jens Holger Nielson, chief executive of Samskip, a freight company that runs into the Humber, says in response to the regulations that they will

“shut transport routes and companies across Europe”.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my hon. Friend for shining a spotlight on such an important issue. In addition to the point that he has rightly made about the likely impact of the regulations on the shipping industry and jobs, are we not also likely to see forecourt diesel prices driven up, with all that that means, and the danger of thousands more lorries on our roads as the price of transport by ship goes up relative to road transport? Does he agree that the Government need to say what they have done to avert that and what they will do now to ensure that common sense prevails?

[Karl Turner]

I am grateful to my right hon. Friend for that intervention. He is absolutely right, of course, and I will return to that point.

As the Minister is aware, the route between Harwich and Denmark is to close after 140 years, because of declining demand and the £2 million annual cost of cleaner fuel. I am concerned that other routes will follow. Echoing such fears, the Transport Committee reported that the regulations could reduce shipping activity, affect ports and roads, and cause job losses.

Any attempt to reduce sulphur emissions is commendable and no one is arguing against reducing them per se, but I am concerned that this so-called green policy will in fact have a detrimental effect on the environment—as my right hon. Friend said. I agree that increased costs will see a modal shift, with freight travelling by road instead of by sea; road freight emits around 10 times more CO₂ per tonne than shipping.

In April 2008, the International Maritime Organisation agreed to reduce sulphur emissions from shipping to ensure that ships only use fuel that emits 0.1% sulphur in designated sulphur emission control areas. The entire eastern and southern seaboards of the UK sit within that control area, so every ship coming in and out of ports from Falmouth to Aberdeen will be required to comply with the regulations on 1 January 2015. At least 220 usual routes operating from the UK will be affected and there is real concern that increased costs will see the closure of many of those routes, resulting in job losses.

[Caroline Nokes (Romsey and Southampton North) (Con)]

I congratulate the hon. Gentleman on securing this important debate. Does he agree that not only shipping companies are likely to be affected, but fantastically successful ports such as the port of Southampton, which contributes directly to around 15,000 jobs in Hampshire? It is critically important for us to have transitional arrangements so that the private sector investment that has continued in Southampton for many years carries on in future.

[Karl Turner]

I agree with the hon. Lady, and I thank her for her intervention. For me, the issue is mainly about the loss of employment, and she is right to mention her own constituency because I am sure that she is concerned about employment there. Although the IMO adopted the regulations, it also definitely recognised that flexibility would be required to allow companies the transition time to adapt to the new era without damage to businesses. The hon. Lady made that same point.

Following an inquiry by the Transport Committee, it reported that the regulations would see an 87% rise in fuel costs, and shipping companies estimate that approximately €55 million will be added to annual fuel bills. To meet such increased costs on the North sea routes will probably be economically unviable. I am told by P&O Ferries and other shipowners that, in reality, ferries tend to run on tight margins. The costs will create a problem not only for ship operators, but for exporters, leading to a detrimental effect on our region’s exports and tourism.

Hull’s local economy relies heavily on tourism, and Hull city council’s 10-year plan sees tourism as a major contributor to the economic regeneration of the city. Hull will be the city of culture in 2017 and we are working hard locally to ensure we have reliable and affordable transport links. As a result of increased fuel costs and in order to overcome the extra expenditure, ferry operators will no doubt pass them on to their customers or, worryingly, reduce services. It is therefore of great concern that the regulations could have a severe impact on the number of tourists coming through our ports and weaken the much-needed tourism economy.

No one disputes the need to reduce sulphur emissions, but, if we consider the resulting increased use of road haulage and accept that shipping produces considerably less carbon emissions per tonne kilometre than any other commonly used means of freight transportation, the environmental argument for the policy in the regulations is undermined.

[Penny Mordaunt (Portsmouth North) (Con)]

I thank the hon. Gentleman for securing the debate, which is timely, because today the Freight Transport Association is celebrating its 125th anniversary. Does he accept that the argument that we need to focus on is how the regulations will be implemented, and the timing, because the UK Chamber of Shipping has accepted and, in my understanding, is content with the move on sulphur emissions?

[Karl Turner]

I agree entirely with the hon. Lady; it is true that timing is the issue. Some argue that businesses have had long enough, frankly, and that some assistance has been provided through tax subsidies. However, as a Member for Parliament for east Hull, where unemployment is high, when businesses tell me that they are worried about job losses, I have to be concerned.

The Hull and Humber chamber of commerce has also expressed worries that the regulations will have a negative impact on the local road haulage sector—job losses in that sector as well perhaps. It argues that increased costs will inevitably be passed on to consumers, such as road haulage firms, and those firms may see it as necessary either to travel longer distances by road, with shorter sea crossings, again increasing CO₂ emissions, or to relocate to other areas of the UK where the implications of the fuel cost increase are less dramatic. Both options are damaging to the economy and indeed to the environment.

As I have said a few times in my remarks, no one has a problem with reducing sulphur emissions, but I am not convinced that the regulations will achieve that goal. I am not convinced that the Government have fully considered the evidence or the true impact that the regulations will have on jobs, the environment, our roads and the shipping industry. We absolutely have to ensure that sulphur emissions are reduced, but that needs to be balanced with growth in a fragile economy. The Government plan to review the effects of the policy in 2019, but I ask the Minister to consider a review much earlier, perhaps 12 months after implementation.

Hull is having a tough time and we need to work hard to protect every local job in my city. Our roads are at bursting point and the last thing that we need next year is heavier lorry congestion. I urge the Minister to push the European Commission for more implementation time and to do all that he can do to ensure that jobs and the environment are fully protected.

--- Later in debate ---

[Karl Turner]

Does the Minister accept that the chamber of shipping is saying that ferry operators are concerned about job losses and about their businesses failing as a result? That is an issue for me, as Member of Parliament for east Hull. Will he address that directly—is there anything he can do as a Government Minister?

[Stephen Hammond]

The hon. Gentleman is right to be concerned. If he waits a few minutes I will tell him directly what the Government have done and are doing now.

The idea that is being put forward today, namely that these are new regulations and a crunch is coming—there is not; there is a date for implementation coming—is not supported by all of the chamber’s own members. On the contrary, some members of the chamber belong to the Trident Alliance, which is a coalition of shipping owners and operators who share a common interest and do not share the views being put across.

I accept that shipping is not the only source of pollutant emissions, but without the controls, polluting emissions from ships will grow significantly because of the reductions made by other modes of transport: unless action is taken, by 2020 shipping will account for more than half of all sulphur emissions in Europe.

As everyone has recognised, the limits undoubtedly pose challenges for shipowners, particularly for those whose ships operate predominantly or exclusively in an emission control area. The Government appreciate that some shipowners, and ferry operators in particular, have raised concerns about the cost of complying with the new limits. From our discussions, we are conscious that the impacts are not spread evenly, and that routes for multipurpose vessels—those carrying both passengers and freight—are likely to see the highest costs. We also recognise the importance of ferries and jobs.

Throughout the whole process we have therefore sought to implement the sulphur limits in a way that maximises the opportunity for the industry to minimise the economic impact. I became shipping Minister in 2012, and immediately in October of that year and again in 2013 I chaired round-table meetings of industry stakeholders, including from shipping, the ports, abatement technology—more colloquially known as scrubbing technology—oil refining and logistics sectors, to consider how we could make sure that people could work to comply with the regulations in a way that minimised regulation and cost. As a direct result, we commissioned a survey to look at the economic costs to industry.