A bunker adjustment factor is applied by shipping lines and is calculated by emission levels, fuel costs and low sulphar directives.
Shipping lines set their own independent BAF rates which are monitored by the EC, although bunker fuel is a derivative of crude, it is really what is left after the refineries have processed more valuable fuels from the crude oil. It is ideally suited to large marine engines and is traded between maritime markets and shipping lines. If you have any questions that are not covered in this section, please do not hesitate to contact us.
In July 2011 the European Commission published a proposal to revise Directive 1999/32/EC (the “sulphur in fuels directive”) that regulates the maximum level of sulphur permitted for fuels used in the shipping sector. The International Maritime Organization (IMO) has already set standards for this and this EU directive is set to turn these international limits into EU law and probably extend the requirements in some areas.
The heavy fuel oil used in international shipping contains on 2700 times more sulphur that road fuel. Sulphur contained in fuel causes emissions of sulphur dioxide (SO2) and also contributes to the formation of secondary particulate matter that is particularly harmful both to humans and the environment. These emissions have a major health impact, with shipping air pollution estimated to cause around 50,000 premature deaths per year in Europe. SO2 emissions also cause environmental problems such as acid rain affecting soil and water and damage to biodiversity.
Ships trading in designated emission control areas have to use fuel oil on board with a sulphur content of no more than 0.10% since 1 January 2015, against a previous limit of 1.00% in effect up until 31 December 2014. Exemptions are provided for securing the safety of the ship or saving life at sea, or as a result of damage to a ship or its equipment. Also, provisions for trials for ship emission reduction and control technology research provide for a time limited exemption. Outside the emission control areas, the current limit for sulphur content of fuel oil is 3.50%, falling to 0.50% m/m on and after 1 January 2020. The 2020 date is subject to a review, to be completed by 2018, as to the availability of the required fuel oil. Depending on the outcome of the review, this date could be deferred to 1 January 2025.