Things That Can Hurt Cruising
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(10-08-2009)

Things That Can Hurt Cruising


We all know that bad press can hurt cruising, things like crime on board, norovirus and the odd soul lost overboard. The press has a way of reporting that is sometimes sensationalist, sometimes more honest, but with the odd public relations exception, it is something that the cruise lines have learned to live with.
There is something far more serious, however, that could force ships to leave markets and adversely affect local economies and that is misguided government intervention.

The Alaska state $50 head tax has already proven that such interventions can force ships out of a trade by driving up costs. But what might have an even greater impact is something that most have never heard about before. It's called an ECA.


The Alaska State Head Tax

Traditionally, various Caribbean islands have tried to generate more income for their economies by instituting new head taxes. In such a disparate geographical area, however, these attempts are usually fruitless. Cruise lines simply start calling at the island next door that is more interested in the business and less willing to tax their clients. These taxes were usually in the order of $5 or $10 a head.

In The State of Alaska, however, under Governor Sarah Palin, imposed a massive $50 head tax, the result of which was not immediate. Since that time, however, we have had announcements from all of Carnival, Holland America, Princess and Royal Caribbean that they would be withdrawing ships from the Alaska trade in 2010, and possibly more in 2011. On top of this, Cruise West and Norwegian Cruise Line have cut their Alaska sailings quite substantially (Cruise Examiner, April 6/09).

At a July 24 summit of the First Things First Alaska Foundation (FTFAF) held in Juneau, a recommendation was made to withdraw the $50 head tax and some Alaska ports are talking about reducing their fees in order to protect the business. According to PeggyAnn McConnochie, executive director of FTFAF, Juneau could be seeing a loss of $25 million worth of business in 2010.
Another recommendation was not only to spend more on an Alaska state marketing campaign but also to work on educating the public about the tax initiative and its effects on the community. A further summit is planned for Anchorage next week.

Newly-appointed Alaska Governor Scott Parnell has said he will not rescind the tax as it was passed by Alaska voters and meanwhile, as business drains away, Alaska ports, hotels, tour companies, vendors, retailers and residents at large will all suffer from the head tax's affect on business in 2010.

One good thing for Alaska, however, is that they have somehow managed to be exempted from a new North American ECA, which was approved by the IMO last month and will cover the coasts of the United States and Canada, but not Mexico, Alaska or the Canadian Artic, to a distance of 200 miles offshore. What is an ECA? Read on!


A Big Issue - the North American ECAHAL's ship in Alaska


On the other side of the Continent, at the 11th Annual Canada/New England Cruise Symposium held June 16-18 in Saguenay, Quebec, another potential threat to cruising was unmasked by Richard Pruitt, director of environmental programs for Royal Caribbean Cruises Ltd. When he asked his audience at a panel on partnership between cruise lines and destinations how many had heard of the new North American Emission Control Area (ECA), only two people put up their hands.

The US Environmental Protection Agency, in coordination with its Canadian counterpart, has applied to the International Marine Organization (IMO) to designate the coastline of the US and Canada as an ECA. Since the Saguenay meeting, Cruise the Saint Lawrence executive director Réné Trépanier has been quoted as describing this initiative as a "worrying issue."

While the Canadian government, the province of Quebec and local interests are investing $156 million to develop cruise business in the St Lawrence, the emergence of a new ECA could also cause ships to withdraw from the area or stay away if it means higher operating costs.

So just how much more are these operating costs? While the EPA has estimated increased fuel costs at $7 per person per day, Michael Crye, executive vice president of the Cruise Lines International Association, has disputed this, saying it could be more like $15 a head.
The cost of the lighter distillate fuels is double the cost of the bunker fuel that is used by the cruise lines now and Crye says that a simplistic EPA analysis has ignored the effect of supply and demand increasing the cost of the lighter fuels as demand increases, and questions whether there is even an adequate supply in the area. But the important thing is that at these levels the extra cost on a typical 7-day cruise could be anything from $49 to $105, which is double the level of the Alaska tax. At it's worst it could stop a lot of Canada/New England cruises.


Some Background

Regulated by the International Maritime Organization and known as the International Convention for the Prevention of Pollution from Ships (MARPOL in short), Annex VI adopted in October 2008 introduced restrictions on emissions, particularly the sulphur content of fuel burnt by ships trading in designated Sulphur Emission Control Areas (ECA's), with the global sulphur cap reduced initially to 3.5% (from 4.5%), effective from January 1, 2012; then progressively to 0.5 %, effective from January 1, 2020, subject to a feasibility review to be completed no later than 2018.

However, the limits applicable in ECA's will be reduced from 1.5 % now to 1% on July 1, 2010, and further reduced to 0.1 % from January 1, 2015. Progressive reductions in nitrogen oxide (NOx) emissions from marine engines were also agreed.

Annex VI allows for Emission Control Areas to be designated for SOx and particulate matter, or NOx, or all three types of emissions from ships, subject to a proposal from Parties to the Annex, which will be considered by the IMO, if supported by a demonstrated need to prevent, reduce and control one or all three of those emissions from ships.
In the case of the EPA, the argument is that "the ECA would be expected to save as many as 8,300 lives and provide relief from respiratory symptoms for over 3 million people each year," but it made no comparison to how many are already affected by simple highway pollution. In America alone, while 41,000 lives are lost every year in traffic accidents and 13,000 are saved by seatbelts, 70,000 lives a year are reported to be lost because of pollution and 10,000 to guns.

While these regulations come into effect on July 1, 2010, quite independently of MARPOL, there was a unilateral imposition on January 1, 2007, of a tax by Norway on Nitrogen Oxide (NOx) emissions, a subject that itself has been complicated by divisions between domestic trading ships and foreign-going ones in near waters and so on.

One spokesmen for cruising, Carnival UK chief executive and European Cruise Council chairman David Dingle, has been outspoken about green critics of the maritime industries in the past, particularly about costs.
Philip Naylor, general manager, fleet operations for Carnival UK, in an address to the Cruise Europe AGM in Bornholm, Denmark, in May 2007, made an interesting presentation, in part of which he said, "a number of detailed and comprehensive emission studies have demonstrated quite conclusively that NOx emissions from ships in port do not make any significant contribution to the deterioration of air quality in the locality and that much more positive results would be achieved through improved road traffic management and through preventing road vehicles from keeping their engines running whilst waiting in port areas.

Because the debate has not been particularly well informed the interrelated complexity of these issues has not been fully grasped."


In a considered argument in the Spring 2009 issue of "Dream: World Cruise Destinations," Dingle added, "The applications on the emissions of SOx and NOx must also be debated vigorously. Through new IMO rules, it will be necessary to burn increasingly more expensive fuel in Emission Control Areas. If these control areas are to be extended further, the impact must be considered very carefully as the economic outcome could be very severe for the communities in affected regions."


Complicated But Worth Debating

The issue of emission controls is complicated, but the subject of ECA's and their effects on the cruise industry and on destinations is going to be one for much debate. The outcomes of some of these actions do not seem to have been properly thought through, and in the end, more thought must be given to the effects these intiatives have on local economies.
At the moment, as Richard Pruitt was reported to have said, there seems to be a disconnect between different departments of government.

(Source: By Mark Tré - Cybercruises.com)


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