28 Feb 2018

We are polluting, but not in the way you think

Lennart writes:*

People have always been producing waste and the oldest, cheapest way to dispose it has always been dumping or burning. Over time, we have discovered that this is not a good solution, as pollution poses severe problems for public health and ecosystems. Hence we now avoid landfilling (in general) and hence incinerators filter toxic fumes (mostly), at least in most developped countries like the Netherlands. But this concerns mainly household trash; what about the most toxic waste? The really bad, dangerous stuff? Like the residues from petrochemical, pesticides and fertiliser industry?

Well, despite what you might expect from Dutch laws and regulations, a big portion of this waste is actually secretly being burned as an illegal component of fuel oil without much filtering whatsoever. And the crazy thing is that the government has known this and has been tolerating this for decades. Not only regarding the burning of chemical waste in fuel oil, but also (many other environmental crimes in general, always putting economic interest before the wellbeing of people.

Cancer hotspots are near ports (Source)
This mixing has already been done since the mid 80s because of a loophole in the law, that still has not been addressed. Basically it is illegal to burn toxic waste, but it is not strictly speaking illegal to mix it and burn as fuel oil. The only legal requirements for fuel oil the are that it shouldn’t clog the ship’s motor and that the sulfur grade, water grade and density don’t pass certain norms (though ship companies are not obliged to test their oils). That completely disregards heavy metals, PCBs, fenol, polycyclic aromatic compounds, and other potentially toxic substances. And this has very real and devastating consequences. For instance when you look at the ‘death by cancer rate’ in the Netherlands, you can see the correlation with problematic areas like the Rotterdam harbor and the Delfzijl municipality in Groningen. Yet unfortunately the global stage for a sustainable maritime sector still focusses on sulfur and CO2.

The method of mixing is disappointingly simple. When crude oil is distilled, several oil products are created, like diesel, kerosene, gasoline and more. The higher the boiling point, the higher the viscosity, and therefore the lower the usability as a fuel. One of these hard to use oils can be mixed with e.g. diesel to create fuel oil that can only be used by large containerships with heavy motors that run for weeks. The trick is to not use relatively expensive diesel, but to mix with chemical waste instead. That way you make profit twice over: once charging for waste disposal and once for selling fuel.

  The cracking value chain (Source)
This is an example of diffused negative externalities affecting a common pool good, like air, that are not reflected in the cost of a private good or service, like selling oil. In principle such a problem can be fixed with a Pigouvian tax, but it is actually much trickier than that for several reasons.

The main one being that everyone has interest in low costs of waste disposal in the whole supply chain, which has economic effects on a large scale.

The port of Rotterdam is proud to promote its low fuel oil prices and ships are known to divert from as far as the mediteranian, just to buy cheap fuel oil in Rotterdam. Even though the price is artificially below what the market price should be, if laws were actually being followed. Every stakeholder benefits in this system, including the government that often has to act both as supervising party as well as market partner. And usually the economic argument wins, rather than protecting civilians from (indirect) death and disease.

As a possible solution to all this, a new company has arisen: Goodfuels. Their biobased fuel oil emits 90% less CO2 and is made from biological leftover flows from industry, so in principle not from chemical waste. The question is though, to what extend it will be possible to ‘cheat’ with this oil once the stakes are high, if the environmental benefits really add up and if they will be able to offer their fuel for competitive prices at large scale. Though, this year they successfully let a first container ship sail on their product, so it does show great potential.

Bottom line: Illegaly mixing chemical waste in fuel oil for ships is a known environmental problem since the mid 80s, but it has never been fixed. There is too much interest in keeping fuel oil cheap for economic reasons, which is why the Dutch government doesn’t intervene, even though it should. This has very real consequences, such as more deaths by cancer, though that effect is hard to prove legally. A new company named Goodfuels is trying to better the market of fuel oil from the inside out, by successfully offering a biobased alternative. It remains unclear though, weather or not this will be the best approach to revolutionise the marine industry in the fight against climate change and the protection of the environment for public health.

* Please help my environmental economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)