Working Paper

Alternatives to heavy fuel oil use in the Arctic: Economic and environmental tradeoffs

The use of heavy fuel oil (HFO)—the leftover residues from the crude oil refining process—as a marine fuel poses serious environmental and economic risks, especially in ecologically sensitive areas like the Arctic. The International Maritime Organization (IMO) has prohibited the use and carriage of HFO in the Antarctic. However, the international community has not yet implemented similar regulations for the Arctic. As Arctic sea ice melts, economically viable trans-Arctic shipping routes will become increasingly available for longer periods of the year. As ship traffic grows in the Arctic, the use and carriage of HFO will also grow, raising the risks of an HFO spill and increasing emissions of climate-warming black carbon (BC) in a region warming at more than twice the rate of the rest of the world.

This study compares the economic and environmental tradeoffs of switching from HFO to two alternative fuels, distillate fuel and liquefied natural gas (LNG), in the IMO Arctic, as defined in the IMO Polar Code. Switching from HFO to LNG is challenging, because most ships in the Arctic fleet would need to be converted to operate on LNG, which is a potentially expensive undertaking in the short term. Switching from HFO to cleaner distillate fuels is more feasible; it would cost $9 million to $11 million (in 2015 U.S. dollars) to switch all of the ships in the Arctic fleet that use HFO, other residual fuels, and residual fuel blends to cleaner distillate fuels in 2020 and beyond, according to the study. This represents a 4% increase in fleet-wide fuel costs for Arctic ships and avoids the potential costs of cleaning up an HFO spill—costs that have routinely exceeded $100 million.

The study concludes that, to safeguard the Arctic, prohibiting any petroleum-based fuel oil in the region provides the greatest long-term protection from the environmental and economic risks of spills and BC emissions. Regarding a short-term solution, prohibiting the use and carriage of HFO, desulfurized residual fuel, or residual fuel blends would immediately reduce the risks associated with the use and carriage of HFO as a marine fuel.

Note: A corrigendum has been issued to correct an error in the equation found in section 3.5. The correction affects the magnitude of fuel cost savings associated with a switch from residual fuels to LNG reported in Table 4. The correction does not affect the overall conclusions of the working paper, but it does magnify the cost savings of switching from residual fuels to LNG. Please see the corrigendum for more information.


Emissions control