MIAMI BEACH -- Rising fuel costs, natural disasters and political uprisings are posing significant challenges to the cruise industry, and another headache is on the horizon for cruise line executives: a tighter cap on emissions from ships operating in North America.
The planned implementation of the so-called Emissions Control Area, which will affect any cruise ship that operates within 200 miles of the North American coast, was top of mind during the State of the Industry panel discussion at Seatrade Cruise Shipping Miami, the annual conference held here last week.
"The 200-mile rule will have a profound effect on all of us," said Stein Kruse, CEO of Holland America Line. He added that the new regulation, slated to take effect in August 2012, is a bigger issue for the cruise industry than rising fuel costs.
Vessels within the emission-control zone would be required to reduce sulfur dioxide emissions from fuel, and that could require retrofitting some engine systems. The sulfur dioxide content allowed in emissions would max out at 10,000 parts per million, followed by a further reduction to 1,000 parts per million by 2015. For comparison, a 2005 standard for highway vehicles in Euro zone countries set a maximum sulfur dioxide emissions content of 50 parts per million.
The program, which will be implemented by the Environmental Protection Agency, is designed to "dramatically reduce air pollution from ships and deliver substantial benefits to large segments of the population, as well as to marine and terrestrial ecosystems," according to the EPA.
Adam Goldstein, president and CEO of Royal Caribbean International, who provided an overview of environmental and technological issues during the panel, noted that the program would extend to Puerto Rico and the U.S. Virgin Islands. The zone is also expected to include Canadian waters.
"It will change our world," he said.
There are technical upgrades that could assist in reducing sulphur dioxide content, he said, such as "scrubbers," which extract sulfur dioxide from exhaust, and down the road the industry could start using biofuels.
But all of the executives on the panel agreed that the program represented a major change in the way the lines would select routes and port calls.
Kruse said that the EPA has disregarded the economic impact the regulations would have on cruise lines and ports.
Besides Kruse and Goldstein, the panel included Jan Swartz, executive vice president of sales and marketing for Princess and Cunard; Gerry Cahill, CEO of Carnival Cruise Lines; Kevin Sheehan, CEO of Norwegian Cruise Line; Dan Hanrahan, president and CEO of Celebrity Cruises; and Pierfrancesco Vago, CEO of MSC Cruises.
Regulatory issues also were a topic at Sea-trade 2010, when cruise line officials criticized Alaska for some of its environmental rules and a $50 per-person head tax. Alaska Gov. Sean Parnell, who attended that conference and heard the gripes firsthand, returned this year and was a guest speaker at the State of the Industry discussion.
"What a difference a year makes," he said, referring to a rollback last June of the taxes that had so frustrated the industry.
"We have cut the passenger tax by 25% -- more in Juneau and Ketchikan -- and we have increased our tourism marketing funding by 70%. We are issuing three-year environmental permits," Parnell said. "We heard you loud and clear."
Christine Duffy, CLIA's president and CEO as of Feb. 1, also took the stage briefly at the conference in her first public appearance since moving into the post.