Carbon Dioxide Emissions: Effects, Costing and Mitigation Measures Dr Zabi Bazari | GMN Consultant Workshop Title | Dates | Mombasa, Kenya The Global MTCC Network (GMN) project is funded by the European Union and implemented by IMO The views expressed in this presentation can in no way be taken to reflect the views of the European Union

Content 1 GHG emissions and their impacts 2 Cost of CO2 3 Mitigation measures and barriers 1 2 3 4 Technology cost-effectiveness 5 Conclusions

GHG Emissions Impacts

CO2 share of GHG emissions Carbon dioxide: Most of the atmospheric GHG emissions. From many sources. Methane: Agriculture, livestock, mining, transportation, sewage and natural gas. Nitrous oxide: Mainly from industrial agriculture fertilizers. Halocarbon (Fluoro gases): Non- natural. Extensively used as refrigerants. Other gases like ozone or water vapour have GHG properties. Global anthropogenic GHG emissions Source: IPCC AR4 In shipping, more than 99% of GHG emissions are CO2

Shipping air emissions and their impacts IMO 2nd GHG study 2009 . 5

Main impacts of GHG emissions Global warming (temperature rise) Climate change Ice cap melting Desertification Sea level rise Oceans acidification Associated costs

Millions are suffering from ever more intensive weather events in Asia and the Americas

And millions are affected from flooding 8

and too much water in some places

... or no water at all

Climate change impact on oceans Oceans as a sink: Oceans are a major sink for CO2 emissions. Oceans properties change as a result. Oceans acidification: Due to absorption of CO2 and acid rains. A lower pH by 0.1 units already in place. Ocean dilatation (sea-level rise) endanger the coastal ecosystems and accelerates erosion. Impacts on: Marine habitats Costal areas Some land areas may disappear

GHG Associated Costs Fuel cost (internal cost) CO2 social cost (external cost)

Cost of fuel to the economy Industrial activities are impacted by price/cost of fuel. This will depend on energy intensity of the industrial activities: The more energy intensive, the more is the cost of fuel relative to other costs of production. Transportation is generally an energy intensive industry. Shipping fuel cost is a major part of total shipping costs.

Social cost of CO2 The social cost of carbon is an estimate of the net damages to the society. It is estimated for a single additional tonne of CO2 in a given year. It is the net cost associated due to all impacts: Changes in agricultural productivity, risks to human health, damage to ecosystem, floods, etc.  Social cost allows to translate reductions of carbon dioxide emissions into monetary benefits.

Steps to estimate social cost of CO2 Four key steps of social cost of carbon dioxide estimation: Step 1 : The projection of future socio-economics and emissions Step 2: The translation of emissions into climate change Step 3: The translation of climate change into damages to human welfare Step 4: The discounting of damages over time Due to uncertainty in every step, various assumption should be made. Based on various scenarios, a number of predictions are made.

How social cost of CO2 is estimated The estimated social cost of CO2 is varied and depends on various assumptions that are made. Complex models are used to cater for various damages. Example of social cost estimates by USA EPA. The cost is per tonne CO2 and is dependent on the year. Source: EPA Factsheet, December 2016 Sensitive to discount rate High impact cases if happens, the cost will be higher.

Benefits of CO2 mitigation Reduction of direct cost to society/industry in the form of less fuel (energy) cost. Reduction of social cost to society in mitigating the negative impacts. So, energy efficiency is a win-win scenario for economy as well as for environment (society)

Mitigation Measures

Mitigation efforts in industries CO2 mitigation follows same pattern in various industries. They are normally tackled in three aspects: Energy efficient design of industrial processes Energy efficient operation of industrial processes Alternative sources of energy To achieve the above objectives, national/international standards are developed. Design standards/regulations that deal with process and technology design. Operational standards/standards for energy management and best practice

Mitigation related typical standards/regulations Examples of design standards/regulations: EEDI for ships Fuel economy standards for cars Energy labelling standards for buildings, cars, household appliances, etc. …….. Examples of operational standards/regulations: ISO 50001 on “energy management system” SEEMP for ships Standards for GHG / fuel consumption measurement, verification and reporting, Standards for energy audits …….

MBM as a mitigation measure Market Based Measures (MBM) are strong market instruments that could be used to accelerate the GHG mitigation efforts. Main aim of an MBM system for GHG mitigation could be: Encourage development of eco-ships Encourage eco-shipping Encourage use of alternative fuels in ships Ensures that globally, the level of emissions are capped Etc. Other reasons why some may encourage use of MBM: Ensure that the polluter pays for its negative impacts Generate new revenue Create jobs and employment Promote and expand the finacial markets Create a level playing field between transport modes.

Shipping specific CO2 mitigation measures Technical Hull form Efficiency rudders Hull air cavity Propeller boss cap fins Foul release paints Waste heat recovery Fuel cells Variable speed drives Energy efficient electric motors Etc. Operational Itinerary management Ballast exchange Tank cleaning Cargo heating Cargo handling Etc.

Main barriers to mitigation efforts Eco-ship: Availability of new technologies. Economic cost-effectiveness. Etc. Eco-shipping: Split incentives Uncertainty in saving levels: Measurement and verification Economic cost-effectiveness Alternative fuels: Lack of infrastructure Lack of availability Price competitiveness

MACC for measurement of cost-effectiveness Marginal Abatement Cost Curves (MACC) are used to show potential CO2 reduction of each technology and associated costs/benefits. MACC shows the reduction potential (tonne/year) and abatement cost ($spent/tonne CO2 reduction) on one diagram. Cost-effectiveness of technologies are measured by pay-back periods or NPV (Net Present Value). A large number of MACC has been produced by various organisations. In general, we need a MACC for each ship type and size to be able to identify best methods of CO2 reductions.

How to estimate the MAC MACC is derived using the following data: Cost of fuel-saving measures The fuel saving potentials The fuel price The discount rate Etc. Data should be specified for each ship type, size and age. K capital cost discounted by interest rate; S service cost, O opportunity cost; E is energy cost reduction, α is fuel reduction rate, F original fuel consumption, CF carbon factor

MAC Curve for international shipping Source: DNV 26 26

IMO Technology Appraisal tool It is an excel-based tool. Developed by DNV-GL Has an interface (dashboard) that one could control inputs and see the output results.

IMO Technology Appraisal Tool

Cost of technologies / measures The financial data is hard to acquire. However, there are general cost numbers for various technologies. DNV-GL has performed a study for the IMO and included these numbers in the IMO Technology Appraisal tool. A review of these details can be seen in the IMO Tool IMO Technology Appraisal Tool

Conclusions CO2 is the main GHG emissions. The majority of CO2 is due to burning of fossil fuels. In shipping, more than 99% of GHG emissions are CO2. The main impact of CO2 emissions: Global warming Rising sea levels Ocean acidity Economic impacts of CO2: High cost of energy to economy High social cost on the society

Conclusions Main mitigation measure is the move to Low Carbon Shipping Technical and operational regulations and standards are in place to force industry to move in this direction. MBM is another market technique to support the above. One of the barriers to use of measures are economic cost- effectiveness. Estimation of Marginal Abatement Cost (MAC) is one way of measuring cost-effectiveness. A tool is developed by IMO to support the MAC analysis of shipping measures.

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