NORTH AMERICAN PANEL OCTOBER 14, 2008 REDUCING GREENHOUSE GAS EMISSIONS FROM SHIPS JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

BACKGROUND Kyoto Protocol adopted 1997 IMO works on GHG since 1998 Modest results after 10 years UNFCCC meeting in Copenhagen to renew Kyoto Protocol December 2009 IMO needs a set of rules before Copenhagen or UNFCC will act

BACKGROUND CO2 emissions from all shipping is 3.3% of the total* CO2 emissions from international shipping is 2.7% of the total* But, GHG emissions from shipping estimated to doubled as from 1990* Shipping (and aviation) under pressures to be included into Kyoto Protocol renewal * (According to update IMO Study on GHG emissions (MEPC 58/INF.6))

IMO ACTION December 2003 – IMO Assembly adopts Resolution A.963(23), IMO Policies and Practices Related to the Reduction of GHG from Ships. Tasks MEPC to develop mechanisms to reduce GHG from shipping MEPC attempts to make progress, but is hampered by developing countries insistence that Article 2.2 Kyoto Protocol applies, ie. only Annex 1 countries are required to reduce GHG from shipping - “common but differentiated responsibilities”

IMO ACTION July 2005 – MEPC adopts MEPC/Circ.471, Interim Guidelines for Voluntary Ship CO2 Emission Indexing for Use in Trials NOV 2007 – IMO Secretary General informs Assembly of his intentions to recommend to MEPC a way forward to expedite IMO work on GHG emissions from ships APRIL 2008 – SG presents expedited work plan which proposes completion of tasks by July 2009 OCTOBER 2008 – MEPC 58 considers issues

IMO ACTION Issues considered: Mandatory design index for new ships Ship Energy Efficiency Management Plan – for existing ships including: - Best practices to save energy used by the ship - Operational Index (for each voyage & over a period of time/voyages) - Other voluntary operational measures - Energy inventory Market based incentives, such as: - Global fuel levy or hybrid mechanism - Emissions trading schemes (ETS) and/or clean development mechanism (CDM)

NEW SHIP INDEX Mandatory index for new ships Interim formulae agreed (in a simple form) Definitions of terms used, almost completed Power for diesel-electric propulsion systems not finalised Corrections factors for ice-class & weather conditions still to b developed Verification in two steps: Plan approval (model testing) Sea trials (final check) Interim formulae on trials and be re-assessed by the intersessional meeting, March 2009

NEW SHIP INDEX Pme - Power of the Main Engine(s) – 75% of the MCR for each ME. SFCme - Specific Fuel Consumption of the Main Engines (at 75% MCR). Cme/ae - Carbon to CO2 correction factor (i.e. how many tons of CO2 would be emitted by burning one ton of carbon; “rule of thumb” 3.1 tons of CO2 for 1 ton of carbon but it varies with the type of fuel, HFO, LSFO or MDO/MGO) Pae - Required Auxiliary Engine power to supply normal maximum sea load when the ship is sailing at the voyage speed . SFCae - Specific Fuel Consumption of the Auxiliary Engines (at 50% of MCR or torque). Peff - Main engine power reduction due to innovative energy efficient system. Capacity - DWT at the deepest operational draught of the ship Vref - Speed to be obtained. P and Capacity should be consistent with each other. Fw - “weather correction factor” – aimed to disclosed if ships meeting the required Design

NEW SHIP INDEX All suggestions by INTERTANKO were agreed at MEPC 58: Use value of main engine power at 75% MCR Use auxiliary enginer power at 50% MCR Specific fuel consumption at these values are given by the engine’s EIAPP Certificates Sea trails to be part of the verification Verification process: Vref. to be deducted from model testing at ship’s maximum draught and at 75% MCR Vref. to be obtained at the sea trials Should the owner/designer need a higher Vref. , then this should be established at design approval stage and more power be designed in

SHIP EFFICIENCY MGT PLAN For each ship in operation SEMP to contain: Best practices to save energy used by the ship Operational Index (for each voyage & over a period of time/voyages) Other voluntary operational measures Energy inventory INTERTANKO, ICS, BIMCO, INTERCARGO work on a model SEMP guidelines for IMO Best Practices – INTERTANKO works on a model to be approved by the Council (November 2008) OCIMF “Energy Efficiency and Fuel Management” – an appendix to TMSA 2 OCIMF opens for consideration of c/p clauses to optimise the voyage and other operations to save energy during transportation

GREENHOUSE GASES OCIMF Best Practice Guide “The Company is able to demonstrate that it is actively liaising with Charterers to optimise vessel speed and voyage schedules.” INTERTANKO Policy??? “INTERTANKO MEMBERS, as part of their commitment to reduce Greenhouse Gas emissions, inter alia, commit to actively liaise with Charterers to optimise vessel speed and voyage schedules and call upon ALL charterers to equally commit to this liaison and on OCIMF to help facilitate the adoption of optimal vessel speeds and voyage schedules.”

OPERATIONAL INDEX MEPC 58 agreed Operational Index is a voluntary tool to monitor each ship’s fuel consumption Each voyage index calculate per MEPC/Circ. 471 Monitoring is by a Rolling Average Index over a period of time or a number of voyages For tankers, MEPC 58 agreed to the Rolling Index Average suggested by INTERTANKO, OCIMF and BIMCO Rolling Index Average for tankers calculates the fuel consumption per tone-miles for last 10 voyages Indication of the ship performance but still to be agreed upon

MARKET BASED INCENTIVES Global fuel levy – Danish proposal Apply to all ships in international trade Revenue collected nationally and channeled to independent international GHG fund Revenue generated applied to: 1. acquisition of emission quotas/credits generated in other industrial sectors 2. funding projects in developing nations 3. funding IMO Technical Cooperation program Emission Trading ??

NEXT STEPS Correspondence Group on the Operational Index and SEMP Intersessional Meeting (9 to 13 March 2009) to finalize the Design Index, SEMP and Operational Index MEPC 59 (July 2009) which may: Approve regulations on the Design Index Conclude or approve SEMP and Operational Index Decide on how to tackle MBI (to keep and develop or to drop them)

GREENHOUSE GASES Outstanding questions Will maritime transportation be included in a future global framework under the UNFCCC/Kyoto Protocol OR will IMO be allowed to address GHG from ships? Will it apply to all ships OR will a “common but differentiated responsibilities” prevail? If through IMO, will it be a revision of Annex VI of MARPOL or a new IMO treaty?

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