INTERTANKO Seminar 27 April 2010 Singapore Peter M. Swift

Greenhouse Gas Emissions Key Dates Outcome of COP15 IMO (MEPC) Programme “Virtual Arrival” Industry study/TEEMP/Other Low Sulphur Fuel Issues

Shipping’s GHG Emissions Selected Key Dates 12/2009 UNFCCC COP15 Meeting, Copenhagen 3/2010 IMO MEPC 60 5/2010 INTERTANKO Council 5-6/2010 UNFCCC, Bonn 5 to 8 /2010 IMO MBM-Expert Group 6-7/2010 IMO MEPC Intersessional 9-10/2010 IMO MEPC 61 10/2010 INTERTANKO Council 10-11/2010 UNFCCC COP16 Meeting, Cancun 7/2011 IMO MEPC 62 12/2011 EU Deadline for IMO/International Agreement

MEPC Challenge remains ! IMO Principle: “No More Favourable Treatment” Versus Kyoto Protocol principle: “Common But Differentiated Responsibility”

? What was the outcome COP15 No change yet ! NO targets NO resolution of Kyoto/IMO Treaty conflict NO direct reference to international shipping in Copenhagen Accord No change yet !

IMO Programme To develop: EEDI for new ships SEEMP & EEOI for all ships and, if possible/needed: Market Based Measure (Instrument) for shipping

Intersessional Working Group To improve the text for mandatory requirements of EEDI and SEEMP in terms of: coverage of ship types and ship sizes for the EEDI; establishment of EEDI baseline(s); frequency of reducing the mandatory value of EEDI (reduction in 3 phases); reduction rate from the baseline for the phases for the EEDI; To develop various guidelines: on the method of calculation of EEDI; for the calculation of baselines for attained EEDI; to support the regulatory framework for verification of the EEDI

MBM – Expert Group Group of MBM schemes which would require all ships to pay a contribution: 1. International Fund for Greenhouse Gas emissions from ships – suggested by Denmark and supported and complemented by some other Administrations such as Cyprus, Marshall Islands and Nigeria. 2. Global Emission Trading System for International Shipping, as proposed by Norway, France and Germany; and a Global Emissions Trading System for GHG Emissions from International Shipping, as proposed by UK. Group of MBM schemes which provide rewards to more energy efficient ships: 3. Leveraged Incentive Scheme based on the International GHG Fund - proposed by Japan. 4. Trading with Efficiency Credits based on Efficiency Standards for All Ships - proposed by the USA. 5. Vessel Efficiency System - proposed by the World Shipping Council.

Virtual Arrival OCIMF /INTERTANKO project Virtual Arrival is all about managing time and managing speed. It’s not about blanket speed reduction to match current market conditions. Virtual arrival is about identifying delays at discharging ports, then managing the vessel’s arrival time at that port/terminal through well managed passage speed, resulting in reduced emissions but not reducing capacity. It is inherently wasteful to steam at full speed to a discharge port where known delays to the vessels cargo discharge have been flagged. The vessel then spends time at anchor off the port awaiting a berthing slot, or tank space, polluting the surrounding area with unnecessary emissions. Virtual arrival seeks to build a win-win between owners and charterers, by reducing emissions from vessel propulsion, capturing savings, reduce on board fatigue, increasing safety and reducing risk.   Charterers may be able to offset their demurrage liability, owners may be able to reduce their bunker costs, ports may be able to reduce emissions in their local area, and there are potentially carbon savings through reduced fuel usage. An additional benefit is the enhanced communications throughout the voyage between all parties. 9

Virtual Arrival - Summary Cooperation between Charterer (Terminal Operator) and Owner Speed is “optimised” when ship’s estimated arrival is before the terminal is ready Owners and Charterers agree a speed adjustment May use an independent 3rd party to calculate / audit adjustment Owners retain demurrage, while fuel savings and any carbon credits are split between parties Next Steps: OCIMF-INTERTANKO running joint workshops Charter Parties being reviewed (INTERTANKO/BIMCO/BP/Chevron) – indemnity and liability issues, including bills of lading Individual oil majors and owners “trialling” system Bulk carrier sector examining feasibility

GHG emissions - OTHER TEEMP – Tanker Energy Efficiency Management Plan Industry Study – RT, OCIMF, WSC: Achievable targets ? Cooperation with others – e.g. Carbon War Room ?

Industry Study

Low Sulphur Fuel Issues EU Sulphur Directive - 0.1% at berth requirement - Revision timetable - Finnish concerns & Annex VI Revision CARB requirements – legal challenge North American ECA

For more information, please visit: Thank you For more information, please visit: www.intertanko.com www.poseidonchallenge.com www.shippingfacts.com www.maritimefoundation.com London, Oslo. Washington, Singapore and Brussels

Kyoto Protocol Established under UN Framework Convention on Climate Change (UNFCCC) and adopted in 1997 Ratified by 181 countries – not the USA Categorises Annex 1 (Developed) Countries and Non-Annex 1 (Developing) Countries Annex 1 Countries are committed to make GHG reductions with set targets, but also flexible mechanisms Runs through to 2012, with Conference of Parties (COP15) to meet in Copenhagen in Dec 2009 to develop successor Kyoto recognises “common but differentiated responsibilities”, i.e. developed countries produce more GHGs and should be “responsible” for reductions Kyoto looks to IMO to address Shipping and ICAO to address Aviation, and as such these emissions are currently excluded from Kyoto targets

IMO Principles Effective in contributing to the reduction of total global GHG emissions Binding & equally applicable to all flag States Cost-effective Able to limit or effectively minimize competitive distortion Based on sustainable environmental development without penalizing global trade and growth Based on a goal-based approach and not prescribe specific methods Supportive of promoting and facilitating technical innovation and R&D in the entire shipping sector Accommodating to leading technologies in the field of energy efficiency Practical, transparent, fraud free and easy to administer

Possible Outcomes for Shipping at COP15 Stalemate - no agreement / deferred to COP16 - status quo maintained Shipping is included in national targets/commitments of (All parties) (Annex 1 parties) IMO encouraged to continue without delay to develop policies and measures to reduce GHG emissions, within framework of UNFCCC general agreement UNFCCC establishes “global targets” for shipping and “directs” parties to work through IMO to achieve these Parties agree to establish a UNFCCC global agreement to address maritime emissions, (taking into account work done by IMO?) to be concluded by [2011]

Virtual Arrival - a way to reduce emissions Background Potential emission reduction for existing shipping said to be up to 15% (at no cost?) Fuel represents 60-80% of operation/running costs for owners What drives/restricts emission reduction? It is recognised that commercial and practical restrictions sometimes apply Virtual Arrival is a project that involves several stakeholders Virtual Arrival implies co-operation and removing commercial restrictions It is inherently wasteful to steam at full speed to a discharge port where known delays to the vessels cargo discharge have been flagged. The vessel then spends time at anchor off the port awaiting a berthing slot, or tank space, polluting the surrounding area with unnecessary emissions. Virtual arrival seeks to build a win-win between owners and charterers, by reducing emissions from vessel propulsion, capturing savings, reduce on board fatigue, increasing safety and reducing risk.   Charterers may be able to offset their demurrage liability, owners may be able to reduce their bunker costs, ports may be able to reduce emissions in their local area, and there are potentially carbon savings through reduced fuel usage. An additional benefit is the enhanced communications throughout the voyage between all parties. 18

Virtual Arrival - a way to reduce emissions by taking advantage of known inefficiencies in the supply chain and reducing speed when the terminal is not ready to discharge the cargo   In addition to directly reduced emissions, other benefits are: Reduced congestion and emissions in the port area Improved safety Reduced use of fuels Potentially increased use of weather routing Important pre-conditions:   The safety of the vessel remains paramount The authority of the vessel’s Master remains unchanged The basic terms of trade remain the same It is inherently wasteful to steam at full speed to a discharge port where known delays to the vessels cargo discharge have been flagged. The vessel then spends time at anchor off the port awaiting a berthing slot, or tank space, polluting the surrounding area with unnecessary emissions. Virtual arrival seeks to build a win-win between owners and charterers, by reducing emissions from vessel propulsion, capturing savings, reduce on board fatigue, increasing safety and reducing risk.   Charterers may be able to offset their demurrage liability, owners may be able to reduce their bunker costs, ports may be able to reduce emissions in their local area, and there are potentially carbon savings through reduced fuel usage. An additional benefit is the enhanced communications throughout the voyage between all parties. 19

What is needed to do to make Virtual Arrival work? A known delay at the discharge port A mutual agreement between two (or more) parties to adapt the ship’s arrival time to take advantage of the delay An agreed Charter Party clause that establishes the terms for reducing the speed to adapt to the new arrival time An agreement on how to calculate and report the Virtual Arrival and the performance of the vessel This may involve a Weather Analysis Provider (WAP) OCIMF/INTERTANKO and class are producing transparent standards for verification of WAPs But mainly it’s a win–win situation for all, based on trust and transparency   On achieving a common industry view for points three to six, then all that is needed to make each VA a success is the willing participants and an identified known delay at disport. 20

Possible measures

Possible measures

Industry Study

Possible Abatement Measures Gas fuelled engines Electronic engine control Waste heat recovery Air cavity lubrication Contra-rotating propeller Fuels cells as auxiliary engines Frequency converters Exhaust gas boilers on auxiliary engines Energy efficient light systems Wing generator Wind power – kite Wind power – fixed sails or wings Solar panels Solar panels Trim/draft optimising Weather routing Voyage execution Steam plant operational improvements Speed reduction due to port efficiency Propeller condition Speed reduction due to fleet increase Hull condition Propulsion efficiency devices Cold ironing Engine monitoring Reduced auxiliary power usage