1 Air Quality Regulation in California Critical Issues in Greenhouse Gases, Stationary Sources & Mobil Source Emissions January 12, 2007 Jim Flanagan

2 Two views of marine transport >Dirtiest mode of transport >Uses high sulfur fuel >Engines not designed to minimize emissions >Cleanest mode of transport >Efficient use of energy resources >Lowest drag on movement

3 How should we measure and track environmental performance? >Reduction from baseline >High baseline  reductions appear less meaningful >Per container (TEU) shipped per mile >To track performance and for comparisons >Consider entire environmental footprint Good business planning reduces emissions

4 Air Emissions in Marine Transportation Consider the full transportation chain footprint >Ocean going vessels >Main engine emissions >Dockside auxiliary engine emissions >Harbor craft: tugs, pilot vessels, etc. >Container loading and unloading >Movement off-site Energy Use  Air Emissions

5 Pollution Prevention: Increasing Efficiency Reduces Emissions and Costs >Pollution prevention and waste minimization – Redesign of processes and practices to reduce or eliminate emissions or waste. >Reuse of materials and converting wastes to new uses. >Recycling. >End-of-pipe treatment (such as catalytic reduction). >Disposal (includes shifting emissions or impacts to other areas) Best Worst

6 Energy efficiency for container vessels compared with other modes of transport S-Type container vessel Rail – Electric* Rail – Diesel* Heavy Truck* Boeing * Energy Use kWh/tkm Emissions (g/tkm) CO PM 0.009n/a n/a SO x NO x *Source: Network for Transport and the Environment (NTM)

7 Shipping by water is most energy efficient

8 Bigger ships are more efficient

9 g CO2/TEU.km = grams carbon dioxide emitted per twenty-foot container unit transported one kilometre. Larger vessels are more efficient

10 Shipping efficiencies through technology Maersk Line energy optimization initiatives include: >Waste heat recovery systems reduce fuel use 10%. >Slide valves >Computer systems improve cargo, route & speed efficiency >Waste oil clarification decanters separate burnable liquids from waste oil, water, and sludge mixtures >New cylinder lubrication systems use less oil >Efficient hull and propeller maintenance >Hull coatings

11 Shipping Gets More Efficient *First half of 2006 Results Our efforts to reduce CO2 emissions have led to a significant 5.6 per cent decrease in fuel consumption and reduction in emissions per tonne of cargo. This corresponds to a total reduction in CO2 emissions of 1.81 million tonnes during the period 2002 to 2006*.

12 Port area air quality options >Is shore-side power a solution? >Stresses shoreside electrical networks >Significant capital costs and time required >Compatibility issues from port to port >Only reduces emissions while at dock >Safety issues >Other options include >Cleaner fuels while near ports >Cleaner engines >On-board control technologies: SCR, PM filtration, etc.

13 Reduces emissions: Total: over 400 tons/yr SOx:92% PM: 73% NOx: at least 10%

14 Vessel Loading and Unloading >Minimize container movement >Mathematical models used to minimize moves to load and unload vessels >On-dock rail where feasible >Inland mode choices >Rail for minimum drag and resistance >Trucks for greatest flexibility >Pollution prevention >Potential for electrification for new sites >Minimize sulfur content of fuels >Newest feasible engines

15 Shipper Challenge #1 Uncoordinated Regulation >Different governments want different outcomes >Europe is concerned about GHGs, SOx and fine particulate; whereas California is concerned about diesel particulate and ozone >Different issues  Different approaches to solutions >Measurements and models vary >Quality

16 Shipper Challenge #2 The Law of Unintended Consequences >Improvements in one area can lead to problems in other areas >Tests on SCR showed increasing particulates >Restriction of at-sea dumping increases fuel use >Newer vessels result in old-vessel recycling issues >Scrubbing generates acid water >Be careful what you measure >Choice of metric >Data quality >Monitor vs. model

17 The Maersk Challenge >Being a good world-wide corporate citizen >Reducing our GHG footprint  reducing overall energy use >Consider world-wide operational impacts >Harmonizing world-wide concerns >Getting cargo where it needs to be on time and at competitive cost

18 Environmental Trends: Air Quality >Increasing focus on health impacts of diesel emissions >SOx, NOx and PM (particles) >Ships, CHE, trucks, rail >Air quality in many ports exceeds standards. >Governments and customers are concerned about “Greenhouse Gases” (CO 2 ) >Regulatory actions will include >Tighter fuel standards world-wide (cost factor) >Need for new technologies: AMP, SCR, PM filters

19 Maersk’s Air Quality Program >Reduce sulfur in fuel where it impacts shoreside air quality >Develop mobile solutions for mobile sources >Replace not retrofit port cargo handling equipment >Implement management systems to ensure consistent evaluation of issues >Use good science and metrics >Test thoroughly before committing >Data-based decisions >Work with shippers, other carriers and governments on metrics, reductions and technologies >Clean Cargo Working Group

20 Thank you