Mitigating Air Emissions – A Shipowner Point of View Kevin Krick APL Head of Security and Environment, Americas NAMEPA 18 FEB 2015

More than 90% of the total global transportation is accomplished by the shipping industry 1 Shipping & Emissions

Container Shipping & Emissions Shipping is the most environmental friendly and energy efficient form of transportation 2

Second IMO GHG Study 2009 CO2 emissions from shipping vs Global CO2 emissions 3

One challenge we all need to overcome… 4

APL’s Environmental Policy 5

 What drives our environmental efforts? –“…committed to sound environmental stewardship…” - APL  Air Emission Challenges: –Reducing Carbon –Addressing Criteria Pollutants  SOx  NOx  PM  VOCs –Mandates for specific fuels (low sulfur) or technologies (cold ironing) –Strategies:  Improving Operations  New Technologies & Designs 6 A Shipowner Point of View

 Carbon Reductions –Voluntary with some regulatory schemes (e.g. California’s AB32, EU targets & trading) –Shipping regulations remain to be developed; commercial reasons continue to drive reductions  Criteria Pollutants –Regulations in place & continue to evolve  Low Sulfur Fuels: –SOx, PM  Emission Control Areas: –SOx, NOx, PM  Cold Ironing: –SOx, NOx, PM, VOCs 7 Differentiating Air Emissions

 Operational Improvements –Less Fuel Consumed = Less Carbon Produced –Slow Steaming –Managing Trim –Weather Routing –Hull Maintenance  Design Improvements –New Builds - Comparing my 1972 Chevelle (6 MPG) with my 2012 MINI (39 MPG) –Energy Efficiency Design Index (EEDI) –Electronic Engine Controls –Innovative Rudder and Propeller Designs –Hull Coatings 8 Shipowner Carbon Reductions

Energy Efficiency Design Index (EEDI) N ew builds must be as efficient as the average efficiency of vessels over the IMO baseline 10 year period (1999 – 2009) Ship TypeSizePhase (percent reduction) Phase (percent reduction) Phase (percent reduction) Phase & beyond (percent reduction) Container Ship 15,000 DWT & above ,000 to 15,000 DWT* N/A * For smaller vessels (10,000 to 15,000 dwt) the percent reduction is dependent upon their size within the range specified. 9 10% 20% 30% DWT EEDI EEDI = CO2 emission = ΣP x CF x SFC transport work capacity x speed Unit: gram CO 2 / (ton* nautical mile)

APL and EEDI New Builds between 2011 and 2014 APL Temasek is 33.4% more efficient than IMO’s required EEDI 14,000 TEU vessel - Length: 369m, Breadth: 51m, Draft: 13m

APL’s New Builds – Environmental Excellence 11

APL’s Carbon Reduction Strategy  In 2010, APL announced a carbon goal of: Reducing greenhouse gas emissions associated with cargo transportation and handling to 30% below 2009 emission levels.  In doing so, APL became the first carrier to: –Have its carbon data independently and annually verified by a third-party class society verifier as part of the process, and –Include all Scope 1 emissions beyond just those produced by vessels. 12

APL’s Carbon Reduction Strategy Result By 2013, APL’s aggressive, across the board investment in efficiency coupled with operational improvements to reduce fuel consumption resulted in: APL successfully reducing emissions by 33.4% thereby achieving our carbon emission reduction goal two years early. 13

 Twin Approaches: –Setting Emissions Standards for the Industry –Mandating Technology or Materials  Setting Standards –Need to be realistic –Encourage investment in technology & approaches to address the reductions –From a Shipowner Point of View: Optimal  Mandates –Lock shipowners into one means of emission reductions –While this approach may achieve the desired result, it does so at a higher economic cost with fewer benefits 14 Criteria Pollutant Reductions

North American ECA – 01 AUG 12 & 01 JAN nautical miles off coastlines - 1.0% S in fuel initially - 0.1% S in fuel in January Tier III engines in

Air Emissions – LSF & SOx Timeline All vessels (old and new) California Clean Fuel Regulations – 24nm 16

Air Emissions – NOx Timeline TierShip ConstructionNOx Emission Limit (gms/KWHr) on or after n<130n = n ≥ 2000 IJanuary 1, x(n -0.2 )9.8 IIJanuary 1, x(n )7.7 III*January 1, x(n -0.2 )2 * subject to a technical review to be concluded 2013 this date could be delayed The NOx control requirements of Annex VI Only New Buildings Tier Ship Construction, on or after NOx Emission Limit (gms/KWHr) ( n<130) IJanuary 1, IIJanuary 1, III*January 1, * Proposal to delay The NOx control requirements of Annex VI 17

Connecting the ship to shore side grid-based electrical power and shutting down the auxiliary diesel generators at berth. Effective January 1, 2014  % of vessels / 50% emissions reduction.  % of vessels / 70% emissions reduction.  2020-beyond - 80% of vessels / 80% emissions reduction.  No annual averaging, compliance by quarter.  Non-compliance fines can be up to USD $100K per hour. 18 California Cold Ironing

Cold Ironing – Schematic 19

Innovative Technologies – One Example  Krystallon Seawater Scrubber Installed aboard the APL England. The scrubber features an advanced emission control technology in which seawater is used to scrub, or filter contaminants from a ship’s auxiliary engines and boiler before exiting the exhaust stack of a ship. Wash water discharged from the treatment system complies with MARPOL IV and the NPDES General permit issued for Exhaust Gas Cleaning Devices by EPA. All recovered solids are disposed ashore as hazardous waste. Emission Reductions: 99% SOx & 70% PM. 20

Seawater Scrubber Viewed From Stern 21

 2020 Worldwide Sulfur Cap of 0.5%: –Industry leaders: Will result in carriers incurring tens of billions of dollars annually in higher fuel costs, with no clear mechanism for recovering those costs from customers.  “When you go from burning bunker to burning a distillate fuel everywhere, you’re talking about the better part of $100 billion, annually, for the container industry alone.” - Ron Widdows, World Shipping Council chairman  As per the International Chamber of Shipping, “for better or worse, the global cap is very likely to be implemented in 2020, almost regardless of the effect that any lack of availability of compliant fuel may have on the cost of moving world trade by sea.”  Question of Health Benefits…worth the cost? 22 Looming Challenges for Criteria Pollutants

Customers Focus on the Environment  Want to improve their environmental performance throughout their supply chain.  Want to be associated with a company that has environmental stewardship. 23

Partnerships Make the Difference Regulators & Environmental Agencies Understand perspectives, provide information and work towards attainable, effective practices Industry Partners Business for Social Responsibility’s Clean Cargo Working Group World Shipping Council Singapore Shipping Association Pacific Maritime Shipping Association North American Marine Environment Protection Association Equipment Manufacturers Innovation Staying ahead of regulatory requirements Fuel Suppliers Anticipating need for worldwide availability of low-sulphur fuel 24

 Reducing Carbon –Being Accomplished in Advance of Regulations  Addressing Criteria Pollutants –“Economic Environmentalism”  Mandates vs. Targets –Set goals, not limits on how to achieve them  Collaboration is Key 25 A Shipowner Point of View “…committed to sound environmental stewardship…”

26 Caring about Climate Change

Thank You!