1. Maritime Environmental Issues and Regulatory Status Seog Tae, KANG Marketing Manager, Global Marketing & Customer Support, DNV Maritime KNECC, 20 October 2009, Busan

2. © Det Norske Veritas AS. All rights reserved Slide 215 September 2009 Key Environmental Issues Recent environmental regulatory developments cover more than CO2; - Ballast Water - SOx / NOx / PM - VOC - Scrapping / Recycling However, CO2 is pre-eminent on the regulatory and political agenda

3. © Det Norske Veritas AS. All rights reserved Slide 315 September 2009 IMO BWM Convention, 2004 All ships shall have on board: - Ballast water management plan - Ballast water record book Ballast Water Management - Exchange - Treatment Entry into force - 12 months after signing by: - 30 States - 35% of world merchant shipping tonnage Status of the Ballast Water Convention July 2009: - 18 states - 15,36 % of world merchant shipping tonnage Will have retroactive validity

4. © Det Norske Veritas AS. All rights reserved Slide 415 September 2009 © Det Norske Veritas AS. All rights reserved Slide 413 June 2016 Ballast Water Regulations (B-3) Keel laid BW [m 3 ] DWT / Ship type 200820092010201120122013201420152016 < 2009 1500- 5000 3400 – 15000 / Tanker 4200 – 14200 / Bulk 4100 – 14000 / General cargo < 1500 > 5000 15000 / Tanker 14200 / Bulk 14000 / General cargo ≥ 2009< 5000 <15000 / Tanker <14200 / Bulk <4000 / General cargo ≥ 2009 < 2012 > 5000 >15000 / Tanker >14200 / Bulk >14000 / General cargo ≥ 2012> 5000 >15000 / Tanker >14200 / Bulk >14000 / General cargo D1/D2D2 a) D1/D2D2 a) D1/D2D2 a) D2 D1/D2D2 a) MEPC 59 concluded that there are enough technologies available in the market for ships constructed in 2010 and that no postponement is needed.

5. © Det Norske Veritas AS. All rights reserved Slide 515 September 2009 Latest MARPOL Annex VI Revision - SOx Sulphur limit for fuel oilSulphur content Enforcement Global4.50% 3.50% 0.50% [Prior to 1 January 2012] [1 January 2012] [1 January 2020] 1 ECA (SECA)1.50% 1.00% 0.10% [Prior to 1 July 2010] [1 July 2010] [1 January 2015] 2 Abatement technology (eg Scrubbers) is an "equivalent measure". This means that an Administration may allow abatement technologies, but the Administration (and not the ship) has to acknowledge that:  They have equivalent efficiency in terms of SOx, PM and NOx emissions  That they operate within the requirements of the IMO guidelines  That they do not harm the environment (potential water discharge issue) Update IMO MEPC58 - Adopted 9 October 2008 – Entry into force 1 July 2010 1 Subject to a review of fuel availability in 2018, with the option to delay the 0.5% sulphur global cap by five years 2 Also applies to all EU ports and inland waterways from Jan. 1 2010 (EU Directive 99/32 Amendment)

6. © Det Norske Veritas AS. All rights reserved Slide 615 September 2009 Latest MARPOL Annex VI Revision - NOx NOx limitsRequirementEnforcement Tier I17.0 g/kWh (=todays) Ships built 1-Jan-00 to 1- Jan-11 Tier II14.4 g/kWhShips built after 1-Jan-11 Tier III3.4 g/kWhShips built after 1-Jan-16 and operating in ECAs Ships (>5MW) built 1-Jan-90 to 1-Jan-00 to comply with Tier I, provided approved method for NOx reduction is available and cost effective Update IMO MEPC58 - Adopted 9 October 2008 – Entry into force 1 July 2010

7. © Det Norske Veritas AS. All rights reserved Slide 715 September 2009 New ECA – MEPC 59 Developments The proposal to designate an ECA for the coastal waters of USA and Canada was approved with a view to adoption at MEPC 60 May be in force from Aug. 2012 Mexico, Bahamas likely to join Significantly increases impact of MARPOL Annex VI revision from 2015 / 2016

8. © Det Norske Veritas AS. All rights reserved Slide 815 September 2009 Californian Regulations - CARB OAL approved the rulemaking and filed it with the Secretary of State on May 29, 2009. The regulation became effective on June 28, 2009 (Compliance for the Phase I fuel requirements began on July 1, 2009) These regulations would require operators to use the following low sulfur marine distillate fuels in auxiliary diesel and diesel-electric engines, main propultion diesel engines, and auxiliary boilers on ocean-going vessels within 24 n-miles; Effective dateFuel** July 1, 2009 Phase I Requirement Marine Gas Oil (DMA) at or below 1.5% sulfur; or Marine Diesel Oil (DMB) at or below 0.5% sulfur January 1, 2012 Phase II Requirement Marine Gas Oil (DMA) or Marine Diesel Oil (DMB) at or below 0.1% sulfur **DMA and DMB are marine grades of fuel as defined in Table I of International Standard ISO 8217:2005

9. © Det Norske Veritas AS. All rights reserved Slide 915 September 2009 Californian Regulations - Port of Long Beach Under the rules for its construction, vessels must adhere to stringent emission reduction measures to minimise or eliminate the environmental impacts of shipping operations. All container cargo vessels calling at the terminal will be required to plug into shoreside electricity and turn off their main and auxiliary engines In addition, all vessels will adhere to other port's Vessel Speed Reduction Program, which will cut their fuel consumption and reduce their exhaust emissions from 40- miles offshore. Compliance most likely required in 2014

10. © Det Norske Veritas AS. All rights reserved Slide 1015 September 2009 CO2 - The shipping industry can’t wait Shipping will have to reduce CO2 emissions – as all other industries. Shipping has to act now in order to influence frame conditions If shipping does not act, regulators outside shipping will define the actions More cargo can be moved from air, trucks and rail to ships More, and more efficient, shipping is part of the global solution

11. © Det Norske Veritas AS. All rights reserved Slide 1115 September 2009 EU Position – Strong Commitment

12. © Det Norske Veritas AS. All rights reserved Slide 1215 September 2009 Global emissions scenarios 12 Most reductions in shipping can happen with existing technologies GAP 1 - Already known technical, operational and structural means, enabling  50% reduction for vessels delivered in 2030  70% reduction for vessels delivered in 2050 GAP 2: Break-through technologies to be made commercial beyond 2020

13. © Det Norske Veritas AS. All rights reserved Slide 1315 September 2009 Regulatory Drivers EU Climate Change Political Developments Softening commitment to EU 2020 goals (some countries) due to financial instability However, "The European Council confirms its determination to honour the ambitious commitments on climate and energy policy“. Complex agreement finalised December ’08. Practical ramifications and impact not clear, but goals for land-based industry are weakened. European Parliament (EP) agreed revised carbon trading system (ETS) in 2008. Airlines to be included. EP instructed the Commission to consider including shipping by 2013. Commission has given IMO until end 2011 to act, if not EU will act unilaterally, imposing regional regulations by 2013. In practical terms this is a decision that is both binding and non-revocable.

14. © Det Norske Veritas AS. All rights reserved Slide 1415 September 2009 GHG Regulatory Drivers – IMO Politics IMO under strong pressure to deliver results by UNFCCC Copenhagen climate conference (COP15) December 2009 Political barriers - clashing IMO and UNFCCC principles - Significant differences in national positions as regards IMO’s role in curbing ship emissions of GHG in relation to the mandate of the UNFCCC and Kyoto protocol - Developing countries (non-Annex I) generally in consensus that IMO must adopt the principles of UNFCCC / Kyoto, i.e. “Common But Differentiated Responsibilities (CBDR)” - This is strongly opposed by delegations of the developed countries (Annex 1), invoking the IMO principle of “No More Favourable Treatment” - So far not possible to break this impasse, in-depth discussions on application of CO2 regulations, as well as on introduction market based instruments (MBI’s), deferred until MEPC60 (March ’10) - Disagreements among MBI advocates on instrument most appropriate for international shipping - bunker tax or emission trading

15. © Det Norske Veritas AS. All rights reserved Slide 1515 September 2009 Green House Gases –MEPC 59 Achievements No agreement on regulatory matters – decisions deferred to MEPC 60 earliest (March 2010) Discussion on market based instruments deferred until MEPC60, pending developments at UNFCCC COP15 (Dec. 09), MEPC work plan indicates decision at MEPC62 earliest Finalisation of guideline for Energy Efficiency Operational Index (EEOI) to be used on a voluntary basis (IMO Circ.684) Consensus reached on interim guidelines for Energy Efficiency Design Index (EEDI) and verification scheme, to be used on a voluntary trial basis (IMO Circ.681 and 682) Consensus on draft guidance on the development of a Ship Energy Efficiency Management Plan (SEEMP) to be used on a voluntary basis (IMO Circ.683) Developments at COP15 (Dec. ’09) will be instrumental for further progress on ship GHG regulations

16. © Det Norske Veritas AS. All rights reserved Slide 1615 September 2009 The Evolution of an EEDI The principle: Japan: MEPC 57/4/12 Denmark: GHG-WG 1/2/1 MEPC 58/4 USA: MEPC 58/4/35 MEPC 58/23 GHG WG2

17. © Det Norske Veritas AS. All rights reserved Slide 1715 September 2009 Present EEDI Formulation Main Engine Aux. Engine Efficient design options Waste heat and shaft motors Transport work capacity Ice strenghtening factor Weather factor The basic principle is retained but complexity increased Minor adjustments can be expected but no major changes No discussion on application and requirements yet

18. © Det Norske Veritas AS. All rights reserved Slide 1815 September 2009 Possible Timeline for Mandatory EEDI MEPC 59 - July 2009 - EEDI formula finalised and agreed as voluntary measure MEPC 60 – March 2010 - EEDI possibly approved as mandatory measure, including application issues (scope of application, requirement levels, verification issues, non-compliance consequences, entry into force date, etc.) - Diesel electric ships possibly included MEPC 61 – October 2010 - Decision of MEPC 60 adopted Entry into force – assuming MARPOL Annex VI is used as legal instrument; somewhere between 2013 - 2018

19. © Det Norske Veritas AS. All rights reserved Slide 1915 September 2009 Recycling Convention Adopted Adopted in May 2009, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships places responsibility on: -ship owners -ship builders -recycling facilities -and national authorities will become mandatory for all ships above 500 GT to establish and maintain an Inventory of Hazardous Materials Entry into force 10-15 years?

20. © Det Norske Veritas AS. All rights reserved Slide 2015 September 2009 Recycling of Ships – MEPC59 Developments Draft Guidelines for the Inventory of Hazardous Materials were finalized and adopted. Due to the significant amount of work remaining for development of the facility guidelines, the intersessional correspondence group was re-established and tasked to continue work with the view of finalization during MEPC 60.

21. © Det Norske Veritas AS. All rights reserved Slide 2115 September 2009 New Requirements Prohibited Materials (prohibited from new installation): Asbestos PCB Ozone Depleting Substances (some ok until 2020) Anti-fouling system inconsistent with the AFS Convention Surveys Initial, Renewal, Additional, Final New Ships Material Declarations (MD) and Supplier Declarations of Conformity (SDoC) for all products, systems and equipment installed on the vessel form the basis of Part 1 Existing Ships Ship owners shall draw upon expert assistance for creating Part 1. IACS Unified Requirement being developed for service suppliers engaged in visual/sampling checks and testing for hazardous materials.

22. © Det Norske Veritas AS. All rights reserved Slide 2215 September 2009 The Future…Key Regulatory Issues CO2 – key political regulatory issue for the immediate future, shape of regulations yet to be agreed SOx/NOx/ECA implementation – operational and design implications of great significance Ballast Water – retroactive entry into force will cause yard retrofit capacity issues, potentially leading to non-compliance problems for numerous ships Recycling of Ships – finalisation of facility guidelines and the resulting content will have direct impact on the industry, will be an issue at MEPC60 Particulate Matter – increasing concern over particulates, and growing realisation that low sulphur fuels does not eliminate the problem makes this a likely area of increasing focus

23. © Det Norske Veritas AS. All rights reserved Slide 2315 September 2009