1. IMO’s work on prevention of air pollution and control of GHG emissions from ships Adoption of mandatory Energy Efficiency measures for ships
Eivind S. Vagslid
Technical Adviser to the Secretary-General
Secretary-General’s Office
IMO
Visit to IMO by Norwegian Shipping Forum
London 18 October 2012

2. IMO – specialised UN agency
170 Member States
IGOs and NGOs
London headquarters
Annual budget £30+ M
Secretariat: 300+ staff
50+ Nationalities
Secretary-General: Koji Sekimizu, Japan
53 treaties covering all aspects of international shipping
Design – Construction - Equipment – Operation – Maintenance – Manning
Prevention – Response – Liability – Compensation
IMO is one of the smallest UN agencies, headquartered in London, with an annual budget of less than 20 million pounds and around 300 staff in the secretariat.
There are some 50 nationalities represented on the staff, in six divisions: Maritime Safety, Marine Environment, Legal and External Relations, Technical Co-operation, Administrative and Conference.
Note: The IMO Assembly in November 2005 approved budgetary appropriations of £49,730,300 for against £46,194,900 for
IMO – the International Maritime Organization - is the United Nations specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships. Member Governments use IMO to draw up internationally agreed standards that can be applied to all ships.
We sum up our objectives in our mission statement: Safe secure and efficient shipping on clean oceans
Safe, secure and efficient shipping on clean oceans!

3. Progress of measures at IMO - example
Proposal to IMO
Committee
Incident
Idea,
development
Discussion, refer
to Sub-Committee,
Working Group
Development of draft
Regulation, circular,
Code or resolution
Let me give you an idea of how measures progress through the IMO machinery.
Any IMO Member State can propose a new regulation or amendment to existing one. It might arise from an incident, or simply from an idea or technical development.
The Member State first puts its proposal to the relevant IMO Committee. The Committee would then discuss the proposal and, if it was considered to have merit, might decide to refer it to a sub-committee for more detailed consideration. For more complex issues, a working group or correspondence group might be established to work on the issue at an even more intense technical level.
After appropriate discussion in these fora, a detailed draft – whether it for a new measure, an amendment to an existing measure, a code of practice, guidelines or a circular – is drawn up, ready for consideration and approval at the appropriate level.
This explains the process in the simplest of terms. Depending on the complexity of the issue, some measures can be quickly agreed and adopted while others require more time.
IMO member states undertake to put into practice the measures they develop and adopt at IMO. That is why the Organization always aims to adopt measures by consensus as this way ensures the widest possible implementation by the member states.
Adoption of
new regulation

4. IMO’s Treaty Instruments
Safety and Security
SOLAS, STCW, Load lines, COLREGS, SUA
Pollution Prevention
MARPOL Annexes I to VI, Dumping (LC/LP), Intervention, AFS, [Ballast Water Management,] [Recycling]
Response and Reaction
SAR, OPRC, HNS Protocol,
[Wreck removal]
Liability and Compensation
CLC, IOPC Fund, Athens, Bunkers, HNS
Broadly speaking, the main IMO Conventions fall into four categories. Those dealing with safety and security include:
the Safety of Life at Sea Convention (SOLAS) which is generally considered to be the most important of all international treaties concerning the safety of merchant ships. Among the topics covered in its chapters are ship construction, subdivision and stability, fire protection, life saving appliances and arrangements, radiocommunications, safety of navigation, carriage of cargoes and dangerous goods, safe management and maritime security;
Others include the Convention on Standards of Training, Certification and Watchkeeping for Seafarers, the Load lines Convention, the Collision Regulations or COLREGS and the so-called SUA Conventions, which are legal instruments aimed at ensuring that appropriate action is taken against persons committing unlawful acts against ships such as the seizure of ships by force, acts of violence against persons on board ships and the placing of devices on board a ship which are likely to destroy or damage it.
The 2005 SUA Protocols were adopted October 2005 to update the treaties.

5. IMO’s Treaty Instruments
Date of entry into force
No. of Contracting States / Parties
% world tonnage*
IMO Convention
17-Mar-58
170
97.16
SOLAS 1974
25-May-80
162
99.20
SOLAS Protocol 1978
01-May-81
117
96.86
SOLAS Protocol 1988
03-Feb-00
103
95.67
Stockholm Agreement 1996
01-Apr-97 11
8.59
LL 1966
21-Jul-68
161
99.19
LL Protocol 1988 98
95.96
TONNAGE 1969
18-Jul-82
152
99.06
COLREG 1972
15-Jul-77
155
98.71
CSC 1972
06-Sep-77 78
60.95
1993 amendments
Not yet in force 9
6.18
SFV Protocol 1993 17
19.78
STCW 1978
28-Apr-84
156
99.22
STCW-F 1995
29-Sep-12 15
4.75
SAR 1979
22-Jun-85
62.45
STP 1971
02-Jan-74
23.98
SPACE STP 1973
02-Jun-77 16
23.33
IMSO 1976 Convention
16-Jul-79 97
94.92
1998 amendments
31-Jul-01 40
26.91
2008 amendments**
Not yet in force** 10
3.65
FAL 1965
05-Mar-67
115
90.77
Broadly speaking, the main IMO Conventions fall into four categories. Those dealing with safety and security include:
the Safety of Life at Sea Convention (SOLAS) which is generally considered to be the most important of all international treaties concerning the safety of merchant ships. Among the topics covered in its chapters are ship construction, subdivision and stability, fire protection, life saving appliances and arrangements, radiocommunications, safety of navigation, carriage of cargoes and dangerous goods, safe management and maritime security;
Others include the Convention on Standards of Training, Certification and Watchkeeping for Seafarers, the Load lines Convention, the Collision Regulations or COLREGS and the so-called SUA Conventions, which are legal instruments aimed at ensuring that appropriate action is taken against persons committing unlawful acts against ships such as the seizure of ships by force, acts of violence against persons on board ships and the placing of devices on board a ship which are likely to destroy or damage it.
The 2005 SUA Protocols were adopted October 2005 to update the treaties.

6. Broadly speaking, the main IMO Conventions fall into four categories
Broadly speaking, the main IMO Conventions fall into four categories. Those dealing with safety and security include:
the Safety of Life at Sea Convention (SOLAS) which is generally considered to be the most important of all international treaties concerning the safety of merchant ships. Among the topics covered in its chapters are ship construction, subdivision and stability, fire protection, life saving appliances and arrangements, radiocommunications, safety of navigation, carriage of cargoes and dangerous goods, safe management and maritime security;
Others include the Convention on Standards of Training, Certification and Watchkeeping for Seafarers, the Load lines Convention, the Collision Regulations or COLREGS and the so-called SUA Conventions, which are legal instruments aimed at ensuring that appropriate action is taken against persons committing unlawful acts against ships such as the seizure of ships by force, acts of violence against persons on board ships and the placing of devices on board a ship which are likely to destroy or damage it.
The 2005 SUA Protocols were adopted October 2005 to update the treaties.

7. Ship emissions one of the last major ship pollutants to be regulated
Work started at IMO in the late 1980’s
Annex VI adopted in 1997, in force in May 2005,
Substantially revised 2005 – 2008
Revised Annex VI in force 1 July 2010
Prohibits ODS in line with the Montreal Protocol
Regulates exhaust gas: NOx & SOx (PM), and cargo vapours from tankers (VOC)
Energy Efficiency covered in new chapter 4 in force 1 January 2013
Emissions from ships - Air pollution and greenhouse gases - was one of the last major pollutants from ships to be regulated, the work started at IMO in the late 1980s.
The Protocol of 1997 introducing MARPOL Annex VI did not enter into force in May 2005, when it was ratified by the required number of States representing the required tonnage.
As well as prohibiting the release of ozone depleting substances in line with the Montreal Protocol, MARPOL Annex VI regulates exhaust emissions of Nitrogen oxides and Sulphur oxides.
It applies to all ships, fixed and floating platforms and drilling rigs.
Annex VI does not cover greenhouse gases in general or emissions of CO2 in particular, the most significant of the greenhouse gases emitted by ships.
Following a three year revision process, MEPC 58 in October 2008 unanimously adopted amendments to MARPOL Annex VI to further reduce harmful emissions from ships. The main changes are progressive reduction in emissions of nitrogen oxides (NOx), sulphur oxides (SOx) and particulate matter (PM) and the introduction of emission control areas also for NOx and PM, while the initial MARPOL Annex VI, which was adopted in 1997, held such provisions only for SOx.

8. Range of typical CO2 efficiencies for various cargo carriers
Road
RoRo/Vehicle
LPG
Bulk
Reefer
LNG
Crude
Container
General Cargo
Chemical
Product
Rail 50
100
150
200
250
300
g CO2 / ton*km
Data: Second IMO GHG Study 2009

9. Efficiency improvements
World seaborne trade
Efficiency improvements
Fuel Consumption World Fleet
Source: Fearnley's Review

10. Second IMO GHG Study 2009 2007 shipping CO2 emissions 870 million tons
Other
Bulk
General Cargo
Container
RoRo
/Vehicle
Ropax
Cruise
Tank 50
100
150
200
250 CO 2
emissions (million tons / yr)
Deep sea ships
Regional ships
Ocean going
Coastwise
Future CO2 emissions:
Significant increase predicted: % by 2050 in the absence of regulations
Demand is the primary driver
Technical and operational efficiency measures will provide significant improvements but will not be able to provide real reductions if demand continues
MEPC 59 has been notably assisted in its work by the Second IMO GHG Study 2009, which is the most comprehensive and authoritative assessment of the level of greenhouse gas emitted by ships, as well as its potential for reduction. The Study also evaluates the different policy options for control of GHG emissions from ships currently under consideration within IMO and other organizations.
The Second IMO GHG Study 2009 came to the following main conclusions:
International shipping was estimated to have emitted 870 million tonnes, or about 2.7% of the global emissions of CO2 in 2007.
Carbon dioxide was the most important GHG emitted by ships, both in terms of quantity and of global warming potential.
Mid-range emissions scenarios showed that, by year 2050, in the absence of policies, ship emissions could grow by 200% to 300% (compared to the emissions in 2007) as a result of the growth in world trade.
A significant potential for reduction of GHG emissions through technical and operational measures had been identified. Together, if implemented, these measures could increase efficiency and reduce the emissions rate by 25% to 75% below the current levels. Many of these measures appeared to be cost-effective, although non-financial barriers may discourage their implementation.   
If the climate was to be stabilized at no more than 2°C warming over pre‑industrial levels by 2100 and emissions from shipping continue as projected in the scenarios that were given in the report, then they would constitute between 12% and 18% of the global total CO2 emissions in 2050 that would be required to achieve stabilization (by 2100) with a 50% probability of success.

11. Potential reductions of CO2 emissions
Although ships are the most fuel efficient mode of mass transport, the Second IMO GHG Study 2009 identified a significant potential for further improvements in energy efficiency by operational measures, such as fleet management, voyage optimization and energy management. The Study estimated that 10 to 50 % reductions of CO2 emissions are possible through the combined use of these measures. Saving energy at the operational stage is presently addressed by the Ship Energy Efficiency Management Plan (SEEMP) where the development of the Energy Efficiency Operational Indicator (EEOI) may be used as the monitoring tool.

12. Examples of efficiency measures:
Technical:
Improved hull design and engine efficiency
More efficient propellers and rudders
Larger ships, combination carriers
Reduce installed power (speed)
Wind and solar power
Alternative fuels
Operational:
Speed and energy management
Improved routeing & less waiting
Enhanced fleet management and better utilization

13. 14 April 2017
2030 – abatement potential
Average marginal CO2 reduction cost per option - World shipping fleet in 2030 (existing and newbuilds)
350 MT CO2 = 115 MT fuel = potential annual worldwide saving of 57 BUSD (500 USD/ton)
Note; abatement potential for individual ship types and size segments vary widely

14. IMO’s work on GHG control and Energy efficiency
Work on air pollution prevention from late 1980s
In 1991 IMO’s Assembly called for the development of MARPOL Annex VI
The 1997 MARPOL Conference’s on Annex VI called for GHG action by IMO
First IMO GHG Study published in 2000 (1.8% - rapid and massive growth)
IMO’s GHG policy adopted by Assembly 23 in December 2003 (res.963(23))
Development of T&O measures, including EEOI, EEDI, SEEMP: 2000 – 2009
Voluntary application and testing by administrations and industry: (2005)
Basic principles adopted by MEPC 57 (April 2008)
Regulatory text developed 2009 – 2011
2011: Adoption of new chapter 4 to MARPOL Annex VI: mandatory T&O measures
Second IMO GHG Study 2009 published (2.7%, significant reduction potential)
Development of an MBM from 2007, Expert Group reported in 2010
Technical - mainly applicable to new ships – EEDI
Operational - applicable to all ships in operation – SEEMP and EEOI
Market-based Measures (MBM) – carbon price for shipping, offsetting, incentive, may generate funds
IMO Assembly resolution A.963(23) on IMO Policies and Practices Related to the Reduction of Greenhouse Gas Emissions from Ships, urges the Marine Environment Protection Committee (MEPC) to identify and develop the mechanisms needed to achieve limitation or reduction of greenhouse gas (GHG) emissions from international shipping and, accordingly, to develop a GHG work plan.
MEPC has on this basis given extensive consideration to control of greenhouse gas emissions from ships and IMO’s work on enhanced energy efficiency and the Organization has developed specific technical and operational measures with the aim of making them mandatory in the near future, and on the third building block, the market‑based mechanism is working in accordance with a work plan culminating in 2011.

15. Breakthrough at IMO MEPC 62 (11 – 14 July 2011)
Mandatory technical and operational
measures adopted
Mandatory energy efficiency measures
Adopted (EEDI and SEEMP) for all ships
by inclusion of new chapter 4 in MARPOL Annex VI
Further development of supporting guidelines on:
Calculation of EEDI
EEDI Reference Lines (average of ships built 1999 – 2009)
EEDI Survey and Certification
Development and implementation of SEEMP
EEOI - Energy Efficiency Operational Indicator (MRV tool and benchmark)
Work on EEDI formulas for ship types not yet covered
Intersessional meeting in January 2012 prepared guidelines

16. New Chapter 4 to Annex VI Regulation 19 – Application
Ship types: bulk carriers, tankers,
container ships, general cargo ships,
gas carriers, reefers and combination carriers
- Covers 71% of international shipping CO2
- 4 years waiver clause for Administrations
in need of more time
Regulation 20 Attained EEDI
Regulation 21 Required EEDI
Regulation 22 SEEMP for all ships (400 GT)
Regulation 23 Promotion of technical co-operation and transfer of technology relating to the improvement of energy efficiency of ships

17. Energy Efficiency Design Index - EEDI17
Energy Efficiency Design Index - EEDI
g of CO2 emitted
Attained EEDI ≦ Required EEDI values
cargo capacity x speed
-10% ships built between 2015 – 2020
-20% ships built between 2020 – 2025
-30% ships built between 2025 – [2030]

18. Required EEDI – Regulation 21
Reduction factors (in percentage) for the EEDI relative to the EEDI Reference line
Ship Type
Size
Phase 0
1 Jan 2013 –
31 Dec 2014
Phase 1
1 Jan –
31 Dec 2019
Phase 2
1 Jan –
31 Dec 2024
Phase 3
1 Jan 2025
and onwards
Bulk Carrier
20,000 DWT and above 10 20 30
10,000 – 20,000 DWT
n/a
0-10*
0-20*
0-30*
Gas carrier
10,000 DWT and above
2,000 – 10,000 DWT
Tanker
4,000 – 20,000 DWT
Container ship
15,000 DWT and above
10,000 – 15,000 DWT
General Cargo ships 15
3,000 – 15,000 DWT
0-15*
Refrigerated cargo carrier
5,000 DWT and above
3,000 – 5,000 DWT
Combination carrier

19. Ship Energy Efficiency Management Plan SEEMP - Onboard management tool
Monitoring of emissions and energy performance of individual ships and encouraging continues improvement, using the operational indicator (EEOI) as monitoring tool and benchmarking
Improved voyage planning (Weather routeing/Just in time)
Speed and power optimization (single most important issue)
Optimized ship handling (ballast/trim/use of rudder and autopilot)
Improved fleet and ship management - utilization
Improved cargo handling
Energy management
The Ship Energy Efficiency Management Plan is being developed, with invaluable input from the shipping industry, as a practical tool to increase the energy efficiency of ships in operation. The Plan’s purpose is to encourage the ship operator to apply the many fuel-saving practices currently available, often referred to as “low hanging fruit”, ready for picking. The most obvious include:
- Improved voyage planning (Weather routeing/Just in time);
- Speed and power optimization;
- Optimized ship handling (ballast/use of rudder and autopilot);
- Improved fleet management;
- Improved cargo handling; and
- Onboard energy management (e.g. engine heat recovery), to name but a few.

20. Energy Efficiency Operational Indicator - EEOI
MRV tool and benchmark for individual ships
A ship specific efficiency indicator to be used by all ships in operation (new and existing) obtained from fuel consumption, voyage data (miles) and cargo data (tonnes)
Cargo Onboard x (Distance traveled)
Fuel Consumption in Operation =
Actual Fuel
Consumption
Index
The Energy Efficiency Operational Indicator (EEOI) enables operators to measure the fuel efficiency of a ship in operation. Expressed in grams of CO2 per tonne mile, the indicator enables comparison between individual ships and thereby facilitates adoption of appropriate measures to reduce energy consumption. More importantly, the Indicator makes it possible for operators and crews to monitor the effectiveness of any new measures applied in accordance with the Ship Energy Management Plan.
The Energy Efficiency Operational Indicator has been implemented on a trial basis since 2005 and the outcome and experience obtained from hundreds of trials will enable the MEPC in July to adopt a mature and robust tool to gage the operational efficiency of individual ships.

21. Guidelines adopted by MEPC 63 (March 2012)
2012 Guidelines on the method of calculation of the attained Energy Efficiency Design Index (EEDI) for new ships
2012 Guidelines for the development of a Ship Energy Efficiency Management Plan (SEEMP)
2012 Guidelines on survey and certification of the EEDI
Guidelines for calculation of reference lines for use with the EEDI
MEPC 64 continued work in accordance with the work plan for technical and operational measures for ship types and propulsion systems not covered by the current EEDI formula

22. EEDI and SEEMP Effects 2020 - Combined effects
103 – 200 mill tonnes CO2
10 – 17% reduction over BAU
$20 – 80 bill fuel savings
Results of analytical study by Lloyds Register and DNV, commissioned by IMO. Document MEPC 63/INF.2
The Energy Efficiency Design Index (EEDI) provides a figure, expressed in grams of CO2 per tonne mile, that measures the attainable energy efficiency of a specific ship design. It enables the designer to optimize the various parameters at his disposal and provides an energy rating for the ship before it is built. The Index will, therefore, stimulate technical development of all the components influencing fuel efficiency. Through the application of this Index, ships in the near future will have to be designed and constructed intrinsically energy-efficient.
The formulation of the Index is rather complex, in that it tries to accommodate a wide range of ship types and sizes. The formula, which I cannot show in the slide because of size and complex structure, may still suffer some modifications before it is agreed by the MEPC in July. 22

23. EEDI and SEEMP Effects 2030 - Combined effects
237 – 423 mill tonnes CO2
18 – 26% reduction over BAU
$90 –310 bill fuel savings
Results of analytical study by Lloyds Register and DNV. Doc MEPC 63/INF.2
The Energy Efficiency Design Index (EEDI) provides a figure, expressed in grams of CO2 per tonne mile, that measures the attainable energy efficiency of a specific ship design. It enables the designer to optimize the various parameters at his disposal and provides an energy rating for the ship before it is built. The Index will, therefore, stimulate technical development of all the components influencing fuel efficiency. Through the application of this Index, ships in the near future will have to be designed and constructed intrinsically energy-efficient.
The formulation of the Index is rather complex, in that it tries to accommodate a wide range of ship types and sizes. The formula, which I cannot show in the slide because of size and complex structure, may still suffer some modifications before it is agreed by the MEPC in July. 23

24. EEDI and SEEMP Effects Combined effects over BAU 2020: 10 - 17%
2020: %
2030: 18 – 26%
[2050: 35 – 41%]
Results of analytical study by Lloyds Register DNV. Document MEPC 63/INF.2
The Energy Efficiency Design Index (EEDI) provides a figure, expressed in grams of CO2 per tonne mile, that measures the attainable energy efficiency of a specific ship design. It enables the designer to optimize the various parameters at his disposal and provides an energy rating for the ship before it is built. The Index will, therefore, stimulate technical development of all the components influencing fuel efficiency. Through the application of this Index, ships in the near future will have to be designed and constructed intrinsically energy-efficient.
The formulation of the Index is rather complex, in that it tries to accommodate a wide range of ship types and sizes. The formula, which I cannot show in the slide because of size and complex structure, may still suffer some modifications before it is agreed by the MEPC in July. 24

25. Effects of amendments
Following the adoption, IMO commissioned a study from LR/DNV to estimate the effects, document MEPC 63/INF.2
2020 – combined effects of EEDI and SEEMP
million tonnes of CO2
10 – 17% reduction over BAU
US$ 20 – 80 billion annual fuel cost savings
2030
million tonnes of CO2
18 – 26% over BAU
US$ 90 – 310 fuel cost savings
2050
706 – 1320 million tonnes of CO2
35 – 41% reduction over BAU

26. Breakthrough at IMO
“This is a landmark for the Organization, which has now made a positive contribution to worldwide efforts to stem climate change and, indeed, a landmark for the international community since, for the first time in history, it has been possible to legislate GHG emission reductions for an entire industry sector”
E.E. Mitropoulos
IMO Secretary-General
“…..this underscores the fact that IMO is best positioned to play a leadership role in addressing greenhouse gas emissions from international shipping.”
Ban Ki-Moon
UN Secretary-General
“I would like to congratulate IMO on this outstanding result….The adoption of mandatory efficiency standards for international shipping is a major step and a substantial contribution….”
Christiana Figueres
UNFCCC Executive Secretary

27. Capacity building needs
Preliminary assessment presented to MEPC 61
Training of flag State and port State control officers
Training of seafarers in use of new technologies
Instil in the industry an energy efficiency culture
IMO’s Integrated Technical Co-operation Programme for the biennium allocated funding for the first round of training activities to be undertaken before the entry into force of the amendments

28. Capacity building activities
Workshops on CO2 emissions from shipping
Regional and national workshops on awareness raising and knowledge sharing to enhance global implementation and to enable States to take appropriate actions
Regional and national workshops on energy efficient ship operation for ship and shore based personnel
Regional and national workshops on energy efficient ship design for administrations, academia and industry
Regional workshops on port State control procedures and regulations related to energy efficiency and air pollution regulations under MARPOL Annex VI
Sub regional workshops focus on raising awareness on CO2 emissions
National workshops concentrate on Implementation of regulations with more details
Thailand May 2012 ( Sub-regional and National)
Philippines May 2012 (National)
RoK – not confirmed dates (Sub-regional)

29. Technical Cooperation and Capacity Building activities planned for 2011 – related to EEDI and SEEMP
Model course for energy efficient ship operation developed by WMU – Finalized and issued in To be used for officers training by education institutes and the industry, important for future training Capacity building: $650,000 for training activities (e.g. EEDI verifiers) $200,000 for fellowships and $200,000 for workshops First awareness raising workshop in Durban 24 – 25 November Agreement with KOICA for a South East Asian Climate Capacity Building Partnership in Maritime Transport - $ for First workshop held in Singapore 16 – 18 November 2011 A total of 12 workshops in the region 2012 – 2013 Dialog with donors for a global project: $10 – 40 millions

30. Transfer of technology, technical assistance and capacity building on energy efficiency
Transfer of technology covered in many IMO instruments, regulation 23 of new Chapter 4 goes beyond similar obligations in other treaties as it encourages cooperation bilaterally, through IMO or other organizations
Transfer of technology outside IMO’s ITCP
Work on draft resolution together with the regulatory text with the intention to adopt them as a package, not possible to reach consensus, still pending, needs to be resolved urgently
International shipping – unlike land-based industries, which are regulated mainly through national legislation – requires global regulations if it is to function, as it has done for centuries, as the principal vehicle for the movement of global trade. Indeed, shipping is perhaps the most international of all the world’s major industries – and this is demonstrated by the diversity of national interests that may be involved in the design, building, ownership, operation and crewing of a typical ocean-going merchant vessel, not to mention the finance and insurance aspects, nor yet the cargo ownership. Most ships spend their working lives travelling between different countries, different continents and different legal jurisdictions, very often far away from the country of their registry, as they carry the raw materials, goods and products that underpin the global economy.
Ships are competing in a single global market and must be regulated at the global level for the regulations to be effective. Accordingly, a future GHG regime for international shipping must not negatively affect sustainable development, especially in developing countries, and should not lead to distortion of international competition and create new barriers in international trade.
To these ends, therefore, IMO has been energetically engaged in the development of a robust regime to control GHG emissions from ships that will regulate international shipping at the global level and thus contribute to the stemming of climate change and ocean acidification and, at the same time, contribute financially towards combating climate change in developing countries.

31. MARPOL Annex VI coverage
Number of flag States
Gross tonnage
Total
World total
162
957,981,010
100%
Annex VI countries 64
861,474,101
89.96%
Based on a proposal by its Chairman, the Committee agreed that an expert group should be established to undertake the feasibility study and impact assessment of the proposed mechanisms called for by the work plan.
The scope of the feasibility study and the impact assessment is to identify for each proposed MBM the reduction potential on GHG emissions from international shipping, as well as its impact on world trade and sustainable development, on the shipping industry and on the maritime sector in general, giving priority to the maritime sectors in developing countries.
The study/assessment will also review the practicability of implementing the various options and provide information on how the difference in capability in developing and developed states, as well as the special needs and circumstances of developing countries, can be addressed by the different proposals.

32. Non-Annex VI countries
Breakthrough at IMO
Adopted by majority as full consensus could not be reached despite strenuous efforts, however no division between developing and developed countries (Non-Annex I/Annex I).
The majority of developing countries eligible to vote supported the adoption, including all LDC and SIDS
Number of countries
Gross tonnage
Total
Yes 49
757,412,533
79.06% No 5
97,083,482
10.13%
Abstain 2
4,877,396
0.51%
Not present 8
4,448,076
0.46%
Non-Annex VI countries 98
96,506,909
10.04%
World total
162
957,981,010
100%

33. Will the EEDI and SEEMP be enough?
They probably would if demand for shipping stopped growing. BUT…
-World trade is likely to keep increasing
-Emerging economies generate need for shipping
-Developing countries depend on sea transport for development
So, the reductions achieved by EEDI and SEEMP may be offset by increase in world trade and need for sea transport
That’s why we need a market-based measures

34. Market-based reduction measures – MBM
An MBM under IMO would serve two main purposes
An economic incentive for enhanced energy-efficient both trough design and operation (in-sector reductions)
Off-setting in other sectors (out-of-sector reduction)
10 MBM proposals by governments and NGOs under review
Charges, ETS, Efficiency based, Incentive Schemes, Rebate Mechanism
Three main streams:
GHG Fund: Offsetting above a target line
ETS: 100% auctioning (global/national)
- remaining proceeds: R&D, TC, improve port/maritime infrastructure in developing countries, Climate Finance
Efficiency based (EEDI): Closed trading of credits

35. MBM Expert Group established by MEPC 60
The analysis of the proposed MBM addressed, inter alia:
Environmental effectiveness, cost-effectiveness and potential impact on trade and sustainable development
Incentives to technological change and innovation
Practical feasibility and the need for technology transfer to and capacity building within developing countries, mobilizing climate financing
Relation with other conventions (UNFCCC, Kyoto Protocol and WTO) and compatibility with international law and IMO’s regulatory framework
Additional administrative burden and legal aspects for National Administrations
The potential additional workload, economic burden and operational impact for individual ships, the shipping industry and the maritime sector

36. MBM Expert Group established by MEPC 60
Developed methodology to asses, inter alia, possible impacts on end consumers and selected industries, in particular in developing countries, and analyzed 10 MBMs proposed by Governments/ NGOs
Selected commodities and trades:
Iron ore (Dirty Bulk) – Crude oil (Tankers) – Grains (Clean Bulk) – Clothing and furniture (Container)
Assumptions and growth scenarios:
Size and composition of world fleet – growth scenarios (IPCC A1B: 1.65% and B2: 2.8%) – fuel and carbon prices – uptake of technology – etc.
Elasticity estimates of freight rate to fuel price increase:
Source
Clean Bulk
Dirty Bulk
Tanker
Container
IMO (MBM-EG)
0.25
0.959
0.324
0.116
UNCTAD -
1.0
0.28
0.19 – 0.36
OECD

37. Nautical distance weighted by bilateral trade
MBM-EG concluded that those countries most affected would be those furthest away from their trading partners
Ad valorem maritime transport cost Australia
Cereals
Ores
Crude Oil
Manufactured
Impact 0.16%
11%
20%
13% 5%
Ad valorem maritime transport costs for Chile
Cereals
Ores
Crude Oil
Manufactured
Impact 0.26%
27%
20% 6% 5%
Average global increase in freight costs equal to a 10% fuel price increase by introducing MBM
Clean Bulk
Dirty Bulk
Tanker
Container
2.7%
9.8%
3.0%
2.0%

38. Vivid Economics estimates (average for all routes)
Impact Study by MBM-EG
Cost pass-through range from 10% cent to over 100%
- Great variations between different trades, e.g., ore/containers
Product market
Cost pass-through (%)
Wheat South Africa
10–40
Iron ore China* 52
Wheat Kenya
50–75
Furniture EU
60–90
Wheat Algeria
Apparel EU
Barley China
10–25
Crude oil South Korea*
111
Rice Philippines
5–20
Crude Oil US* 73
Maize Saudi Arabia
90–100
Shipping market
Vivid Economics estimates (average for all routes)
UNCTAD estimates
Panamax grain
0.19
N/A
Capesize ore
0.96
1.00
Containers
0.12
VLCC
0.37
0.28

39. Emission reductions in 2030 Modelled emission reductions across various scenarios
SECT
VES
Bahamas
GHG Fund
LIS
PSL
ETS (Norway France)
ETS (UK) RM
Mandatory EEDI (Mt)
123 -
299
299*
MBM In sector (Mt)
106 -
142
14 - 45
1 - 31
32 -
153
29 -
119
27 -
114 68
MBM Out of Sector (Mt)
152 -
584
190 -
539
124 -
345
Total reductions (% BAU)
19 -
31%
13 -
23%
10 -
20%
40%
3 -
10%
2 - 8%
28%
Potential supplementary reductions (Mt)
45 -
454
104 -
143
232 -
919
917 -
1232
696 -
870
187 -
517
LIS and PSL were both modelled assuming a contribution or levy which is based on the carbon price. Greater in sector reductions from the LIS are a result of the refunds provided to good performing ships.
In contrast the lower in sector reductions from the GHG Fund are due a contribution rate which is lower than the carbon price. The contribution rate for the GHG Fund was assumed to be set at a level that would deliver enough revenue to purchase the required number of out of sector credits, plus an additional 10% to fund adaptation and R&D. The potential reductions that could be delivered from using these remaining proceeds for mitigation are shown for comparative purposes even though these proceeds were not assumed to be collected for mitigation.
The Jamaican proposal for the PSL did not specify how revenues would be used although the focal point indicated that a significant portion would be used for mitigation.
No out of sector reductions have been assumed for the MBM, but the potential for supplementary out of sector reductions from use of remaining proceeds is shown. This potential is greatest for the PSL as the proposal does not allocate any revenue to a particular purpose or purposes.
In terms of mitigation potential, the main difference between the ETS proposal by the UK and the other ETS proposals relates to how permits are proposed to be auctioned. Under the UK proposal it appears that auction revenues would remain with national governments so it has been assumed that this would not be available for out of sector mitigation or other climate financing, and hence potential reductions are shown as zero.
While the rebate mechanism and the ETS proposals would apply a price incentive based on the carbon price the range of modelled reductions is lower for the rebate mechanism due the influence of a price ceiling.
* Included if the mandatory EEDI is adopted by the committee

40. Potential climate change financing
Potential climate change financing* Modelled “remaining proceeds” across various scenarios
MBM
2020 ($ billion)
2030 ($ billion)
GHG Fund
4 - 14
LIS
6 - 32
PSL
SECT
VES
8 - 41
5 - 18
ETS (Norway, France)
ETS (UK)
Bahamas RM
* Excludes financing of out-of-sector emission reductions

41. Impacts of an MBM – Conclusions:
Impacts on consumers depend on stringency of MBM, e.g. the carbon price, if it is equal to a 10% increase in fuel price, it means a 2 – 10% increase in transport costs and an increase of 0.0 – 0.2% on end prices Trading distances - Market share Domestic Domestic production - Value-to-weight ratio Impacts on developing countries will vary by country independent of level of economic development. As a result, developing countries, especially SIDS and LDCs, should not be treated as a collective bloc in assessing impacts MEPC (65) will continue work on MBMs and on further impact studies with a view to select a suitable instrument in 2015

42. The needs and circumstances of developing countries in the context of climate finance
There will be impacts from introducing and MBM, but they will be dwarfed by increases in energy and food prices
Compensating affected consumers and industries cent by cent is not possible, a workable proxy is needed
An MBM is intended to drive behavioural change
– any compensation will undermine this purpose
To use 25 – 40% of revenues to compensate all developing countries by the same key will deprive the most vulnerable countries/peoples for large climate finance opportunities
A targeted approach needed where only those most affected will be compensated (threshold/GDP per capita)

43. IMO’s MBM impact study to continue
MEPC 65 (May 2013) will continue work on MBMs and on further impact studies, selection of instrument 2015
Impact on import costs = 10% fuel price
Australia
Chile
0.16%
0.26%
MBM cost in relation to world imports
Emissions
(Mt)
Costs
($billion)
Seaborne Imports
Costs/Imports
(%)
870
17.4
9.393
0.19%

44. To avoid this, CO2 emissions must peak within 10 – maximum 15 years
What is the consensus view
of the world’s most eminent scientists?
IPCC Fourth Assessment Report (FAR)
- A 1ºC to 2C increase in temperature above 1990 levels will place many unique and threatened systems, including many biodiversity hotspots, at significant risk.
A global mean temperature increase of more that 2C will lead to increasing risk of species extinction and climate havoc
The CO2 concentration must not exceed 450 ppm to keep the global warming within 2C above 1990 level by 2100
To avoid this, CO2 emissions must peak
within 10 – maximum 15 years

45. The World’s challenge: Increasing CO2 concentrations
Expected in 2100
The World’s challenge: Increasing CO2 concentrations
Today 2005
Source: IPCC FAR 2007

46. What is the world community doing?
First step: Adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992.
- Aimed at stabilizing atmospheric concentrations of greenhouse gases to avoid “dangerous anthropogenic interference” with the climate system.
Second step: Adoption of the Kyoto Protocol in 1997
Commits developed countries (Annex I Parties) to reduce their overall emissions by an average of 5.2% below 1990 levels between
Third step: Bali Action Plan – Copenhagen Accord – Cancun Agreements – Durban Platform (2011)
- Universal legal treaty covering all parties, to be adopted by 2015 and in force by 2020

47. UNFCCC debate on allocation of emissions from international shipping 1992 - 1997
1 No allocation
2 Proportional to national emissions
3 Fuel sales
4 Nationality of company
5 Flag
6 Route of vessel
7 Route of cargo
8 Country of origin of cargo
9 Emissions in territorial waters
Kyoto Protocol Article 2.2
“The Parties included in Annex I shall pursue limitation or reduction of emissions of greenhouse gases not controlled by the Montreal Protocol from … marine bunker fuels, working through … the International Maritime Organization, …”
MEPC 56 in July 2007 followed up the decision by MEPC 55 to update the “2000 IMO Study on Greenhouse Gas Emissions from Ships” and agreed to a time frame and Terms of Reference for the update. The IMO Secretariat is currently establishing a Steering Committee to assist the Secretariat and is soliciting voluntary financial contributions. It has started the tendering process for the study which will be undertaken by an international consortium of renowned research institutes.
A Correspondence Group was established by MEPC 56 with instructions to compile and consider different possible approaches on technical, operational and market based measures to address GHG emissions from ships. The Group will present a written report to MEPC 57 in March/April 2008 with a view to providing input to the ongoing considerations in accordance with the adopted GHG work plan.

48. Distribution of the world fleet March 2008
ships above 400 GT
Flag States
Number of ships GT DW
Annex I
33.4%
26.1%
22.82%
Non-Annex I
66.6%)
73.9%
77.18%
Article 1(b) of the IMO Convention
Encourage removal of discriminatory actions … promote the availability of shipping without discrimination … not be based on measures designed to restrict the freedom of shipping of all flags ..;
International shipping – unlike land-based industries, which are regulated mainly through national legislation – requires global regulations if it is to function, as it has done for centuries, as the principal vehicle for the movement of global trade. Indeed, shipping is perhaps the most international of all the world’s major industries – and this is demonstrated by the diversity of national interests that may be involved in the design, building, ownership, operation and crewing of a typical ocean-going merchant vessel, not to mention the finance and insurance aspects, nor yet the cargo ownership. Most ships spend their working lives travelling between different countries, different continents and different legal jurisdictions, very often far away from the country of their registry, as they carry the raw materials, goods and products that underpin the global economy.
Ships are competing in a single global market and must be regulated at the global level for the regulations to be effective. Accordingly, a future GHG regime for international shipping must not negatively affect sustainable development, especially in developing countries, and should not lead to distortion of international competition and create new barriers in international trade.
To these ends, therefore, IMO has been energetically engaged in the development of a robust regime to control GHG emissions from ships that will regulate international shipping at the global level and thus contribute to the stemming of climate change and ocean acidification and, at the same time, contribute financially towards combating climate change in developing countries.

49. Shipping under UNFCCC
Consultations in UNFCCC is slow and has not lead to an agreed text as
there are three challenging obstacles:
How should the balance between the basics principles under the two conventions be expressed in the new treaty text (UNFCCC and its fundamental CBDR principle, and on the other hand, the IMO constitutive Convention with its non discriminatory approach)?
Should the new UNFCCC treaty state how revenues from a market-based instrument for international shipping under IMO should be distributed and used (climate change purposes in developing countries)?
Should a reduction target be set for international shipping, and if so, what should the target be and should it be set by UNFCCC or IMO?
No text on international shipping in the Durban outcome other than to continue address the issue

50. Links with and effects on UNFCCC negotiations
As the regulations address ships and not States, and as they do not impose any reduction obligations, quantified or otherwise, on States, as well as the fact that the cost of introducing EEDI/SEEMP will be borne by the industry, there are no incompatibility issues with UNFCCC Kyoto Protocol’s Article 2.2 is still interpreted differently by Parties Did adoption of mandatory T&O by MEPC 62 settle the issue? Disbursement of revenues from an MBM for international shipping under IMO is seen by many as a way to accommodate both sets of principles under the two conventions: - CBDR under UNFCCC and non-discrimination under IMO An MBM for international shipping could be a predictable source to the Green Climate Fund and thereby facilitate the UNFCCC negotiations

51. Climate Finance under UNFCCC
The Copenhagen Accord noted the need for climate finance
$30 billions annually 2010 – 2019 and $100 billions annually from 2020
The AGF report highlighted international shipping as a suitable and predictable source for climate change funding.
$ 3 – 8 billions from international shipping – work should continue in IMO
The Cancun Agreements agreed a process to establish the Green Climate Fund which was formally established in Durban and made operational by 2012 under the World Bank, process to identify funding sources in 2012
G-20 requested WB/IMF to explore potential sources
Report to be considered by Ministers of Finance early November for submission to Durban. Elaborates on possible approaches but focuses on taxation not on the combined effect of an MBM: reduction and finance

52. Durban outcome affecting IMO’s work
Reported in MEPC 63/5/5
The mandate of AWG-LCA extended by another year
International transport part of mitigation under Sectoral Approaches
Seven options for text on international transport in new treaty or COP decision
Establishment of the Green Climate Fund
Work programme under LCA to identify sources (public and private)
Several proposals to use international shipping as source (AGF and G20)
Direct links with IMO’s MBM work – proposed text on “no net incidence”
Agreement on Carbon Capture and Storage as CDM
Sub-seabed carbon storage regulated by the London Protocol
Based on a proposal by its Chairman, the Committee agreed that an expert group should be established to undertake the feasibility study and impact assessment of the proposed mechanisms called for by the work plan.
The scope of the feasibility study and the impact assessment is to identify for each proposed MBM the reduction potential on GHG emissions from international shipping, as well as its impact on world trade and sustainable development, on the shipping industry and on the maritime sector in general, giving priority to the maritime sectors in developing countries.
The study/assessment will also review the practicability of implementing the various options and provide information on how the difference in capability in developing and developed states, as well as the special needs and circumstances of developing countries, can be addressed by the different proposals.

53. Summary - IMO’s GHG Work
Mandatory technical and operational measures adopted in July 2011 – in force 1 January 2013
Important step - Energy efficiency standard for new ships, operational measures for all ships - Significant reductions
MBM for international shipping under IMO
Continued development - Possible adoption of treaty in 2015
Climate Finance and the Green Climate Fund may be the key to unlock the UNFCCC/IMO deadlock
Application to all ships via IMO is the only way to raise revenues from international maritime transport (precedence in IOPC)