1. Shipping and the Environment GHG Emissions from Ships A Industry’s Perspective by Manager Research and Projects Cyprus - 20 May 2009 The European Maritime Day
INTERTANKO is the International Association of Independent Tanker Owners INTERTANKO has been the voice of independent tanker owners since 1970, ensuring that the oil that keeps the world turning is shipped safely, responsibly and competitively. Membership is open to independent tanker owners and operators of oil and chemical tankers, i.e. non-oil companies and non-state controlled tanker owners, who fulfil the Association's membership criteria.  Independent owners operate some 80% of the world's tanker fleet and the vast majority are INTERTANKO members. The organisation has 270 members, whose combined fleet comprises more than 2,700 tankers totalling 225 million dwt, which is 70% of the world's independent tanker fleet. INTERTANKO's associate membership stands at some 300 companies with an interest in shipping of oil and chemicals. INTERTANKO is a forum where the industry meets, policies are discussed and statements are created. It is a source of first-hand information, opinions and guidance. INTERTANKO has a vision of a professional, efficient and respected industry, that is dedicated to achieving Safe transport, cleaner seas  and free competition.
INTERTANKO industry spokesperson
The strong support that INTERTANKO enjoys allows it to speak authoritatively and proactively on behalf of tanker operators at international, regional, national and local level. It is also able to maintain a 26-strong secretariat and a network of 14 committees and four regional panels that coordinate an extensive work programme that comprises more than 50 agenda items. Governments and shipping regulators have taken a closer interest in tanker shipping in recent years. INTERTANKO has responded by establishing, strengthening and maintaining relationships with legislators on all levels, working with them to ensure a fair and equitable distribution of the responsibilities and liabilities involved in carrying oil and chemicals by sea. Underlining its commitment to representing its members where key decisions are made, INTERTANKO opened offices in Singapore and Washington DC in 1999, in addition to its principal offices in Oslo and London. Within the shipping industry itself, INTERTANKO participates in discussions within the International Maritime Organisation (IMO) where we have NGO status and the International Oil Spill Compensation Fund.  In addition, it has consultative status at the United Nations Conference on Trade and Development. Oil and its derivatives will remain the world’s most critical commodity in the foreseeable future and tankers will be needed to distribute it to where it is needed.  As long as tankers are vital to this distribution INTERTANKO will provide leadership in the development and implementation of industry standards and practices, and international regulations  for maritime safety and environmental protection.
Erik Ranheim has been with INTERTANKO for 25 years and has been involved in both the technical and commercial aspects of tankers shipping. He is an economist and has also sailed as an officer in the merchant navy. He has been involved in both technical and commercial issues and has written several INTERTANKO publication on specific topic related to the tanker market and the tanker industry.

2. The Challenges The world demands greener shipping
Emission from shipping is dirty and harmful for the health and the environment
Annex VI now in place
GHGs emission from shipping is not directly regulated under the Kyoto protocol
IMO assumed to regulate GHG emission
Shipping recognizes that action is necessary

3. Notes
Basics?

4. Backdrop World focus – basic crises
Food / resources crises
“If anything, international trade has reduced the price of food over the years through greater competition, and enhanced consumer purchasing power." WTO Director-General Pascal Lam
Economic crises
It is widely recognized that trade stimulate world economic growth, which is regarded to be necessary to avoid a:
Climate crises
Which easily can create a vicious circle of resources and economic crises
Catch 22 - conflicting interests?
Shipping in the middle with few friends?

5. World trade by shipping by type cargo
bn tonne miles
Source: Fearnleys

6. Trends – Co2 emission, energy use, global trade
Index
In general the CO2 emission has developed in line with energy consumption, which again has developed according to the population the growth in the population.
Over the last years oil consumption has developed stronger that the population growth because the strong economic growth in large countries such as Russia, India and in particular China .
Cos emission has also developed stronger than energy consumption because coal increased its part of energy consumption.
The strong growth in seaborne trade can firstly be attributed to the strong import to China of raw materials and the strong growth in finished good from China to Europe and the US.
There has been strong growth in shipping
Source: Fearnleys/INTERTANKO

7. World primary energy demand IEA the Reference Scenario
1000 million tonnes oil equivalents
Source: IEA

8. Engine break specific fuel consumption
g per kWh
Source: Lloyd’s Register
Fuel efficiency in shipping has has improved

9. CO2 Emissions per Unit Load by Transport Mode
Large Tanker
Large Containership
Railway
Coastal Carrier
Small-size
Commercial Truck
Airplane
Standard-size
100
200
300
400
398
226 49 11 6 3 1
Units Relative
Shipping energy efficient
Source:Ministry of Land, Infrastructure and Transport (Japan): The Survey on Transport Energy 2001/2002 MOL (Japan): Environmental and Social Report 2004 9 9

10. Everybody must reduce emission
CO2 emission does not mean much unless related to the size of the company and the nature of its operation
Shipping represents only some 3% of GHG emission,
but
Emission is made up a multitude of small contributors
Shipping carries ~ 80% of goods transported and volumes shows an increasing trend
and
The challenge is, therefore, to reduce emission by improving efficiency without unduly affecting trade

11. The Stern Report Lord Stern of Brentford
Conclusions:
Human-caused alterations to the global climate may result in reductions of global GDP of anywhere from 5 to 20% per year
Current global economic crisis shows how a relatively small reduction of output, such as 1 - 2% of GDP, may already have considerable implications for trade
Climate change may initially have small positive effect, but longer term the effects will be very damaging. The benefits of strong, early action outweigh the costs.
Policy of action to be based on 3 elements:
Technology
Behavioural change
Carbon pricing
Lord Stern of Brentford
Later the situation is believed to be much more serious that outlined in The Stern Report

12. Shipping’s tools to reduce GHGs?
Technology
Design index
Ship Efficiency Management Plan
Behavioural change
Operational index
Cooperation with charterers
Improving logistics
Pricing of carbon
Emission trading Scheme (ETS), to stimulate entrepreneurship?
Levy
Compensation fund
No general agreement on MBIs

13. CO2 reduction – Trade increasing
% increase if
no efficiency
measures taken
World Fleet Energy Consumption
Bridgeable gap??
% absolute reduction onshore
On-shore target
Reference

14. Ship sizes and emission 400 GT and above
GT ships CO2 emission from ships
> ,000 ~ 90%
> ,000 ~ 87%
>2, ,000 ~ 80%
>10,000 16,000 ~ 67%
Source: DnV

15. Fair to the 3rd world Energy (oil equivalents) consumption and CO2 emission per capita (not including hydro or nuclear)
Oil equivalents/capita
CO2 emission /capita
.. the only serious defensible principle is equal emission rights per capita, adjusted for past emissions.
Source: IEA

16. The options to reduce GHG emission
Notes
The options to reduce GHG emission

17. Energy Efficiency Design Index - EEDI
Require a minimum energy efficiency of new ships
Stimulates technical development
Separates technical and design based measures from operational and commercial measures
Compares the energy efficiency of an individual ship to similar ships which could have taken its cargo
Wide support in IMO, except some developing countries*
Supported by INTERTANKO
Sea trial Esther Spirit
You cannot manage what you cannot measure
To be based on, installed power, specific fuel consumption, correction factors to account for specific design elements, speed, dwt, the contribution from auxiliary machinery EEDI = Fuel consumption / cargo x distance
* Wants “common but differentiated responsibilities” agreed under UNFCCC and the Kyoto Protocol.

18. The CO2 operational index
An instrument for evaluating quantitatively the effect of operational fuel efficiency measures, such as speed reduction or optimum navigation
Charterers great influence
Necessary to evaluate SEMP
Not immediately mandatory
No direct link to design index

19. Cap-and-trade
The quotas system has already contributed with investments in the non-Annex I countries which will reduce of CO2 emission by 1,800 m tonnes (1.2% annually) for the period
Word emission ,000 m ts, today some 30,000 m ts
CO2 has become a commodity and CO2 trading a multi billion (€50 bn) industry
Carbon Point

20. Cap-and-trade not enough?
For the period until 2012 so many allowances are given that CO2 price will be zero, for the period , tighter, average prize some €35/tn
According McKinsey $75 per tn is necessary to make a sufficiently number of emission reduction initiative profitable, $45/tn expected and this will only cause half the needed reduction
Legal requirements necessary to limit emission from certain sectors, in addition to
Public support to emission reducing measures
Jørgen Randers Professor
Professor at the Norwegian School of Business Asdministation

21. Aviation ETS scheme All* flights to/from EU included as of 2012
Reduction %, later 5% cut p.a.**
Operators must submit plans by
Use of revenues generated by auctioning allowances decided by EU by members
Complemented by technical/ operational CO2 reducing measures
Further unilateral and other agreements on global measures to reduce greenhouse gas emissions from aviation.
On 7 October the Environment Committee of the European Parliament called for shipping to be included in the revision of the European Union's Emissions Trading Scheme (EU-ETS).
After the publication of the Directive on the inclusion of aviation in the EU-ETS on 13 January 2009 it is now increasingly becoming clear how the system will work in practice: 
1.      On 11 February the Commission published a provisional list of aircraft operators, which will be covered by the Directive. This list will be updated on an annual basis and allocates each individual aircraft operator to a single Member States. Member States are responsible for those operators to which they have issued an operating license and for those operators, whose emissions in 2006 where mostly attributable to that Member State.
2.      Operators must develop plans for Monitoring, Reporting and Verification (MRV) of their Revenue/Tonne-KM data (RTK) and total fuel use data for flights into, out of, or within the EU during They must submit this data to the regulator by 30 March 2011 in the form of an Annual Emissions Report (AER) to apply for the allocation of free allowances.
3.      In December 2011 the regulator publishes the final allocation of allowances for each operator. Allowances are allocated on 28 February 2012 and the first operative year of the ETS for aviation begins on 1 March 2012.
4.      The Competent Authorities of administering Member States will supervise and enforce the requirements of the ETS Directive and the Decision on the Monitoring, Reporting and Verification of Greenhouse Gases. I.e. they ensure that operators submit their monitoring plans (due 31 July 2009), verified tonne-kilometre report and AER.
5.      Verification bodies must verify data in the 2010 tonne-kilometre report submitted by operators and emission data in the AER (first one due on 31 March 2011).
6.      Accreditation bodies supervise the work of the verification bodies.
* smallest planes excluded
** Reduction target based of average emissions
Europe basis for shore based ETS - decided aviation ETS - shipping next?

22. ETS pros and cons -
Marine ETS still at conceptual stage, allowance allocation and/or auctioning needs to be defined
Will require definition of a ‘CAP’
Fluctuating carbon market price introduces investment uncertainty for GHG reduction technology.
Requires set-up of trading administration and agreement on an effective monitoring, verification and enforcement system.
Effective enforcement will require the set up of a data exchange process involving all participating states.
Requires strict investment criteria and monitoring of fund expenditure.
‘Critical mass’ of Annex 1 and non-Annex 1 countries must be signatory to be effective
Shipping very fragmented compared to current onshore and aviation ETS +
Contributes to reduced CO2 emission by definition,
Links shipping into onshore/aviation ETS
Market based pricing of carbon
Direct purchase of CO2 units from Administrator reduces opportunity for evasion.
With enforcement by port states, implementation can initially be limited to Annex 1 countries (80% of world trade).
Equal treatment of international trading vessels > 400 GRT regardless of ownership, flag state, or port of origin.
Enables ship operators to invest-or-buy
Dynamic- may stimulate entrepreneurship
Little understood by shipping people, some support from shipping (Belgian, Italian, Norwegian, Swedish and UK Shipowners’ Associations)
Source: OCIMF with some adaption

23. Reducing global warming
A global problem, to be addressed globally.
A long-run problem, the long-run levels of atmospheric concentrations of greenhouse gases more important than the level of emissions in any particular year, as with
The costs of reducing the level of emissions will be much lower if it is done efficiently, i.e. comprehensiveness, covering all sources of emissions, countries and ways of reducing atmospheric carbon concentrations. Then two conditions should be met:
we need a global agreement, and a global agreement will require equitable burden sharing.
The shadow price of carbon should be approximately the same in all uses, in all countries, and at all dates
A system of taxes on carbon (that would operate like the VAT), would be a better approach than the "Cap and Trade" system of carbon trading
Joseph Stiglitz Nobel prize economics
Professor at Columbia University (United States) Formerly Chief Economist at the World Bank

24. Reducing global warming
On the "Cap and Trade" system, was easy to implement for major sources of emissions, but harder to implement for the multitude of small sources. It is also giving rise to distortions and transactions costs. A key issue is how to allocate emission rights, which are a valuable asset, worth perhaps $2 trillion annually (or 5% of global GDP). This issue has become a major stumbling block in reaching a global agreement, and the attempt to avoid taking on full implications of this issue is one of the reasons for distortionary policies (or for carbon in different uses being priced differently).
Joseph Stiglitz Nobel prize economics
Professor at Columbia University (United States) Formerly Chief Economist at the World Bank

25. GHG Compensation Fund pros and cons+
Contributes to reduce emission as fund is to be used to buy emission reduction credits, and to stimulate the development of and the use of emission reduction technology
Equal treatment of international trading vessels > 400 GRT regardless of ownership or flag state
Conceptually simple to implement
Provides ship owner some certainty over costs
Use of bunker delivery note as evidence of payment facilitates enforcement.
Accuracy of the bunker oil consumption baseline will improve as global compliance is achieved.
Data can be used for Annex VI supply/demand studies.
Introduces an ‘invest-or-pay’ concept -
May not reflect the price of carbon.
Requires monitoring and adjustment of levy to achieve desired outcome.
‘Critical mass’ of major bunker supply countries must be signatory for effective implementation.
Issues of principle, governance and administration need to be resolved.
For reductions in GHG emissions to be achieved, strict investment criteria and monitoring of fund expenditure are required.
Setting the contribution level to the fund is subject to political pressures.
The complexity of the bunker supply chain makes collection of funds by the Administrator unlikely to be 100% effective.
Once introduced, a levy is unlikely ever to be removed even if the CO2 reduction target is achieved – regarded as tax
No current precedence
Supported by BIMCO, INTERCARGO, JSA, MAS, HKSOA, UGS and INERTANKO under certain preconditions
a tax is “a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc”,
Source: OCIMF with some adaption

26. Gasoline price at the pump
Dollar per litre
Levy

27. GHG Fund proposed by Denmark
Mitigation/Adaptation project
R&D for highly efficient ships
IMO-TC
International GHG Fund
Contributions
( per unit fuel)
Contributing to the adaptation of
developing countries and to investment
to reduce CO2 emission
(Compatibility of CBDR principle and
uniform application of rules )　

28. MBIs - INTERTANKO PRINCIPLES
1. Effective in contributing to the reduction of total GHG - funds collected be used to buy credits in accordance with JI & CDM.
- stimulate leading energy efficiency technologies - stimulate innovation and R&D
- encourage terms and conditions to improve logistics
2. Environmentally sustainable without negative impact on global trade and growth and should: - be cost effective
- be able to limit distortion of competition
- give credit for actions already taken which have already resulted in GHG reductions
3. Comprehensive, efficient, transparent and credible enforcement & monitoring
- ship specific and based on actual fuel burned
- governed by IMO
- binding and equally applicable to all ships
- practical, transparent, fraud-free and easy to administer - able to demonstrate compliance through proper monitoring
- certainty & predictability of the scheme

29. Other initiatives to reduce GHG emission
It is extremely difficult for the industry to identify the appropriate solutions without knowing what the ultimate target reduction levels were. It was anticipated that these levels might be established at the United Nations Framework Convention for Climate Control (UNFCCC) meeting that would be taking place in Copenhagen in December. Also of concern was the position of developing nations that only the ships of developed nations should be required to implement greenhouse gas reduction measures. In this regard Mr. Swift pointed out that the industry established guiding principles included “be binding on and applicable to all ships, be cost effective and not distort competition.” The panel requested to be kept informed on developments on this issue that would be taking place at the 59th session of the IMO Marine Environment Protection Committee meeting in July.
Other initiatives to reduce GHG emission

30. Ship Efficiency Management Plan SEMP
SEMP for each ship in operation
SEMP to contain:
Best practices to save energy
Voyage optimization
Propulsion Resistance Management Programme
Other technical/operational measures
Voluntary Operational Index (for each voyage & over a period of time/voyages)
When IMO SEMP guidelines completed, INTERTANKO will based on this work out SEMP for tankers by pooling information

31. Industry initiatives Ship efficiency management plan
OCIMF “Energy Efficiency and Fuel Management” – an appendix to TMSA 2*
OCIMF opens for consideration of c/p clauses to optimise the voyage and other operations to save energy during transportation
*TMSA Tanker Management Self Assessment

32. Best Practices
Advice, input:
*Class
*Charterers
*Yards
*Other owners
*Others
Participation from a wide range of tankers
Applicability/ effectiveness
Dynamic continuous improvement
INTERTANKO
Membership
3,100 tankers
Various, individual measures
Monitoring, assessment
Adjustment/corrective action
Depend on fleet characteristics
INTERTANKO a forum for sharing information and experience

33. Notes
Conclusion

34. Conclusions on emission to air
Shipping wants to be proactive and reduce emissions
Annex VI – industry initiative using cleaner fuels also reduce GHG emission (alt. abatement technology)
Reducing GHG emission
High costs for marginal effects on existing ships
ETS - large part of shipping sceptical, shipping expected to mainly be a buyer of credits
Levy - many governments sceptical (taxation), no precedent world wide
SEMP main mean to reduce emission from existing ships
Shipping prepared to contribute but shipping involves more than just the owner/operator – there is a chain of responsibility

35. Cypriot oil tanker "Haven" burning in the Gulf of Genoa
The sea get sick, but it never dies
Healing is a matter of time,
But also of opportunity
Greek proverbs
Thank you

36. It is extremely difficult for the industry to identify the appropriate solutions without knowing what the ultimate target reduction levels were. It was anticipated that these levels might be established at the United Nations Framework Convention for Climate Control (UNFCCC) meeting that would be taking place in Copenhagen in December. Also of concern was the position of developing nations that only the ships of developed nations should be required to implement greenhouse gas reduction measures. In this regard Mr. Swift pointed out that the industry established guiding principles included “be binding on and applicable to all ships, be cost effective and not distort competition.” The panel requested to be kept informed on developments on this issue that would be taking place at the 59th session of the IMO Marine Environment Protection Committee meeting in July.
Appendices

37. Leveraged Incentive Scheme for GHG Fund (proposed by Japan)
Labeling
(Evaluation of efficiency improvement)
Mitigation/Adaptation project
R&D for highly efficient ships
IMO-TC
Refund
(based on
evaluation)
[ 60% ]
[ 40% ]
Assistance to infrastructure development
International GHG Fund
Contributions
( per unit fuel)
Human Resource development
Recycling capacity building
Leveraged Incentive for
Efficiency Improvement
(improvement effort will be rewarded
in the form of refund.
Contributing to the adaptation of
developing countries and to investment
to reduce CO2 emission
(Compatibility of CBDR principle and
uniform application of rules )　

38. ETS proposal for the shipping industry
suggested by SEAaT
UNFCCC
EU ETS
IMO
Central Registry
Flag
Ship
DOC
Fuel Quantity
CO2 Emissions
Allowances
Verifier
Shipping Companies
Fuel Input
Other Entities
Countries
Quantity
Carbon Factor
Surrender Allowances
ISM Audit
Carbon Management process
Global Sectoral Report
Allocate allowances to Industry
Grant allocation to ships
Other Shipping Companies
Buy & Sell credits
Ships can buy AAUs from Countries via the IMO
Ships can buy CERs & EUAs direct from other entities
Shipping companies can invest directly in CDMs and JIs

39. How would this work on a shipping company level?
(suggested by SEAaT)
Start of compliance period
Allocation to industry
UNFCCC
IMO
Allocation to company e.g 1000 tonnes based on fleet shape
During the compliance period
Shipping Company
Operates fleet within 1000 tonnes allocation
100 tonnes
400 tonnes
200 tonnes
300 tonnes
Bulk carrier
Ro-Ro
Aframax
VLCC
Actual 150 tonnes
Actual 150 tonnes
Actual 250 tonnes
Actual 450 tonnes
End of compliance period - reporting
Total allocation = 1000 tonnes
Total actual emissions = 1000 tonnes
Therefore no credits to sell or buy

40. Best practice on tanker emissions & energy efficiency
1. Programme for measuring and monitoring ship efficiency
2. Voyage optimization programme
Speed selection optimization
Optimised route planning
Trim optimization (ESP 2 - 4%)
3. Propulsion Resistance Management Programme
Propeller Resistance
Hull Resistance (ESP 1 - 6%)

41. World primary oil demand IEA the Reference Scenario
mbd
Source: IEA