KLIMAGASSUTSLIPP FRA SKIP og IMOs REGULERINGSPROSESS

1. KLIMAGASSUTSLIPP FRA SKIPogIMOs REGULERINGSPROSESS Terje C. Gløersen Norges Rederiforbund MNT-Forum Oslo, 16. oktober 2008

2. OVERVIEW • - The problem and the challenge • - Marine bunker consumption and emissions from shipping – past, present and future • - CO2-efficiency of shipping and the reduction potential • - The regulatory process – international and regional

3. THE PROBLEM AND THE CHALLENGE • The Problem • The anthropogenic GHG emissions are causing an unprecedented rapid temperature increase overlaying the non-anthropogenic variations which poses serious threats to our climate. • The Challenge • To prevent dangerous and irreversible climate changes, the GHG emissions must be reduced to limit the global temperature increase, preferably according to stabilisation level I as defined by the IPCC giving a temperature increase of 2.0 to 2,4º C above the pre-industrial level. To achieve this, CO2 emissions must be reduced by 50 to 85 % within 2050 relative to 2000.

4. GREENHOUSE GASESCOVERED BY THE KYOTO PROTOCOL

5. MARINE BUNKER CONSUMPTIONANDEMISSIONS FROM SHIPPINGPAST, PRESENT AND FUTURE

6. COMBUSTION PROCESS • 1 ton of fossil fuel produces 3,1(HFO) to 3,2(MGO/MDO) tons CO2 when combusted • (using figures from 2006 IPCC Guidelines) • Fossil fuel, consisting mainly of Carbon (C) and Hydrogen (H) with an average mol weight in the range 13,8 to 14,2, reacts with O2 to produce CO2 (with a mol weight of 44) and H2O

7. MARINE FUEL OIL CONSUMPTION

8. CONSENSUS ESTIMATES FOR CO2

9. GHG-EMISSIONS FROM TRANSPORT14% of global GHG-emissions (Carry 90% of world trade)

10. GROWTH IN WORLD SEABORNE TRADE AND MERCHANT FLEET (index based) 3,8 % p.a. 3,4 % p.a. 2,5 % p.a.

11. CO2-EFFICIENCY OF SHIPPINGANDTHE REDUCTION POTENTIAL

12. CO2-EFFICIENCIES IN TRANSPORT

13. EXAMPLE OF IMPROVEMENTContainer transportation • Energy consumption for transport of loaded containers from the Far East to Europe: • 1970 200 g/TEU nm (diesel engine) • 1976 196 g/TEU nm (steam turbine) • 1980 120 g/TEU nm (diesel engine) • 1983 110 g/TEU nm • 1988 70 g/TEU nm • 1996 50 g/TEU nm • 2007 25 g/TEU nm ? (subject average weight) • 75% reduction during 26 years up to 1996, corresponding to an average annual reduction rate of 5,4%.

14. EXAMPLE OF IMPROVEMENTSFOC of marine 2-stroke engines Source: MAN Diesel

15. REDUCTION POSSIBILITIES • Technical measures (eg. hull design, propulsion system, engines, etc.) • Operational measures (eg. cargo utilization, speed, routing, etc.) • Cost of fuel has been the main driving mechanism for developing and implementing more energy-efficient and thus CO2-efficient technical and operational measures. • There is still a considerable potential for more CO2-efficient measures, but these are generally not cost-effective with the present fuel cost.

16. THE REGULATORY PROCESSINTERNATIONAL AND REGIONAL

17. THE INTERNATIONAL PROCESS • It is generally accepted, also by the shipping industry, that: • Despite the low CO2-footprint of sea transportation relative to other transport modes, also international shipping need to be covered by some control mechanism as agreed in Article 2.2 of the Kyoto-protocol, not least because of the projected (and welcomed) growth in world trade and thus sea transportation.

18. KYOTO PROTOCOL • Kyoto Protocol adopted on 11 December 1997. • Article 2.2: • The Parties included in Annex I (note: of the UNFCCC) shall pursue limitation or reduction of emissions of greenhouse gases not controlled by the Montreal Protocol from aviation and marine bunker fuel, working through the International Civil Aviation Organization and the International Maritime Organization, respectively.

19. THE IMO-PROCESS SO FAR • Sept. 1997 A resolution is adopted requesting IMO to consider reduction strategies • March 2000 IMO study of GHG-emissions published • Dec. 2003 IMOs Assembly adopts policies for further work • July 2005 Guidelines for CO2-indexing adopted by MEPC 53 • Oct. 2006 MEPC 55 adopts a revised work plan and timetable including deciding to carry out a new in-depth study

20. THE GOAL OF THE IMO-PROCESS • To agree a regulatory mechanism for CO2-emissions from international shipping at MEPC 59 in July 2009.

21. FOCUS OF DISCUSSIONS • Technical & Operational measures available to the shipping industry • Possible recommendatory measures from IMO • Mandatory regulatory measures • Principles for mandatory measures

22. PRINCIPLES FOR A FRAMEWORK (1) • Effective in contributing to the reduction of total global greenhouse gas emissions • Binding and equally applicable to all flag States in order to avoid evasion • Cost-effective • Able to limit – or at least – effectively minimize competitive distortion • Based on sustainable environmental development without penalizing global trade and growth

23. PRINCIPLES FOR A FRAMEWORK (2) • Based on a goal-based approach and not prescribe specific methods • Supportive of promoting and facilitating technical innovation and R&D in the entire shipping sector • Accommodating to leading technologies in the field of energy efficiency • Practical, transparent, fraud free and easy to administer

24. POSSIBLE REGULATORY MEASURESto limit or minimize the CO2-emissions • Direct measures (standards) • Technical requirements (prescribed technical solutions) • Operational requirements (prescribed operational parameters) • Performance requirements (prescribed CO2-index/benchmark) - Design index (based on fixed design parameters)- Operational index (based on actual performance – IMO-index) • Indirect measures • Different types of market-based measures providing economic incentives to minimize the CO2-emissions.

25. SOME MARKET-BASED MEASURES • Include shipping in an emission trading system - cap & trade(open or closed, regional or global, different allocation methods) • Paying a levy or charge for CO2-emissions - cap & charge(pay via fuel price or separately to an international fund) • Differentiation or incentive systems representing carrots or sticks depending on a ship’s design or operational performance • Allocation of emission from ships to states(for example to import countries – effect depends on the measures adopted by the individual states and could thus differ from country to country)

26. PRELIMINARY ASSESSMENTDIRECT REGULATION - STANDARDS • - The common IMO-methodology and simple to administer • - Prescriptive technical or operational requirements will not stimulate innovation and cost-effectiveness • - An operational index can only be determined in retrospect and cannot be used separately • - To define a minimum design index will require a large number of benchmarks as it varies with ship type and size

27. PRELIMINARY ASSESSMENTCAP & TRADE (ETS) • - Allocation should be made in such a way as to avoid distortion of competition (auctioning) • - The cap should be open to allow for growth in world trade (combined with other ETS) • - A possible lower limit of ship size to simplify • - Should be linked to UNFCCC, possibly as a separate sector (“country”) • - Ideally most cost-effective for society - same rules for all sectors • - Administrative complicated ?

28. PRELIMINARY ASSESSMENTLEVY/CAP & CHARGE • - A charge on fuel purchases or a periodically payment based on fuel consumption • - The charges are channelled to an international fund under the control of IMO • - Fund to buy CO2-allowances and support adaptation measures, which may win the support of developing countries • - Same effect as cap & trade (based on full auctioning) if charge is equivalent to the CO2-quota price • - Simpler to administer than cap & trade

29. NORWEGIAN & NSA POSITION • Advocates a special Emission Trading System as the overall most effective regulatory measure for international shipping. • Will support design index for new ships as a supplementary mechanism, subject to verification of index definition and baselines.

30. What has happened in 2008?

31. IMOs GHG TIMETABLE IMO-process Correspondence Group IGHGWG 1 MEPC 58 IGHGWG 2 MEPC 59 Oslo June London Oct March London July UNFCCC-process (partly) COP 14 COP 15 Poznan Dec Copenhagen Dec 2008 2009

32. OUTCOME OF MEPC 58 (1) • Market Based Instrument (Levy or ETS) • Non-annex I countries (acc to UNFCCC) strongly oppose any such measure unless the UNFCCC principle ”common, but differentiated responsibilities” is accepted and interpreted that the measure shall not apply to ships under their flag, representing about 70 % of the world fleet. • This is totally unacceptable for all other countries and no agreement can be reach at MEPC 59.

33. OUTCOME OF MEPC 58 (2) • Design Index • The design index may be accepted by non-annex I countries provide that the name is changed fromCO2 Design Index to Energy Efficiency Design Index. • A revised definition was agreed for further evaluation through a voluntary trial period. Further work need to be done to develop baselines for the 7 ship types considered.

34. DESIGN INDEX • text

35. BASELINE (example)

36. OUTCOME OF MEPC 58 (3) • Voluntary measures • Developed for further development and adoption • Revised Guidelines for Energy EfficiencyOperational Index. • A new Ship Efficiency Management Plan • A new Guidance on best practices and other voluntary operational measures.

37. WHAT NEXT ? • IMO • UNFCCC • EU

38. IMOs GHG TIMETABLE IMO-process Correspondence Group IGHGWG 1 MEPC 58 IGHGWG 2 MEPC 59 Oslo June London Oct March London July UNFCCC-process (partly) COP 14 COP 15 Poznan Dec Copenhagen Dec 2008 2009

39. EU PROSPECTS • If IMO is unable to agree a control mechanism by MEPC 59 in July 2009, EU has threatened to adopt regional measures, and currently the most likely measure is to include international shipping entering EU ports in the EU Emission Trading System as soon as possible after 2012, as is the case with international aviation.

40. Takk for oppmerksomheten