JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

1. NORTH AMERICAN PANELOCTOBER 7, 2009GREENHOUSE GAS EMISSIONS FROM SHIPSUPDATE ON IMO DEVELOPMENTS JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

2. IMO ACTIONS • Nine fundamental principles • Technical measures • Operational measures • Market based instruments (MBI)

3. IMO PRINCIPLES • Effective in contributing to the reduction of total global GHG emissions • Binding & equally applicable to all flag States • Cost-effective • Able to limit or effectively minimize competitive distortion • Based on sustainable environmental development without penalizing global trade and growth • 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

4. TECHNICAL MEASURES • Energy Efficiency Desing Index (EEDI) • - require a minimum energy efficiency of new ships • - stimulate technical development • - separate technical and design based measures from • operational and commercial measures • - compare the energy efficiency of an individual ship to • similar ships which could have taken its cargo - Cost: Emission of CO2 - Benefit: Cargo capacity transported a certain distance (- Relates to a seagoing maximum condition) (- Attained index < Required index)

5. OPERATIONAL MEASURES • Ship Energy Efficiency Managment Plan (SEEMP) • improve energy efficiency of ships in operations • best measurable practices on operational procedures setting goals • plan implementation strategy • monitoring – Energy Efficiency Operational Indicator (EEOI) • procedures for self-evaluation and improvement towards set goals • INTERTANKO Guide on Tanker EEMP • EEOI = CO2 emitted per unit of transport work • CO2 emitted measured from fuel consumption • Transport work = cargo mass x distance (nm)

6. IMO STATUS QUO • MEPC 59 (July 2009) agreed on: • Interim Guidelines on the method of calculation of the EEDI for new ships and • Interim Guidelines on voluntary verification of the EEDI • MEPC 59 adopted the Ship Energy Efficiency Managment Plan (SEEMP) • MEPC 59 adopted Guidelines for voluntary use of the ship EEOI

7. MARKET BASED INSTRUMENTS • IMO ”package”: should/would include MBIs? • Reasons given to include MBIs: • Long life of ships • Growth of international shipping • CO2 reductions due to EEDI (new ships) = long term measure • Measures on existing ships = not sufficient to meet reductions of 20% or more in the short terms (up to 2020) • Would MBI be included? • To be discussed at MEPC 60 (March 2010) • Expected not to be opted out • Which MBI? • GHG Compensation Fund • Emission Trading Scheme (ETS) • US alternative – a simplified Cap & Trade Scheme • Alternatives to or combinations of these

8. GHG Compensation FundKey Elements • Bunker fuel contribution:-Mandatory registration of Bunker Fuel Suppliers - Based on the Bunker Delivery Note as evidence - Collection by registered Bunker Fuel Suppliers - Direct transfer to the International GHG Fund - Ships in international trade – all marine fuels • Revenues: -Mitigation, Adaption and Technology Projects - Non-vessel Specific R&D Projects - Technological Cooperation within IMO • A global, binding, separate legal entity – a new Convention

9. GHG Fund - Obligations Ship Owners/Operators: • Purchase fuel from registered Bunker Fuel Suppliers • Keep the Bunker Delivery Note on board The Bunker Fuel Suppliers: • Mandatory/voluntary registration • Provide a certified Bunker Delivery Note • Collect and transfer directly to the International GHG Fund • Electronic report and recordkeeping of bunker fuel sold The State Parties: • Port State Control • Inspections of Bunker Fuel Suppliers

10. GHG Fund Organisation and Administration Structure as the IOPC Fund Convention: • Assembly • Secretariat Tasks and responsibilities: • Receive, record and monitor information • Maintain and allocate revenues • Keep a ship specific registry • Keep a global registry of Bunker Fuel Suppliers • Submit an annual report

11. GHG Fund Conventionsome comments • Not accepted by some Governments as it appears to be an international tax • Needs long time for enforcement • How to set contribution level • Assumes funds are 100% successfully offsetting GHG emissions • Enforcement mechanisms on bunker suppliers • Administrative costs

12. Emission Trading Scheme (ETS) • Promoted but not explained how it would work for shipping • EU threats to include shipping in its ETS • Costly administration and monitoring • Requires a new Convention and a Secretariat • Imposing an absolute emission cap may limit transportation at sea • Some Governments do not accept the ETS alternative

13. USA’s MBI ALTERNATIVE • Mandatory efficiency standards for both new and for existing ships, using the EEDI as a model • The concept is based on the following principles: • regulations set up efficiency baseline for each ship, new and existing • the efficiency base line would be gradually improved (i.e. the energy index value will be lowered) • ships which would not be able to improve their energy efficiency, as required, would be expected to buy credits • IMO has to establish an “efficiency credit generation and trading” amongst the shipping community only • US argued that this approach would provide an equitable, cost effective and timely market-based solution that would complement the developments of the EEDI, EEOI, and SEEMP.

14. USA’s MBI ALTERNATIVEsome comments • Proposal needs further clarifications, e.g. : • periodical tests/sea trials to check efficiency standard/energy index; intervals and test conditions • for new ships, the required EEDI would be the base line • need to establish a fair base line for each ship in service • recognition to ships with higher initial efficiency • credit mechanism: should ships buy credits to compensate only the difference between the expected efficiency and the actual performance? how would these be calculated, recorded and monitored? • INTERTANKO will follow up with US for clarifications

15. INTERTANKO POSITION • Shipping should strive to significantly reduce GHG emissions • INTERTANKO members support and apply operational measures that could result in CO2 and other GHG emissions reductions from tankers • Some other measures, such as improved ship design, improved technologies and improved logistics can only be obtained through a close and coordinated cooperation with other stakeholders and with Governments

16. INTERTANKO POSITION • Regulations through IMO • Regulations should be “ship neutral” • Result is real and sustainable reductions • Maritime Industry remains competitive and profitable • Adopt EEDI as soon as possible • Use EEDI for an early establishment of target levels for CO2 emission reductions for new ships

17. INTERTANKO POSITION • INTERTANKO supports the adoption of SEEMP and has developed a SEEMP model specific for tankers • Stakeholders and regulators have to agree on targeting levels for GHG emission reductions • The target levels should be ambitious • Targets should also be realistic and thus provide incentives for sustainable efforts to achieve them • Initial agreed target levels could be adjusted as experience is gained - it is important to initiate the process of CO2 emission reduction from shipping as soon as possible

18. INTERTANKO POSITION • MBIs – a political decision • If MBIs are included as part of IMO regulatory package for the reduction of GHG emissions from ships, the selected measures should meet the IMO nine principles • INTERTANKO will make its own evaluation according to a set of principles similar to the IMO nine principles

19. MBI – INTERTANKO CRITERIA 1 Governed by the IMO and be specific for the shipping industry 2 Effective in contributing to the reduction of total GHG emissions: • any funds collected should be used as “offsets” • should stimulate leading energy efficiency technologies • should provide incentives for further innovation and R&D • should stimulate stakeholders, such as charterers and ports, to employ ships in the most effective manner to reduce GHG emissions 3 Environmentally sustainable without negative impact on global trade and growth • should be cost effective • should not lead to competitive distortion • should not disadvantage operators or ships which have already taken actions resulting in GHG reductions 4 Efficient and credible enforcement and monitoring • should be binding and equally applicable to all ships • should be practical, transparent, fraud-free and easy to administer by the governing authority • should enable compliance to be demonstrated through proper monitoring • should ensure certainty and predictability

20. COP 15 OPTIONS • IMO shall be encouraged to continue without delay to develop policies and measures to reduce GHG emissions • Parties shall work through IMO to achieve global reduction targets (to be specified in the new agreement) for emissions from marine bunker fuels • (All parties) (Annex I parties) shall pursue reduction in GHG emissions from marine bunker fuels working through IMO • Parties commence negotiations on a global agreement to address maritime emissions, taking in account work done by IMO, concluding in 2011

21. COMPLICATING FACTOR • Article 2.2 of the Kyoto Protocol – Parties to Annex 1 shall pursue reduction of GHG emissions from marine bunker fuels working through IMO • DOS negotiators are confident that this “common, but differentiated responsibilities” provision will remain part of the new agreement • Impact that this will have on IMO negotiations remains to be seen

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