UPDATE ON THE REVISION OF MARPOL ANNEX VI

1. UPDATE ON THE REVISION OF MARPOL ANNEX VI LATIN AMERICAN PANEL March 12-13, 2008 Miami Beach, Florida

2. IMO Process in 2008 • February - BLG finalized its contributions • April - MEPC 57 to approve the revision • October - MEPC 58 to adopt the revision • Enforcement – earliest February 2010

3. Outcome from BLG 11 SOx and PM emissions • A. Status Quo - No change • B. Sulphur Emissions Control Area (SECA): • A global sulphur cap (unchanged or lower value) • SECA sulphur cap lowered in two tiers: • 1.0% in [2010] • 0.5% in [2015] • C1. Change to distillate fuels (ref. INTERTANKO): • Use of distillate fuels for all ships • A global sulphur cap in two tiers: • 1.0% in [2012] • 0.5% in [2015] • Include in MARPOL Annex VI the specification for the distillate fuel to be used by ships • C2. Global cap – As C1 but allows use of residual fuel + scrubbers

4. Outcome from BLG 11 SOx and PM emissions USA PROPOSAL – EMISSION LIMITS AT [200] NM FROM SHORE AS FROM 2011 [0.1% SULPHUR CAP] BIMCO PROPOSAL - GLOBALLY - 3% SULPHUR CAP IN 2012 - 1.5% SULPHUR CAP IN 2016 - USE TREATMENT TECHNOLOGIES IN SECAs SHIPS SHOULD USE MDO ONLY - 1% SULPHUR CAP IN 2011 - 0.5% SULPHUR CAP IN 2015 - ALSO USE TREATMENT TECHNOLOGIES

5. Outcome from BLG 11 SOx and PM emissions • RETAIN 6 OPTIONS, 4 FROM WG MTG PLUS US AND BIMCO OPTIONS; AND • IMO SG WILL PROPOSE STUDY TO DETERMINE THE EFFECTS OF THE OPTIONS

6. Outcome from BLG 12 SOx and PM emissions • Three options • Option 1 – Global Sulphur cap • 4.50% • 1.00% as from 1 January 201[2] • 0.50% as from 1 January 201[5] • Prior to 1 January 201[2] only: • SECAs sulphur cap of 1.50% • Fuel change over procedures & timing recorded • Scrubbers/abatement technologies could be used as a means of compliance

7. Outcome from BLG 12 SOx and PM emissions • Option 2 – Global/Regional • Global S cap 4.50% • SECA S cap • 1.50% • 0.10% as from 1 January 201[2] • Scrubbers/abatement technologies allowed with the limits: • 6.0 g SOx/kWh • 0.4 g SOx/kWh as from 1 January 201[2] • waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

8. Outcome from BLG 12 SOx and PM emissions • Option 3 – Global/Regional with Micro-Emissions Control Areas • Global S cap • 4.50% • 3.0% from 1 January 201[2] • SECA S cap • 1.50% • 1.00% from 1 January 201[0] • 0.50% from 1 January 201[5] • Scrubbers/abatement technologies allowed with the limits: • 6.0 g SOx/kWh • 4.0 g SOx/kWh as from 1 January 201[0] • 2.0 g SOx/kWh as from 1 January 201[5] • waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

9. Outcome from BLG 12 SOx and PM emissions • Option 3 – Global/Regional with Micro-Emissions Control Areas • Micro-Emission Control Areas • up to [24] nm off the coast; better definition yet to be developed • conditions for declaring a Micro - ECA yet to be developed • S cap 0.10% (no date given so far) • scrubbers/abatement technologies allowed with the limit at 0.4 g SOx/kWh • waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

10. Opinions submitted to MEPC 57 SOx and PM emissions • INTERTANKO supports Option 1 • INTERTANKO also suggests that as from 1 January 201[5], Annex VI should also add limitiations to lower the PM emissions such as • carbon residue content in the fuel used by ships • ash content in the fuel used by ships • OCIMF, ICS and BIMCO support Option 3 • IPIECA supports Option 2 but with a S cap in SECA set at 1.00% • Governments we believe support Option 1: Norway, Germany, Sweden, Finland, Italy, Ireland, Greece, European Commission.

11. Possible outcome from MEPC 57? SOx and PM emissions • Possible agreement on a hybrid solution • It starts with Option 2 • It then translates into Option 1 • Other comments: • Greece indicated at BLG 12 they disagree that scrubbers are identified as a specific alternative compliance • Marshall Islands seem to share that opinion • Australia and Canada seem also to support Option 1

12. Outcome from BLG 12 NOx emissions – Pre-2000 engines • Measures on engines installed onboard ships constructed between 1 January 1990 and 31 December 1999 • The NOx emissions at Tier I level • Applicaton date • at the first intermediate or renewal survey; or • [1 January 2010], which one occurs later • Compliance through: • in engine modification (MEPC 57 has to choose between two options); or • abatement technologies

13. Outcome from BLG 12 NOx emissions – Pre-2000 engines • Option 1 • applies to all (i.e. 1990 – 1999) engines • if compliance through in-engine modifications not possible, a Port State could: • require the ship to use distillate fuel; or • deny port entry • Option 2 • applies to larger (1990 – 1999) engines only ([displacement of and over [30/60/90] liters] or [power output of > 5000 kW]) • use of a certified ”upgrade kit”

14. Outcome from BLG 12 NOx emissions – Tier II (new engines) • Tier II standards (emission reductions related to Tier I limits): • 15.5% reduction (engines with n<130 rpm) (i.e. 14.36 g/kWh) • reductions between 15.5% and 21.8% depending on the engine’s rpm (engines with 130 rpm < n < 2000 rpm) • 21.8% reduction (engines n > 2000 rpm) (i.e. 7.66 g/kWh) • Applies to engines installed on ships constructed on and after 1 January 2011

15. Outcome from BLG 12 NOx emissions-Tier III (new engines) • Tier III standards – 80% emission reductions from Tier I limits • Tier III limits apply ONLY to engines installed on ships constructed on & after 1 January 2016 • (a Party to Annex VI can apply the above limits to new engines of 130 kW and above) • Tier III limits in ECAs only • Outside ECAs - Tier II limits • Emission levels for Tier III are as follows: • 3.40 g/kWh (engines with n<130 rpm) • 9*n(-0.2) g/kWh (engines with 130 rpm < n < 2000 rpm) • 1.96 g/kWh (engines n > 2000 rpm

16. Outcome from BLG 12Fuel Oil Quality • Small but important changes and pending discusions • The fuels required to be ”fit for purpose” • MEPC 57 to clarify the meaning of ”fit for purpose” from a quality point of view • IMO to invite ISO to revise marine fuels specifications in ISO 8217 • Define fuel specification for a Global solution • Possible inclusion of limitations of other parameters to reduce PM emissions • BLG developed a standard procedure to interpret the actual test results of the sulphur content of the MARPOL sample

17. CONCLUSIONS • Possible hybrid solution for SOx and PM emissions • starting with Option 2 (with a higher S cap in SECAs, say 1.00% from say 201[2]) • followed by Option 1 • Early dates (i.e. 2015/2016) for enforcing Option 1 would be hard to negotiate • INTERTANKO would be determined to avoid an outcome along the lines of Option 3 • Fuel Oil Quality – INTERTANKO would make efforts to seek the revised MARPOL Annex VI provides a better definition of the quality of the fuels delivered to ships

18. CONCLUSIONS • NOx limits for existing engines - not an easy task • Use of MDO would give an easy NOx reduction by 10% to 15%. BUT without a global use of MDO, the penalty on old ships would be too high • NOx Tier II - possible and rests with manufacturers • NOx Tier III implies use of SCRs/abatement technologies • Prudent that new ships consider compliance with Tier III and install SCRs/abatement technology prior to 2016 • Still to be assessed • SCRs - the only technology to give an 80% reduction; . . . BUT • existing SCR technology not efficient at low engine loads • can compliance be achieved in ECAs irrespective the engine load (close to port, through estuaries and straits ships slow down)?

19. Questions?