IMO GHG REGULATIONS

1. IMO GHGREGULATIONS Latin American Panel Cartagena, Columbia November 1, 2011

2. Energy Efficiency Design Index (EEDI) • Ship Energy Efficiency Management Plan (SEEMP) • Market Based Measures (MBM)

3. EEDI • Amendments to the MARPOL Convention: adopted July 2011, enter into force Jan 1, 2013 • Applies to new:Tankers, Bulk Carriers, Gas Tankers, Container Ships, General Cargo Ships, Refrigerated Cargo Carriers • Does not apply to: ships with diesel-electric propulsion, turbine propulsion or hybrid propulsion systems • New tankers (> 4,000 dwt): • building contract from 1 January 2013 and • delivery not later than 30 June 2015

4. EEDI AttainedEEDI < Required EEDI value Required EEDI = Reference Line – X% Reference Line for tankers =1218.80 x DWT 0.488 Installed propulsion power is not less than the propulsion power needed to maintain the manoeuvrability of the ship under adverse conditions as defined in the guidelines to be developed by IMO. Final Verification at sea trials

5. IMO Reference Line tankers =1218.80 x DWT -0.488 attained EEDI

6. EEDI Reference Line = Phase 0 = no reduction (2013 & 2014) EEDI IMO impact analysis 10% Phase 1 2015 - 2019 20% Phase 2 2020 - 2024 30% Phase 3 on and after 2025 DWT

7. EEDI

8. EEDI • Administrations may delay the enforcement of these amendments with up to 4 years. (i.e. no need for EEDI certification if building contract is before 1 January 2017) • Parties to MARPOL Annex VI have agreed to allow ships with such waivers to call at their ports.

9. INTERTANKO POSITION • INTERTANKO welcomes the adoption by IMO of amendments to the MARPOL Convention mandating energy efficiency measures (EEDI/SEEMP regulations) on ships. • INTERTANKO advocates that: • In the implementation of the EEDI requirements, there should be a “level playing field” and that the EEDI requirements should apply equally to all ships on the same effective date • Compliance with EEDI should focus on improved hull design, propulsion efficiency and energy optimisation, rather than predominantly on reduced speed designs • Any measures taken to comply with EEDI shall not jeopardise nor have an adverse effect on the safety of the ship

10. IMO Guidelines • The method of calculation of the EEDI • Survey and Certification of the EEDI • Interim guidelines for determining minimum propulsion power and speed to enable safe maneuvering in adverse weather conditions • EEDI for larger size segments of tankers and bulk carriers • Cubic capacity correction factor for chemical tankers

11. SEEMP Ship Energy Efficiency Management Plan • Developed as a ship-specific plan by the ship owner • What the Plan should look like in four parts • Planning: Package of measures identified & Goal setting • Implementation: Implementation system • Monitoring: Monitoring system (tools and record keeping) • Self-evaluation & Improvement: Voluntary reporting • Plan includes a List of possible options for improving energy efficiency • SEEMP is part of the ISM Code • Applies to both new and existing ships

12. INTERTANKO TEEMP INTERTANKO’s Guide for a Tanker Energy Efficiency Management Plan • Introduction • Establishing Company & Ship Management Plans • Voyage Optimisation Programme • Propulsion Resistance Management Programme • Machinery Optimisation Programme • Cargo Handling Optimisation • Energy Conservation Awareness Plan

13. OPERATIONAL INITIATIVES • INTERTANKO & OCIMF developing best industry practice together for a better planning of the voyage with the view of reducing CO2 emissions. • OCIMF Trajectory Study

14. MARKET BEASED MEASURES Why Market Based Measures?? • Governments do not believe that ships can meet GHG reduction targets without MBMs • EEDI will not be sufficient • Yet, no reduction targets have been set!!

15. POLICY QUESTIONS • Would INTERTANKO see any justification for a MBM or additional measures on ships in operations? • No matter whether it is justified or not, should INTERTANKO support MBM legislation? • If supporting IMO MBMs, which model should be supported?

16. MARKET BEASED MEASURES • Nine proposals to address to IMO • The leading contenders: 1. International GHG FUND (Denmark) 2. Efficiency Incentive Scheme (EIS) (Japan/WSC) 3. Emissions Trading Scheme (Norway; UK; Germany and France) 4. Mandatory CO2 emission cut targets through technical and operational measures (Bahamas)

17. GHG FUND ETS OFFSETTING SE LLING BUYINGCREDITS SUBMIT CREDITS CONTORL Levy vs. Credits

18. GHG Fund • Global reduction target for international shipping, set by either UNFCCC or IMO • Emissions above the target line would be offset by purchasing approved emission reduction credits • Offsetting activities financed by a levy / contribution paid by ships on every tonne of bunker fuel purchased • Levy collected through bunker fuel suppliers or via direct payment from ship owners

19. GHG Fund • The contribution rate would be adjusted at regular intervals to ensure that sufficient funds are available to purchase project credits to achieve the agreed target line • Any additional funds remaining would be available for adaptation and mitigation activities via the UNFCCC and R&D and technical co-operation within the IMO framework

20. GHG Fund

21. Efficiency Incentive Scheme (EIS) • Collection of funds to a GHG Fund, like proposed by Denmark • However, funds are to be paid only by ships not meeting an efficiency standard to be defined • Both new ships (EEDI compliant) and existing ships will be targeted on their operational efficiency

22. Efficiency Incentive Scheme (EIS)

23. EMISSIONS TRADING SCHEME • A sector-wide cap on net CO2 emissions • Establish a trading mechanism to purchase emission reductions credits • Credits to be bought in-/out-of-sector. Out-of-sector credits permits exceeding the cap • Auction revenue provide for adaptation and mitigation (additional emission reductions) through UNFCCC processes and R&D of clean technologies within the maritime sector

24. EMISSIONS TRADING SCHEME • A number of allowances (Ship Emission Units) corresponding to the cap would be released into the market each year via a global auctioning process • Ships surrender one SEU or one recognised out-of-sector allowance or one recognised out-of-sector project credit, for each tonne of CO2 they emit • Norwegian ETS would apply to all CO2 emissions from ships above a certain size engaged in international trade

25. ETS – UK version • Similar in most respects to the ETS proposal by Norway • UK ETS differs from the Norwegian proposal: • allowances could be allocated to national governments for auctioning • the net emission cap would be set with a long- term declining trajectory with discrete phases (for example, five to eight years) with an initial introductory or transitional phase of one to two years

26. EMISSIONS TRADING SCHEME

27. CO2 emissions cut targets • Technical and operational measures only • No penalties to pay, no rewards to be given, no funds to be collected • New ships (EEDI compliant) • Existing ships – targeted reductions • No compliance – no trade

28. CO2 emissions cut targets

29. CONCLUSIONS • Not easy to predict the development of the MBM issue in IMO • A fair chance for measures to target CO2 emissions reduction for ships in operations • Many MBMs schemes imply the use of a monitoring and verification system for the actual CO2 emissions from each ship • Ships in operations (pre- and post-EEDI) may need to evaluate, demonstrate and report their energy efficiency

30. INTERTANKO POSITION • An MBM is not justified at this time. The industry is already incentivised by high fuel prices • If an MBM should be required, then this should: • be implemented through an international regime • be simple to enforce and to monitor • drive the right behaviour • provide sufficient transparency to maintain the current level playing filed • not be an disproportionate financial and operational burden on the industry

31. INTERTANKO POSITION • Of the current proposals, the GHG FUND seems to be by far the simplest and most transparent from a ship owner point of view • INTERTANKO is not in favour of a trading scheme to reduce GHG emissions.