GHG EMISSIONS REDUCTIONS - UPDATE -

1. GHG EMISSIONS REDUCTIONS- UPDATE - INTERTANKO Council 10 May 2011 Athens

2. ACTIONS BY IMO & INTERTANKO POLICY • EEDI/SEEMP: amendments to MARPOL Annex VI • INTERTANKO: • strong support of the adoption • contingency in case IMO fails to adopt the regulations • Development of Market Based Measures • UNFCCC – big picture • IMO – ship specific picture • INTERTANKO: • ”if IMO decides to use MBMs” • MBMs – assess accoding to a set of principles set by INTERTANKO but which embody the IMO principles

3. ACTIONS BY IMO & INTERTANKO POLICY • SEEMP – Positive feedback from members • EEDI - measure of ships  energy efficiency (CO2 g/tm); calculated by a formula IMO Reference Line (mandatory value): SFC = 190 g/kWh Calculating ship’s attained EEDI: actual SFC (i.e. 160 ~ 170 g/kWh) (a 10% to 15% margin) • Questions around ”the impact on P or Vref. or both” • ”Ships could lack power to safely maneouvre” • ”IMO Reference Line too ambitious for VLCCs”

4. Comparison EEDI Reference Lines

5. EEDI Reference Line for Tankers Owner’s data with the actual SCF

6. CONCLUSIONS ON EEDI/SEEMP • Support adoption of EEDI/SEEMP regulation • Further work with IACS/Industry for EEDI Verification Guidelines • Based on feedback from members, continue to assess the EEDI impact on tankers • INTERTANKO position (together with other industry partners) if IMO fails to adopt these new regulations, e.g.: • industry voluntary action (?) • industry energy efficiency assessment scheme (?) • other (?)

7. COP & EMISSIONS LEVEL • Target: temperature increase < 2°C from pre-industrial levels* • Countries’ pledges and actions to control emissions • Exposed a gap between ambitions and commitments • (* late 1800s) (average temperature of the Earth's surface has risen by 0.74°C since the late 1800s ; or 0.6°C since 1900; it is expected to increase by another 1.8° C to 4°C by the year 2100) • Confirmed 2°C target • Copenhagen pledges and actions under the UNFCCC • Confirmed gap – but no decision how to deal with it • Work to identify goal for global emissions reduction by 2050 and time frame for global peaking of GHG emissions • Post 2012 framework? (2nd commitment period for Kyoto? Top down versus bottom up? Increase in amibition of pledges?) Durban Cancun Copenhagen

8. THE GAP TO ACHIEVE THE GOAL • If the pick of emissions is • targeted for 2020, there is a need for a further 5 bt CO2 emissions reductions • Sources to reduce the gap: • More ambitious national pledges • Mitigation in all countries • Mitigation in sectors not covered by national targets: aviation and shipping Source: UNEP

9. EMISSIONS REDUCTIONS FROM SHIPPING • Potential for direct reduction through design, technical and operational measures (EEDI/SEEMP) • This mitigation potential may be relatively small due to growth of sector • Ambitious goals may be obtained through purchasing credits from other sectors (MBM) • Among observed ”ambitious goals” for ships: • cap on 2005 emissions levels • cap on 2010 emissions levels • reduction of xx% from one of these past levels Source: UNEP

10. ALTERNATIVE TRAJECTORIES FOR SHIPPING Source: UNEP

11. INDUSTRY ASSESSMENT RESULTS FOR TANKERS

12. INDUSTRY ASSESSMENT ON REDUCTION POTENTIAL IN 2030* * Reductions are % from the total CO2 emissions in 2030 if no measure is taken (model assumes an annual gowth of emissions of 2%) REMARKS • Conservative industry assumptions on potential reduction • and uptake on the measures envisaged • Additional 5% fuel penalty due to NOx requirements • Fuel price used in the model 50% less than current prices • Better logistics (e.g. less ballast voyages) not considered • Mandatory EEDI not counted for

13. INDUSTRY ASSESSMENT INTERTANKO REMARKS MODELLED TANKER FLEET AGE PROFILE IN 2030 *in 2010, 5% of ALL tankers between 20 to 24 years (chemical tankers 11%) ** in 2010, 3% of ALL tankers over 25 years (chemical tankers 5%) FINAL REMARKS • Age profile modelled is not realistic • The maximum scenario of 21% potential reduction for • tankers is feasible • Potential reduction could be predicted ”up to 25%” • from the total CO2 emissions to be emitted in 2030 • No expected reductions related to 2007/2010 emissions

14. ALTERNATIVE POTENTIAL REDUCTIONS FOR TANKERS

15. INDUSTRY ASSESSMENT CONCLUSIONS • Prediction of CO2 emissions reductions should be realistic • Increase of fleet efficiency not sufficient to overcome the CO2 emissions increase due to growth of activity at sea • Absolute GHG emissions reductions from tankers unlikely to be achieved by 2030 • Level of estimated reductions depend on, i.a.: • mandatory application of the EEDI • improvement of logistics/operational practices • the turn-over rate of the fleet, and • numerous economic considerations

16. INDUSTRY ASSESSMENT CONCLUSIONS • If shipping is required to achieve reductions at 2005/2007 baselines levels: • it will call for substantial out-of-sector offsets • shipping will be in an undesirable and very objectionable situation of being a cash cow for the world’s reduction of CO2 • It suggested that the industry associations consider these elements when setting their policies • It is strongly recommended that the Industry assessment is not released to the public

17. MARKET BASED MEASURES • No progress at the IMO Inter-sessional meeting on MBM – still 9 alternative schemes • ETS (group of 4) – may be merged at MEPC 62 • GHG International FUND – stand alone • Penalty/reward schemes (group of 3) • Rebated mechanism to developing countries working on the top of any of the above MBMs • Some MBM schemes apply to “in sector” markets only (i.e. shipping only) while some others apply to “in sector and out of sector” markets (i.e. GHG FUND and ETS)

18. MARKET BASED MEASURESCONCLUSIONS • MEPC 62 not expected to conclude • Progress to be reported to the Council, including an assessment against the INTERTANKO criteria for MBMs • Pending outcome from MEPC 62, Council may need to define the INTERTANKO position based on the assessment presented prior to the next meeting

19. COUNCIL IS INVITED TO: • Confirm INTERTANKO support for the adoption of EEDI/SEEMP regulation • Agree the Industry MACC assessment is not made public • Agree that, if IMO fails to adopt EEDI/SEEMP regulation, INTERTANKO, together with other industry partners would consider developping industry voluntary initiatives