NORTH AMERICAN PANEL OCTOBER 7, 2009

GREENHOUSE GAS EMISSIONS GREENHOUSE GAS EMISSIONS FROM SHIPSFROM SHIPS

UPDATE ON IMO UPDATE ON IMO DEVELOPMENTSDEVELOPMENTS

JOSEPH ANGELODEPUTY MANAGING DIRECTOR

IMO ACTIONS

• Nine fundamental principles

• Technical measures

• Operational measures

• Market based instruments (MBI)

IMO PRINCIPLES

1. Effective in contributing to the reduction of total global GHG emissions

2. Binding & equally applicable to all flag States3. Cost-effective4. Able to limit or effectively minimize competitive distortion5. Based on sustainable environmental development

without penalizing global trade and growth6. Based on a goal-based approach and not prescribe

specific methods7. Supportive of promoting and facilitating technical

innovation and R&D in the entire shipping sector8. Accommodating to leading technologies in the field of

energy efficiency 9. Practical, transparent, fraud free and easy to administer

TECHNICAL MEASURES

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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)

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)

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

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

• 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

GHG Compensation FundKey Elements

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

GHG Fund - Obligations

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

GHG Fund Organisation and Administration

GHG Fund Convention some 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

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

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.

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

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

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

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

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

MBI – INTERTANKO CRITERIA1 Governed by the IMO and be specific for the shipping industry2 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 emissions3 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 reductions4 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

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

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

THANKTHANKYOU!!YOU!!

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