Latin American Panel13-14 September, 2010

Lima, Perú

GREENHOUSE GAS EMISSIONSFROM SHIPPING

Peter M. Swift

Reducing Greenhouse Gas Emissions from Shipping

• Key Dates

• UNFCCC and IMO Programmes

• Market Based Mechanisms

• Industry Initiatives

UNFCCC = United Nations Framework Convention on Climate Change

Reducing Greenhouse Gas Emissions from Shipping

Selected Key Dates

12/2009 UNFCCC COP15 Meeting, Copenhagen

3/2010 IMO MEPC 602010 IMO MBM-Expert Group

IMO MEPC Intersessional (EEDI)2010 UNFCC Interim meetings------------

9/2010 IMO MEPC 6110/2010 INTERTANKO Council Meeting11/2010 UNFCCC COP16 Meeting, Cancun2010-2011 EU Council/Commission meetings----------5/2011 INTERTANKO Council Meeting7/2011 IMO MEPC 6212/2011 EU Deadline for IMO/International Agreement

2012 Kyoto Protocol expires

UNFCCC - COP15

What was the outcome ?

• NO targets• NO resolution of Kyoto/IMO Treaty conflict

• NO direct reference to international shipping in Copenhagen Accord

BUT in subsequent discussions:

Shipping is “expected” to make its “contribution” to Climate Change measures with $$$$ (UNFCCC et al)

International Aviation and Shipping should be regulated via UNFCCC and have targets as per other industries

(EU Parliament)

IMO Programme

To develop:

EEDI for new ships (Mandatory)

SEEMP (Mandatory) & EEOI (Voluntary) for all ships

and, if possible/needed:

Market Based Measures for shipping

IMO – UNFCCC Conflicting principles remains a major issue

IMO Principle:

“No More Favourable Treatment”

Versus

Kyoto Protocol principle:

“Common But Differentiated Responsibility”

IMO Intersessional Working Group

To improve the text for mandatory requirements of EEDI and SEEMP in terms of:

• coverage of ship types and ship sizes for the EEDI;• establishment of EEDI baseline(s); • frequency of reducing the mandatory value of EEDI

(reduction in 3 phases); • reduction rate from the baseline for the phases for the

EEDI;

To develop various guidelines:• on the method of calculation of EEDI;• for the calculation of baselines for attained EEDI;• to support the regulatory framework for verification of the

EEDI

IMO MBM – Expert Group

Group of MBM schemes which would require all ships to pay a contribution:

1. International Fund for Greenhouse Gas emissions from ships – suggested by Denmark and supported in principle by Cyprus, Marshall Islands and Nigeria

2. Global Emission Trading System for International Shipping, as proposed by Norway, France and Germany with general support from the UK

Group of MBM schemes which provide rewards to more energy efficient ships:

3. Leveraged Incentive Scheme based on the International GHG Fund - proposed by Japan.

4. Trading with Efficiency Credits based on Efficiency Standards for All Ships - proposed by the USA.

5. Vessel Efficiency System - proposed by the World Shipping Council.

Some are in sector, i.e. shipping only; others are out of sector

Why are MBMs Proposed ?

• Shipping is expected to become more energy efficient

• IMO will adopt technical measures for new ships (EEDI)

• Existing ships will also improve their energy efficiency

BUT

• CO2 emission reductions achieved through technical and operational measures may not be sufficient and their effect will not be seen in the short term

• The increasing demand for transportation at sea could well lead to a net increase in CO2 emissions from ships even though each ship may become more efficient

Why are MBMs Proposed ?

ETS or other MBM

Application of the GHG Fund

Offset (out of sector)

Actual emissions

BAU

Target line

EEDI

Application of ETS

Offsetting (in sector & out sector)Offsetting (in sector & out sector)

Actual emissionsActual emissions

BAUBAU

Target line

EEDI

Funds to UNFCCCFunds to UNFCCC

General comments on MBMs

• Proposals at different level of maturity

• All proposals need further development

• All lack policy details with regard to– enforcement– administration– carbon leakage– fraud– vessels registered with non-party flags– harmonisation

Reducing Greenhouse Gas Emissions from Shipping

Industry initiatives:

• Work on EEDI (including Tripartite workshops)• Developing and assessing GHG reduction measures for

new and existing ships (Tripartite)• Developing Marginal Abatement Cost Curves

- what is achievable ?• Developing operational measures, such as “Virtual Arrival”• Developing industry SEEMPs, such as INTERTANKO’s

TEEMP – Tanker Energy Efficiency Management Plan

plus• Active participation in MBM Expert Group

Mitigation Measures

Mitigation Measures

MAC Curves - Industry study

“Virtual Arrival “OCIMF /INTERTANKO project

Virtual Arrival is all about managing time and managing speed.

It’s not about blanket speed reduction to match current market conditions.

Virtual arrival is about identifying delays at discharging ports, then managing the vessel’s arrival time at that port/terminal through well managed passage speed, resulting in reduced emissions but not reducing capacity.

Virtual Arrival - Summary

• Cooperation between Charterer (Terminal Operator) and Owner

• Speed is “optimised” when ship’s estimated arrival is before the terminal is ready

• Owners and Charterers agree a speed adjustment

• May use an independent 3rd party to calculate / audit adjustment

• Owners retain demurrage, while fuel savings and any carbon credits are split between parties

Next Steps:• OCIMF-INTERTANKO running joint workshops• Charter Parties being reviewed

(INTERTANKO/BIMCO/BP/Chevron) – indemnity and liability issues, including bills of lading

• Individual oil majors and owners “trialling” system• Bulk carrier sector examining feasibility

Virtual Arrival

by taking advantage of known inefficiencies in the supply chain andreducing speed when the terminal is not ready to discharge the cargo In addition to directly reduced emissions, other benefits are:• Reduced congestion and emissions in the port area • Improved safety• Potentially increased use of weather routing Important pre-conditions:•  The safety of the vessel remains paramount• The authority of the vessel’s Master remains unchanged• The basic terms of trade remain the same

What is needed to do to make Virtual Arrival work?

1. A known delay at the discharge port2. A mutual agreement between two (or more) parties to

adapt the ship’s arrival time to take advantage of the delay3. An agreed Charter Party clause that establishes the terms

for reducing the speed to adapt to the new arrival time4. An agreement on how to calculate and report the Virtual

Arrival and the performance of the vessel5. This may involve a Weather Analysis Provider (WAP)6. OCIMF/INTERTANKO and class are producing transparent

standards for verification of WAPs

But mainly it’s a win–win situation for all,based on trust and transparency

 

Council Discussion/Policy Review GHG reductions – INTERTANKO positions

Support in principle for:• Mandatory EEDI – subject to acceptable formula• Targeted reductions in EEDI over time – subject to realistic assumptions• Mandatory SEEMP – subject to applicability of final version and EEOI remaining “voluntary”

Regulation/legislation of GHG emission reductions to be coordinated through the IMO and to be flag neutral; i.e. applicable to ALL ships

Council Discussion/Policy Review

Market Based Instruments:

• As a MINIMUM must meet IMO and INTERTANKO principles

Do we need an MBM for Shipping ?

• Cost of fuel is already sufficient economic incentive (frequently 60-80% of total operating costs)

• Without agreed “targets” for GHG reductions from shipping, how is any shortfall quantified and how is the “purpose” of an MBM defined?

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

Muchas GraciasThank you

For more information, please visit:www.intertanko.com www.shippingfacts.com

www.maritimefoundation.com

London, Oslo. Washington, Singapore and Brussels

Kyoto Protocol

• Established under UN Framework Convention on Climate Change (UNFCCC) and adopted in 1997

• Ratified by 181 countries – not the USA• Categorises Annex 1 (Developed) Countries and Non-

Annex 1 (Developing) Countries • Annex 1 Countries are committed to make GHG reductions

with set targets, but also flexible mechanisms • Runs through to 2012, with Conference of Parties (COP15)

to meet in Copenhagen in Dec 2009 to develop successor• Kyoto recognises “common but differentiated

responsibilities”, i.e. developed countries produce more GHGs and should be “responsible” for reductions

• Kyoto looks to IMO to address Shipping and ICAO to address Aviation, and as such these emissions are currently excluded from Kyoto targets

MBM Proposals

• Out of shipping sector mechanisms– International GHG Fund (Denmark et al.)– Emission Trading Scheme (Norway et al.)– Rebate Mechanisms (IUCN)

• In shipping sector mechanisms– Leverage Incentive Scheme (Japan)– Ship efficiency & Credit Trading (USA)– Vessel Efficiency System (WSC)– Port State Levy (Jamaica)

– Penalty on Trade and Development (Bahamas)

Ship Efficiency and Credit

US EEDI (EIr)US EEDI (EIr)

IMO EEDIIMO EEDI

New ship IMO EEDI (US EIa)

Efficiency Credit = (EIr – EIa) x Activity

Existing hip (EIa)

Efficient Credit >0 = Sells CreditsEfficient Credit < 0 = Buys Credits

Leverage Incentive Scheme

Req. EEDI 1

Req. EEDI 2

Req. EEDI 3

EEDIAttained

0%0%

50%50%

100%100%

50%50%

Ship 2

Ship 1

Ship 3

EEOI

benchmark

Actual

PATERN 1

PATERN 2

Initial EEOI

Reduced EEOI

NEW BUILDINGNEW BUILDING

EXISTING SHIPSEXISTING SHIPS

Possible Abatement Measures

• Gas fuelled engines• Electronic engine control• Waste heat recovery• Air cavity lubrication• Contra-rotating propeller• Fuels cells as auxiliary

engines• Frequency converters• Exhaust gas boilers on

auxiliary engines• Energy efficient light

systems• Wing generator• Wind power – kite• Wind power – fixed sails

or wings• Solar panels

• Solar panels• Trim/draft optimising• Weather routing• Voyage execution• Steam plant operational

improvements• Speed reduction due to port

efficiency• Propeller condition• Speed reduction due to fleet

increase• Hull condition• Propulsion efficiency devices• Cold ironing• Engine monitoring• Reduced auxiliary power

usage