North and Baltic Sea Seminar 2010 Program

“Air Emissions from Shipping: Regulations and Challenges”

Peter M. SwiftMD INTERTANKO

26 November 2010

Paris

INTERTANKO Today

250 + members operating ca. 3,100 ships > 75% of the independent oil tanker fleet and > 85% of the chemical carrier

fleet

300 + associate members: in oil and chemical tanker related businesses

[With strict membership criteria]

15 Committees – 5 Regional PanelsPrincipal Offices – London and Oslo

Representative Offices in US, Asia and BrusselsObserver Status at IMO, IOPC, UNFCCC, OECD and UNCTAD

International Association of Independent Tanker Owners

“The Voice of the Tanker Industry”

INTERTANKO’s Strategic Objectives

To develop and promote best practices in all sectors of the tanker industry, with owners and operators setting the example.

To be a positive and proactive influence with key stakeholders, developing policies and positions, harmonising a united industry voice, and engaging with policy and decision makers.

To profile and promote the tanker industry, communicating its role, strategic importance and social value.

To provide key services to Members, with customised advice, assistance and access to information, and enabling contact and communication between Members and with other stakeholders.

TANKERS

US“Я”

Seafarer Concerns Today

• Criminalisation & Fair Treatment

• Piracy

• Bureaucracy, including:- excessive paperwork- too many inspections

More consideration should be given to the ramifications for the seafarer of new regulations

and legislation at IMO and elsewhere

– e.g. ballast water, multi-fuels, emission abatement technologies, etc.

Air Emissions from Shipping

• Toxic emissions – SOx, NOx, PM – covered by IMO MARPOL Annex VI, EU and other regional regulations

• VOCs (Tankers) – covered by MARPOL • Ozone Depleting Substances – covered by MARPOL

• Greenhouse gases (principally CO2) – under debate at UNFCCC and IMO

SOx = Oxides of Sulphur, NOx = Oxides of Nitrogen, PM = Particulate Matter

VOCs = Volatile Organic Compounds,

UNFCCC= United Nations Framework Convention on Climate Change

IMO = International Maritime Organisation .

“ Toxic Emissions from Shipping- SOx and NOx ”

The Challenges Today

SOx and NOx Regulations

• SOx emissions regulated via Bunkers- with alternative methodologies accepted as Equivalent Measures

• NOx emissions regulated through engine design / limits

Maximum Sulphur Limits- IMO MARPOL Annex VI

IMO Global S limit: Currently 4.5% 1 July 2012 3.5% 1 January 2020 / (2025) 0.5% / (if not available

in 2020) IMO ECA limit:

Initially 1.5%1 July 2010 1.0%1 July 2015 0.1%

ECA = Emission Control Area

• limits the sulphur content in marine fuels• different sulphur limits in open sea and in ECAs• requires quality criteria for the marine fuels

IMO MARPOL Annex VI: Baltic and North Sea ECAs

MAY

2006NOV. 2007

IMO MARPOL Annex VI: North American ECA

200 nm200 nm

200 nm200 nm

Will Mexico join ?

Challenges:Challenges:•ExtentExtent•Fuel availabilityFuel availability•Ship bunker capacityShip bunker capacity

Entry into force 1 August 2012

Caribs?Caribs?

Regional Regulations on Bunkers

EU Sulphur Directive (presently being amended)– basically as per MARPOL Annex VI sulphur provisions – but with additional provision: use of 0.10% sulphur

content fuel when ships ”at berth” (since 1 Janaury 2010)– & MGO/MDO on the EU market should have < 0.1% S

content (since 1 January 2010)

California Air Resource Board (CARB)– use marine distillates within 24nm of the shore– sulphur content in marine distillates:

• before 1 January 2012 – MDO < 0.50% ; MGO <1.50%• after 1 January 2012 - MDO/MGO< 0.10%

Sulphur in Bunkers: Application Dates and Limits

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NOx Emission Regulations - IMO MARPOL Annex VI

IMO MARPOL Annex VI sets limits in 3 Tiers

• Generally on ships built pre 2000 and engine not modified - No limits

• Engines on ships built post 2000 mostly comply with Tier I limits

• Engines on ships built after 1 January 2011 must comply with 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)

NOx Emissions-Tier III (new engines)

Tier III limits – 80% emission reductions from Tier I limits

Tier III limits apply to engines:– installed on ships constructed after 1 Jan 2016– power output of > 750 kW

(130 kW – 750 kW may be exempted by the Administration)

Tier III limits apply in ECAs only

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

Fuel Challenges for Ships

• Availability of Low S bunkers globally

• Quality issues (incl. measurement and verification)

• Requirements for multi-fuels

• Fuel switching – safety concerns (main engines and auxiliaries)

• Onboard storage & segregation capacity

“ Volatile Organic Compounds Emissions ”

Challenges mostly met

VOC Control Measures

Reductions during loading and on passage

e.g. using INTERTANKO VOCON procedure

plus Absorption, Condensation and other measures

“ Greenhouse Gas Emissions ”

The Coming Challenges

Climate Change Challenges

For shipping:

Protection of the Marine Environment includes Atmospheric Environment

GHG emissions – principally CO2 emissions

Shipping is energy efficient

- environmentally responsible, reliable and cost efficient

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217,1

91,2

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VLCC tanker

Bulk carrier

Product tanker

General cargo ship

Container ship

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km

Transport distance for 1 ton cargo per kg GHG emissions

Source: Danish Shipowners Association

Shipping is energy efficient, BUT…

CO2 emissions by country (2007)

CO2 emissions from shipping 2.7% of global total (2007)

and predicted to grow as trade expands

Reducing GHG Emissions from Shipping

Regulatory Processes & Timetables

• UNFCCC Programme

• IMO Programme

• Industry Initiatives

The Regulatory Processes

• UNFCCC 1992

• IMO since 1997

• Kyoto Protocol, adopted 1997 entered into force 2005

• Copenhagen Accord 2009

UNFCCC = United Nations Framework Convention on Climate Change

Kyoto Protocol

• Established under UN Framework Convention on Climate Change (UNFCCC) – 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, - Conference of Parties

endeavouring to develop a successor• Kyoto recognises “common but differentiated

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

Recent and future timetableSelected Key Dates

12/2009 UNFCCC COP15 Meeting, Copenhagen

3/2010 IMO MEPC 60

2010 IMO MEPC MBM-Expert Group IMO MEPC Intersessional (EEDI)

2010 UNFCC Intersessional meetings

9/2010 IMO MEPC 61------------11/2010 UNFCCC COP16 Meeting, Cancun------------7/2011 IMO MEPC 62

11/2011 UNFCCC COP17 Meeting, South Africa

12/2011 EU Deadline for IMO/International Agreement

2012 Kyoto Protocol expires

IMO – UNFCCC Conflicting principles - a major issue

IMO Principle:

“No More Favourable Treatment”

Versus

Kyoto Protocol principle:

“Common But Differentiated Responsibility”

UNFCCC - COP15

The outcome:• NO targets• NO resolution of Kyoto/IMO Treaty conflict• NO direct reference to international shipping in the

non-binding Copenhagen Accord

BUT subsequently:

• International Aviation and Shipping should be regulated via UNFCCC and have targets as per other industries (EU Parliament)

• Shipping should make its “contribution” to Climate Change measures with $$$$ (UN Advisory Group)

• ICAO and IATA agree a package of reduction measures

IMO Programme

IMO (MEPC) developing:

• Technical Measure (EEDI for new ships)

• Operational Measure (SEEMP & EEOI for new and existing ships)

• Market Based Measure (if needed)

Technical Measures

societyforBenefit

costtalEnvironmenindexdesign efficiencyenergy Attained

Environmental cost = Emission of CO2

Benefit = Cargo capacity transported a certain distance

• measures energy efficiency of new ships• encourages design and technical developments

Energy Efficiency Design Index (EEDI)

Technical Measures

Initially only the calculation of the Attained EEDI was planned to be mandatory, but the drive is to establish a mandated

requirement, such that the Attained EEDI < Required EEDI

Energy Efficiency Design Index (EEDI)

CO2 factor x SFC[FOC] (g/kW h) x Engine Power (kW)

EEDI = ----- ----------------------------------------------------------------

(g/tonne mile) Capacity (tonne) x Speed (mile/h)

EEDI Required[ Tankers>20,000 DWT ]

10%10%

20%

30%

Phase 12015 - 2019

Phase 22020 - 2024

Phase 3Phase 3on and after 2025on and after 2025

Reference Line = Phase 0 = no reduction (2013 & 2014)

EEDI

DWT

Attained EEDI < Required EEDI

Operational Measures

• Ship Energy Efficiency Managment Plan (SEEMP)– encourages improvement energy efficiency of ships in

operation– 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

• Energy Efficiency Operational Indicator (EEOI) = CO2 emitted per unit of transport work

CO2 emitted measured from fuel consumptionTransport work = cargo mass x distance (nm)EEOI is “voluntary” – a management tool

Operational Measures

Energy Efficiency Operational Indicator (EEOI)

CO2 factor x [FOC] (g)

EEOI (g/tonne mile) = ----------------------------------------------------------------

Cargo Mass (tonne) x Sailed Distance (mile)

Market Based Measures

MBMs under review at MEPC

• Emissions Trading Schemes• GHG Fund and Leveraged Incentive Schemes• Ship Efficiency & Credit Trading

and Vessel Efficiency System• Rebate Mechanism

Some would require all ships to pay a contributionSome provide rewards to more energy efficient ships

Most include a support mechanism to developing countries

Why are MBMs Proposed ?

or ETSor other MBM

• Ships have a long life – EEDI takes time / operational measures not readily quantifiable; further “incentives” may be needed • International trade and shipping will continue to grow• A deemed “need” to fund offsetting in other sectors

Future Means of Reducing GHGEmissions from Shipping

Industry activities and initiatives

Means of Reducing GHGEmissions from Shipping

Industry initiatives:

• Work on EEDI – formula and reference line (workshops)

• Developing and assessing additional GHG reduction measures for new and existing ships (workshops)

• Developing Marginal Abatement Cost Curves- to determine what is achievable (study groups)

• Developing and implementing operational measures, such as “Optimal speed” (Liners) and “Virtual Arrival” (Tankers and Bulkers)

• Developing industry SEEMPs, such as INTERTANKO’s TEEMP – Tanker Energy Efficiency Management Plan

plus• Active participation in MBM Expert Group

Technical and Operational Mitigation Measures

Technical and Operational Mitigation Measures

Marginal Abatement Cost Curves

PRELIMINARYPRELIMINARY

DRAFT,DRAFT,

Not for circulationNot for circulation

Developed in conjunction with DNV

Virtual ArrivalOCIMF / INTERTANKO project

THE CONCEPT:

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.

It is NOT not about blanket speed reduction to match current market conditions.

Virtual Arrival is all about managing time and managing speed.

Virtual ArrivalOCIMF / INTERTANKO project

THE MECHANICS:

• Cooperation agreement 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

Virtual Arrival- additional benefits

In addition to directly reduced emissions, other benefits include:• Reduced congestion & toxic emissions in the port area • Improved reliability/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

Is an MBM needed for Shipping ?

US

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Source: Bunkerworld

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Bunker prices 2000 – 2010 [USD/tonne] HFO 380 cst / MDO / MGO*, Fujairah

With bunker costs frequently 60-80 % of total operating costs, does shipping need any further

market incentive to reduce GHG emissions ?

THANK YOU

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

www.shipping-facts.comwww.maritimeindustryfoundation.com

57˚44.8’ N

62˚N4˚W

5˚W

48˚30’N

IMO MARPOL Annex VI: North Sea ECA

Global Bunkering

Rest of the World 66%

North Sea 18%

Baltic Sea 3%

USA 12.70%

Canada & Mexico 0.30%

Source: Poten & Partners

Marine distillates on EU must have < 0.10% sulphur content

One - third of bunkers are supplied in ECA ports

Challenges for ships

• Switching between at least 3 grades of fuel• Calling at EU ports, ships need to use:

– Deep sea fuel (HFO)– ECA fuel (LSFO)– EU - ”at berth”/”at anchor” fuel (MGO)

• Onboard storage & segregation capacity• Increase risk of fuel incompatibility• Increases the risks of boiler incidents• Safety requires upgrading/modifications• Viscosity, lubricity, flash point temp.

Quality Problems with Marine Fuel Oils

• HIGH ABRASIVE FUELS• HIGH ASH• LOW FLASH POINT• HIGH SEDIMENTS• HIGH DENSITY• FUELS CONTAINING USED LUBE OILS• POLYETHYLENE CONTAMINATION• POLYSTYRENE CONTAMINATION• HIGH CALCIUM & HIGH SODIUM• HIGH WATER CONTENT• CONTAMINATED FUELS• INCOMPATIBILITY OF BLENDS• FATTY ACIDE METHYL ESTER (FAME)

EEDI / EEOI

CO2 factor x SFC[FOC] (g/kW h) x Engine Power (kW)

EEDI (g/tonne mile) = ------------------------------------------------------------------------------

Capacity (tonne) x Speed (mile/h)

CO2 factor x [FOC] (g)

EEOI (g/tonne mile) = ----------------------------------------------------------------

Cargo Mass (tonne) x Sailed Distance (mile)