IMO GHG

REGULATIONS

Latin American PanelCartagena, Columbia

November 1, 2011

• Energy Efficiency Design Index (EEDI)

• Ship Energy Efficiency Management Plan (SEEMP)

• Market Based Measures (MBM)

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

EEDI

Required EEDI = Reference Line – X%Reference Line for tankers =1218.80 x DWT 0.488

SAVINGSENERGYVxCapacity

SFCxPOWEREEDIAttained

ref

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.

Attained EEDI < Required EEDI value

Final Verification at sea trials

5000

2000

0

3500

0

5000

0

6500

0

8000

0

9500

0

1100

00

1250

00

1400

00

1550

00

1700

00

1850

00

2000

00

2150

00

2300

00

2450

00

2600

00

2750

00

2900

00

3050

00

3200

00

3350

00

3500

00

3650

00

3800

00

3950

000.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

EEDI IMPLEMENTATION

DWT

EE

DI

PHASE 0 (2013 – 2014) – IMO Reference LinePHASE 1 (2015 – 2019) – 10% lower than IMO Ref LinePHASE 2 (2020 – 2024) – 20% lower than IMO Ref LinePHASE 3 (2025 & after) - 30% lower than IMO Ref Line

Attained EEDI < Required EEDI value

X

Required EEDI = IMO Reference Line x Y%

IMO Reference Line tankers =1218.80 x DWT -0.488

attained EEDI

EEDI

10%

20%

30%

Phase 12015 - 2019

Phase 22020 - 2024

Phase 3on and after 2025

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

EEDI

DWT

IMO impact analysis

EEDI

Phase-in Time Period EEDI reduction form Reference Line

Phase 0 1/01/2013–31/12/ 2014 0% (i.e. EEDI values as RL)

Phase 1 1/01/ 2015 – 31/12/2019(1/01/2017 – no waiver)

10%

Phase 2 1/01/2020 – 31/12/2024 20%

Phase 3 1/01/2025 onwards 30%

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.

INTERTANKO POSITION

1. INTERTANKO welcomes the adoption by IMO of amendments to the MARPOL Convention mandating energy efficiency measures (EEDI/SEEMP regulations) on ships.

2. INTERTANKO advocates that: a) 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

b) Compliance with EEDI should focus on improved hull design, propulsion efficiency and energy optimisation, rather than predominantly on reduced speed designs

c) Any measures taken to comply with EEDI shall not jeopardise nor have an adverse effect on the safety of the ship

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

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

1.Planning: Package of measures identified & Goal setting

2.Implementation: Implementation system

3.Monitoring: Monitoring system (tools and record keeping)

4.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

INTERTANKO’s Guide for a Tanker Energy Efficiency Management Plan

1. Introduction

2. Establishing Company & Ship Management Plans

3. Voyage Optimisation Programme

4. Propulsion Resistance Management Programme

5. Machinery Optimisation Programme

6. Cargo Handling Optimisation

7. Energy Conservation Awareness Plan

INTERTANKO TEEMP

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

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!!

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?

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)

GHG FUND ETS

UNFCCCIMO GHG

FUND

SHIP

MARKET IMO/ETS

SHIP

Levy vs

. Cre

dits

OFFSETTING

BU

YIN

G C

RE

DIT

S

SUBMIT CREDITS

CONTORLSE

LL

ING

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

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

GHG Fund

PROS

•Best developed model and probably simplest•Costs predictability for a defined period•Conceptually simple from the ship operators’ perspective•Equal treatment of international trading vessels•Levy paid guarantees credited CO2 emissions reductions. No further burden for ship operator to demonstrate compliance•Use of bunker delivery note as evidence of payment facilitates enforcement•Accuracy of the bunker oil consumption baseline will improve through data collection

CONS

•The complexity of the bunker supply chain makes collection of funds unlikely to be 100% effective•Implementation depending on efficient control on reporting•Requires monitoring and adjustment of contribution to achieve desired outcome•Some issues of principle, governance and administration need to be resolved•Regarded by some governments as a taxation, thus predicted difficulties on how many Parties would adopt it

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

Efficiency Incentive Scheme (EIS)PROS

•Stronger incentive to ship owners to make measurable direct reductions•Rewards efficiency gains in existing ships regardless of age•Reduces administrative burden and fund leakage by introducing a direct, electronic payment facility•Delivers sustainable emission reductions by promoting investment in efficient design and operational practices•Bunker delivery note is the main focus of verification

CONS•Complexity around standardisation of performance measures•Practical limitations of the use of the EEOI due to changes in trading patterns and environmental conditions•Could require a significant level of administration to create the baseline, monitoring and verification of actual vessel emissions•Level of fees set at a level where it would not be attractive for ships to pay the fee instead of seeking improvements•Slow steaming will only be accounted for if the engine is de-rated and there is proof ship never goes above that speed. Emissions reduction from Virtual Arrival will not qualify

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

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

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

EMISSIONS TRADING SCHEMEPROS

• Enables the “invest-or-buy” concept

• Environmental objective is addressed through a global reduction target

• Reflects market price of carbon• Can link shipping into wider GHG

reduction initiatives• Equal treatment of international

trading vessels regardless of ownership, flag State, or port of origin

• Use of bunker delivery note for verification purposes

• (cruise ships can trade between “at sea” and “hoteling” operations)

CONS

• Requires decision regarding allowance allocation & auctioning•Requires definition of a “Cap” and its universal acceptance•Fluctuating carbon market price introduces investment uncertainty for GHG reduction technology•Requires set-up of trading administration and agreement on an effective monitoring, verification and enforcement system •Perceived as most expensive scheme•Effective enforcement will require the set up of a data exchange process involving all participating states•Requires strict investment criteria and monitoring of fund expenditure.

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

Age (years) Up to 15 15 – 20 20 - 25 25+

Cut 20% 15% 10% 5%

Delivered < 2 years from rule enforcement

> 2 years from rule enforcement

Cut 20% 25%

CO2 emissions cut targets

PROS

•Compliance would provide direct, measurable GHG emissions from ships•Environmental objective is addressed through a global reduction target for each ship type.•Avoids any collection of funds•Equal treatment of international trading vessels regardless of ownership, flag State, or port of origin•Would account for actual emission reductions, thus Virtual Arrival and slow steaming will count

CONS

•Imposes a cap on ship’s activity, thus non-compliance would force the ship to stop trading•Will require difficult work to establish the target cut levels. Same ship can have significantly different fuel consumption in different trades (e.g. North Atlantic winter time, versus West Africa at any time)•The scheme could require a significant level of administration for monitoring and verification of actual vessel emissions

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

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

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.