GHG EMISSIONS REDUCTIONS- UPDATE -

INTERTANKO Council10 May 2011

Athens

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

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/kWhCalculating 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”

Comparison EEDI Reference Lines

EEDI Reference Line for Tankers

y = 1218.8x-0.488

y = 499.7x-0.413

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

150000 170000 190000 210000 230000 250000 270000 290000 310000

Comparison between Owner's Data and EEDI ref line and IMO Ref Linefor VLCCs and Suez Maxs

IMO Reference Line

Series2

IMO Reference Line

Owner's Data

Owner’s data with the actual SCF

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 (?)

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?) D

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THE GAP TO ACHIEVE THE GOAL

If the pick of emissions istargeted 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: Source: UNEP

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:1. cap on 2005 emissions levels2. cap on 2010 emissions levels3. reduction of xx% from one of these past levels

Source: UNEP

ALTERNATIVE TRAJECTORIES FOR SHIPPING

Source: UNEP

INDUSTRY ASSESSMENT RESULTS FOR TANKERSAverage marginal CO2 reduction cost per option - Tank

Baseline: 369 mill tonnes per yearVo

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-100

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20

60

100

140

180

CO2 reduction (million tons per year)

Cost

per

ton

CO2 a

vert

ed ($

/ton

)

0 10 20 30 40 50 60 70

INDUSTRY ASSESSMENT ON REDUCTION POTENTIAL IN 2030*

MINIMUM MOST LIKELY MAXIMUMT B C T B C T B C

6% 7% 6% 15% 19% 14% 21% 25% 28%

Average T+B+C 6% 16% 25%

DNV ORIGINAL 54% 63% 52%

* Reductions are % from the total CO2 emissions in 2030 if no measure is taken (model assumes an annual gowth of emissions of 2%)

• 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

REMARKS

INDUSTRY ASSESSMENT INTERTANKO REMARKS

AGE (years) < 10 10-14 15-19 20-25* > 25*Oil + LPG 18% 31% 13% 18% 19%LNG 4% 27% 21% 24% 24%CHEM 18% 19% 13% 22% 27%

*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%)

MODELLED TANKER FLEET AGE PROFILE IN 2030

• 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

FINAL REMARKS

ALTERNATIVE POTENTIAL REDUCTIONS FOR TANKERS

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

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

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)

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

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