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Shipping is energy efficient
- environmentally responsible, reliable and cost efficient
235,9
217,1
91,2
72,6
53,8
40,5
29,8
9,0
1,9
0 50 100 150 200 250
VLCC tanker
Bulk carrier
Product tanker
General cargo ship
Container ship
Freight train
Ro-ro ship
Heavy truck
Air plane
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 GHGEmissions from Shipping
• Regulatory Processes & Timetables
• UNFCCC and IMO Programmes
• 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
IMO – UNFCCC Conflicting principles - a major issue
IMO Principle:
“No More Favourable Treatment”
Versus
Kyoto Protocol principle:
“Common But Differentiated Responsibility”
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------------
5/2011 INTERTANKO Council
7/2011 IMO MEPC 62
12/2011 EU Deadline for IMO/International Agreement
2012 Kyoto Protocol expires
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
Reducing GHGEmissions from Shipping
• Technical measures
• Operational measures
• Market based measures
Reducing GHGEmissions from Shipping
IMO Programme 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
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)
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
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
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.
Plus Rebate Mechanism
Some are in sector, i.e. shipping only; others are out of sector
Why are MBMs Proposed ?
• To incentivise or reward owners
or• To penalise inefficient ships
or• To fill the gap between what is expected and
what is delivered
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
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
Application of the 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
Application of the Ship Efficiency and Credit Scheme
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
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
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
D/t
on
ne
*MGO since Dec 2008
Source: Bunkerworld
0
200
400
600
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1400
Sep
-00
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-08
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-09
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-10
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-10
MDO/MGO*
HFO
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 ?