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Shipping Emissions Abatement and Trading

A solution for our environment?

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A presentation at the Intertanko & Intercargo lunch

meeting Feb 20, 2008

Lars Carlsson – Chairman of ExCom

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A cross industry group encouraging and facilitating the efficient reduction of harmful emissions to air from shipping

www.seaat.org

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Our Atmosphere - in the proper perspective

Less than 10 km breathable air

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The world is changing.

So far economic growth has been the target of most countries and companies

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Today we know that economic growth can damage our environment. We must reduce our emissions to avoid negative consequences

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Millions are suffering from ever more violent hurricanes in Asia and the

Americas

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And millions are suffering from too much water

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... or no water at all

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It is today widely recognized that we must change our environmental behaviour. NOW

.....or our lifestyle will be changed anyway by nature or possibly by very strict and maybe hastily introduced new legislation

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Environment is moving to the top of the agenda

"If we stay on our present path, we face an unacceptable choice: Either we sacrifice global economic growth ... or we sacrifice the health of our planet to continue with fossil fuel growth… This current system is no longer sustainable." Condoleezza Rice, US Secretary of State

”Environmental issues - including climate change - have traditionally been placed in a category separate from the economy and from economic policy. But this is no longer tenable….”

Gordon Brown, UK Prime Minister

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Political commitment is growing…• By 2020, CO2 emissions across Europe are to be cut by 20 percent as compared to 1990 emissions.

• Renewable energy sources are to make up 20 percent of the EU's energy mix by 2020 - up from their current 6.5 percent share

”We can say to the rest of the world, Europe is taking the lead … You should join us in fighting climate change." José Manuel Barroso, EU Commission President

For the UK's part, we are aiming to meet not only our Kyoto target of reducing greenhouse gas emissions by 12.5% by 2012. We have also set ourselves … a longer-term goal to put ourselves on a path to cut the UK's carbon dioxide emissions by 60% by 2050. Gordon Brown, UK Prime Minister

"Green taxation has to be more than just a compilation of little taxes … We need to profoundly revise all of our taxes and charges. The aim is to tax pollution more, including fossil fuels, and to tax labour less," Nicholas Sarkozy, France President

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… and Shipping will have to do its fair share

“[Shipping] has got away with doing nothing and maintained a clean image which it does not deserve” Caroline Lucas, Euro MP

"Ships are one of the last nearly unregulated sources of air pollution on the planet”David Marshall, Clean Air Task Force, Boston

"If you want to improve air quality on land, you will have a larger effect from spending one euro at sea than you will have spending one euro on land,"

Pieter Hammingh, Dutch environment agency.

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The members of SEAaT have decided to contribute to a more environment friendly world in the field we know; SHIPPING

Norwegian

Shipowners’ AssociationSwedish

Shipowners’ Association

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Transportation and the environment

By most counts shipping is relatively benign on the environment

Air Emissions

0

100

200

300

400

500

600

Shipping Trucks Aviation

gra

ms/t

on

km

CO2

NOx*100

SOx*100

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However, there is scope for improvement… Fr

act

ion

of

tota

l em

issi

on

s %

Road traffic

Industry

Energy

Shipping

Constr Equipm

Other

Example - air pollution in Gothenburg

Source: IVL

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…and our industry’s feet are dragging

Reference: DG Environment

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2000 2005 2010 2015 2020

ships

EU-25

0

2000

4000

6000

8000

10000

12000

14000

2000 2005 2010 2015 2020

ships

EU-25

SO2 NOXktonnes ktonnes

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Air pollution – what’s the problem?

• Health effects – Particulates (PM): Illness and increased mortality - annually abt

100000 fatalities in Europe– Ozon (O3): Formed by NOx. Affects health and plant life

• Acidification– Sulphuric oxide (SO2), Nitrogen Oxides (NOx)

• Eutrophication – Nitrogen Oxides (NOx)

• Corrosion– SO2, NOx, O3

• Climate change– CO2, etc (e g SO2, NOx, VOC)

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Smog

NOx, VOC and sunlight produce low level Ozone which together with PM form a noxious haze responsible for several 100000 deaths annually

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Acidification – SOx & NOx

Percentage of ecosystem exceeding critical load by 2010

More than 20% of which is caused by international shipping (example from Sweden)

Domestic sources

Shipping

Other

SOx &

NOx

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Eutrophication - NOx

Nitrogen oxides contribute to excess algae growth and oxygen shortage in lakes and marine habitatsExample: Caspian Sea

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Air pollution from shipping – what are the solutions?

• NOx– Selective catalytic reduction (SCR), +90% reduction– Humid Air Motor (HAM), 30-70% reduction– Internal engine modifications, 15-20% reduction

• SO2 – Scrubber technologies, – Low sulphur fuel

• PM– Scrubber technologies, – Distillate fuels

– Electric shore connection for use in port • CO2

– Operational measures: Speed reduction, Schedule optimization– Technical measures: Lightweight design, hull & propulsion, engines & fuel

• VOC – Vapour recovery, pressurization, reliquification

Exam

ples

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Available solutions – NOxExample – Selective Catalytic Reduction (SCR)

SCR converter

Urea injection

Up to 98% NOx reduction!

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Possible solutions – SOxExample – Seawater scrubber

Up to 90% efficiency

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CO2, etc: Speed reductions – a readily available option

Speed and emissions

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

0 5 10 15 20

emissions/tonkm

Speed kts

80% emissions

90% speed

You get about20% less emissions for 10% less speed

65%

80%

and 35% less emissions for 20% less speed

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• Size – from 200 to 300 000 tons deadweight

• Cargo handling - from cargo hold storage to tanks and containers

• Powering – from sail to steam to diesel to .....

Shipping is constantly developing…..

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Over capacity of shipyards

• Shipyards will produce ships even if ships are not needed – they will reduce prices and erode our balance sheets

• Is there an alternative to Boom and Bust?

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Over capacity of shipyards – an opportunity?

• Imagine – if we shipowners could take the opportunity to order ships for the future instead of what the yards want to build

• Imagine that we slowly build an environment adapted fleet

• Imagine that we challenge the yards – design ships with minimum carbon footprint!!!

• We owners – can contribute by ordering in a restrictive way – Only ships for the future low emission fleet

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Over capacity of shipyards

• If the Shipping Organisations of the world decided to support a gradual transition from Boom and Bust to an orderly adaption to a low emission society – WE CAN CHANGE THE WORLD FOR THE BETTER.

• Problems? Yes of course!!!• Anti trust.....• Solvable? Sure – the environment demands

solutions – not problem stacking

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Over capacity of shipyards

• Problem elimination program

• Slow speed for reduced emissions. Trading of Emission Reduction Certificates

• Nice side effect – better markets by less capacity

• Build an optimal fleet while shipyard prices are low.

• Nice side effect – less harmful emissions

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Long term development of other measures

Given proper incentive technological advances will gradually lead to:

• Low carbon (e g LNG) and Renewable fuel alternatives

• Alternative power generation, e g hydrogen fuel cells

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….zero emission ships of tomorrow?

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What does shipping need to do?

Emission Reduction Trading offers an opportunity to drive improvement through incentive, thus:

• Rewarding proactiveness and innovation• Getting Maximum reduction per cost

34Source: National Atmospheric Deposition Program

Emission trading – can it produce results?

The US Acid Rain Program – Cap and Trade

Leading to 30% reduction beyond requirement!

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Shipping Emissions Reduction Trading – a key to sustainable transportation

Shipping is the lifeblood of world trade and a key to the ongoing globalisation process

Emission Reduction Trading is a key to making this vital means of transportation sustainable

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This is ALL we leave to our children

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…while we still contribute to a strong world economy!

Let’s make them proud of us…