Anti-Trust/Competition Law Compliance Statement

INTERTANKO’s policy is to be firmly committed to maintaining a fair and competitive environment in the world tanker trade, and to adhering to all

applicable laws which regulate INTERTANKO’s and its members’ activities in these markets. These laws include the anti-trust/competition laws which the

United States, the European Union and many nations of the world have adopted to preserve the free enterprise system, promote competition and protect the public from monopolistic and other restrictive trade practices.

INTERTANKO’s activities will be conducted in compliance with its Anti-trust/Competition Law Guidelines.

GREENHOUSE GASES FOR SHIPS

UPDATE FROM IMO

INTERTANKO North American PanelApril 2010

IMO STATUS QUO

• MEPC 59 (July 2009) agreed on:– Interim Guidelines on the method of

calculation of the EEDI for new ships– Interim Guidelines on voluntary

verification of the EEDI– Ship Energy Efficiency Managment

Plan (SEEMP)– Guidelines for voluntary use of EEOI– Time line for MBMs

IMO STATUS QUO

• MEPC 60 (March 2010) progress:– Provisional draft for a mandatory

regulation on Design and Operational measures (EEDI & SEEMP)

– Provisional agreement on the EEDI verification scheme

– Intersessional meeting to progress on the EEDI and SEEMP regulation

– Expert Group on MBM

ENERGY EFFICIENCY DESIGN INDEX

- Cost: Emission of CO2- Benefit: Cargo capacity transported a certain distance(Relates to a seagoing maximum condition)

SAVINGSENERGYVxCapacitySFCxPOWER

SOCIETYFORBENEFITCOSTTALENVIRONMENEEDIAttained

ref

- - Mandates: New ships; Attained EEDI < Required EEDI- Mandates: Required EEDI value to be reduced in time(frequency and reduction rates to be considered)

- Application: Ships > 400 GT; ship type to be decided- Possible exemptions: diesel-electric ships (new formula)- Inaccuracies: RoRo; RoPax; short-sea; LNG; LPG- Issues: Underpowered ships – safety limits

”Capping” of speed – safety margins

EEDI Required

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Phase 1Phase 1

Phase 2Phase 2

Phase 3Phase 3

Base LineBase Line

EEDI

DWT

X

yrs.YY

yrs.yrs.

Phase Years Reduction1 [2013-2017] [15%]2 [2018-2022] [25%]3 [2023-2027] [37%]

PREDICTIONS (?) FOR TANKERS

BASE LINE FOR TANKERS

INTERTANKO’s Guide for a Tanker Efficiency and Emission Management Plan

1. Introduction2. Establishing Company & Ship Management Plans3. Voyage Optimisation Programme4. Propulsion Resistance Management Programme5. Machinery Optimisation Programme6. Cargo Handling Optimisation7. Energy Conservation Awareness Plan

INTERTANKO TEEMP

OPERATIONAL MEASURES

• Monitoring Efficiency - Energy Efficiency Operational Indicator (EEOI)

– CO2 emitted measured from fuel consumption– Transport work = cargo mass x distance (nm)

• EEOI Rolling Average – Proposed by INTERTANKO & agreed by IMO

WORKTRANSPORTOFUNITEMISSIONSCO

EEOI 2

MARKET BASED MECHANISMS

• Commonalities of MBMs:– apply to ships in service– demand targets– ships’ CO2 emissions will need to be measured– creating funds

• Suggestions classed in three main categories– all ships pay (GHG FUND; ETS)– all ships pay but some get rewards (Japan)– some ships pay (US and WSC models)

• None has a control mechanism to measure the environmental benefit for the funds used

PRINCIPLES FOR INCENTIVES/PENALTIES

• GHG Fund– all ships pay a levy– contribution by fuel consumption (fixed price)– efficient ships receive a reward (Leverage Incentive

System - Japan) • ETS (Norway/Germany/France; UK)

– all ships buy allowances– difference by number of allowances purchased

(market price) • US & WSC MBMs

– no costs for ships complying with a required efficiency standard . . . but

– US MBM - standards based on EEDI base line with a projected increase of efficiency required

– WSC MBM – milder standard than EEDI base line

GHG COMPENSATION FUND

• Ships make a set contribution to the Fund

• Collection by registered Bunker Suppliers

• Bunker Delivery Note as evidence• Mandatory registration of Bunker

Suppliers• Revenues used for

- Mitigation, Adaptation and Technology Projects- Non-vessel Specific R&D Projects- Technological Cooperation within IMO- Rewarding most efficient ships (Japanese alternative)

EMISSION TRADING SCHEME

• CAP on net CO2 emssions for shipping• CAP to be agreed by UNFCCC or IMO with

periodical declining trajectory• Carbon allowance = 1t equivalent CO2 emission • Allowances (distributed) or sold = CAP• End of each period – ship owners surrender

allowances to correspond to the actual fuel consumption:– emissions < CAP – rest allowances can be sold– emissions > CAP – buy additional allowances

EMISSION TRADING SCHEME

• Monitoring – BDN & engine log • Reports (external audited) submitted to a

registry• GHG Certificate for ships in compliance• Incentive/penalty - costs of allowances• Allowances for ships may be linked to

other carbon markets• Cross over to other carbon markets

avoids constraints in growth of shipping

USA’s MBM ALTERNATIVEEfficiency Index Standard

• Ships to meet required Efficiency Index standard (EIR) • EIR uses the EEDI base line formula as a model• New Ship delivery: EIR = mandatory EEDI value• Existing ships: EIR = EEDI base line value for the ship

type & size • EIR value gradually and periodically lowered – same %

for all• In time EIR < EEDI for a ship compliant with new rules! • Ship compliance:

– attained Efficiency Index (EIA) or– direct and continuous fuel consumption monitoring

• EIA – calculated; sea test; or continuous monitoring

(EEOI type of calculation)

USA’s MBM ALTERNATIVEEfficiency Index Standard

• IMO establish Efficiency Credit (EC) trading for ships• Measuring compliance: EC = (EIR – EIA) x Activity• Activity (over a compliance monitoring period):

– actual cargo tonne-miles; – tonne-miles / DWT or – tonne-mile default value for each type and size of ship

• EC > 0 – ship sells credits; EC < 0 – ship buys credits• Periodicity: maximum of 5 years with possible earlier

updates in case ships adopt technologies• ”Activity” aimed to include efficiency in operations:

– operational measures– fleet optimisation

• No CAP in activities but . . .. • Potentially all ships will end up buying credits

WORLD SHIPPING COUNCILVESSEL EFFICIENCY SYSTEM (VES)

• Combination of US MBM & GHG Fund• Emission targets:

– EEDI value and its reduction - new buildings– Less stringent base line and targeted reduction for

ships in operations• Ships meeting the target = no additional

charges• Less efficient ships = charges/tonne of fuel

consumed over the target• IMO establish a Fund to collect charges• Charges proportional to shipping contribution

to the total human-made CO2 emissions

MBMs - OBSERVATIONS

• GHG FUND– regarded as taxation – politically difficult– complexity of bunker purchasing– bunker suppliers need to be part of it

• ETS– will require a definition of a ”Cap”– complex enforcement and monitoring– predicted expensive adminsitration – government participation and data exchange– trading administration by each ship owner

MBMs - OBSERVATIONS• Japanese Leverage Incentive Scheme

– difficult standardisation for measurables– difficult monitoring of each ship in operation– uncertainty of the refund scheme

• US MBM – EEDI compliant ships have little improvement

potentials– strict & complicated enforcement and monitoring– strict improvement requirements – all ships buy

credits– how many credits will IMO generate?

• WSC MBM– only for non-EEDI compliant ships?– need of more details for full assessment

What is in it for me?Shipping’s GREEN Credentials

• This car, weighing one tonne, uses 1 litre of fuel to move 20 kms

• This oil tanker uses 1 litre of fuel to move one tonne of cargo 2,500 kms– more than twice as far as 20 years ago

SHIPPING SHOULD ONLY PAY AND SHOULD ONLY BE RESPONSIBLE FOR OWN EMISSIONS

POLITICAL DILEMMAS

• Need to reconcile:– UNFCCC principle of Common But

Differentiated Responsibility (CBDR)– IMO principle of uniform global rules for

shipping• Design & Operational measures only?• Market Based Mechanisms added? • Global or IMO controlled MBM?• New IMO Convention or amendments to

MARPOL Annex VI?

THANK YOU

For more information please visit www.intertanko.com

dragos.rauta@intertanko.com