1. SKIPSFARTENS KLIMAGASSUTSLIPP OG MULIGE REGULERINGSMODELLER Terje C. Gløersen Norges Rederiforbund Startseminar NIFS-sjøsikkerhetsprosjekt Lysebu, 28.-29. januar 2008

2. OVERVIEW The problem and the challenge Marine bunker consumption and emissions from shipping – past, present and future CO 2 -efficiency of shipping and the reduction potential The regulatory process – international and regional Conclusions

3. THE PROBLEM AND THE CHALLENGE The Problem The anthropogenic GHG emissions are causing an unprecedented rapid temperature increase overlaying the non- anthropogenic variations which poses serious threats to our climate. The Challenge To prevent dangerous and irreversible climate changes, the GHG emissions must be reduced to limit the global temperature increase, preferably according to stabilisation level I giving a temperature increase of 2.0 to 2,4º C above the pre-industrial level. To achieve this, CO 2 emissions must be reduced by 50 to 85 % by 2050 relative to 2000.

4. GREENHOUSE GASES COVERED BY THE KYOTO PROTOCOL GASLIFETIME GWPFRACTION % 20 YRS100 YRSGLOBALNORWAY CO 2 Carbon dioxide 1 176,779,5 CH 4 Methane 12 72 2514,3 N2ON2O Nitrous oxide 114310298 7,9 SF 6 Sulphur hexafluoride 32001630022800 1,1 HFCs Hydrofluorocarbons PFCs Perfluorocarbons

5. MARINE BUNKER CONSUMPTION AND EMISSIONS FROM SHIPPING PAST, PRESENT AND FUTURE

6. MARINE BUNKER SALES & CONSUMPTION

7. CO 2 -EMISSIONS FROM SHIPPING IMO study published in 2000: 1996:Fuel consumption 138 Mton (based on bunker sales) CO 2 -emissions437 Mton Representing 1,8 % of global CO 2 -emissions Recent estimates for 2004: Fuel consumption250 – 300 Mton (based on bunker sales) CO 2 -emissions790 – 950 Mton Representing 2,7 – 3,2 % of global CO 2 -emissions or 1,6 – 1,9 % of global GHG-emissions IMO Scientific Group:2007 (estimate) 2020 (prognosis: 2,1% pa) Fuel consumption:369 Mton486 Mton (ship basis)

8. GHG-EMISSIONS FROM TRANSPORT 14% of global GHG-emissions (Carry 90% of world trade)

9. CO 2 -EFFICIENCY OF SHIPPING AND THE REDUCTION POTENTIAL

10. CO 2 -EFFICIENCY OF TRANSPORT MODES Source: Swedish Network for Transport and the Environment and Danish Shipowners’ Association

11. CO 2 -EFFICIENCY OF TRANSPORT MODES Source: Presentation by Transporti e Territorio (TRT) at EP-conference in Brussel in June 2007 673 913831av. 17

12. REDUCTION POSSIBILITIES Technical measures (eg. hull design, propulsion system, engines, etc.) Operational measures (eg. cargo utilization, speed, routing, etc.) Cost of fuel has been the main driving mechanism for developing and implementing more energy-efficient and thus CO 2 -efficient technical and operational measures. There is still a considerable potential for more CO 2 -efficient measures, but these are generally not cost-effective with the present fuel cost.

13. EXAMPLE OF IMPROVEMENT SFOC of marine 2-stroke engines Source: MAN Diesel

14. EXAMPLE OF IMPROVEMENT Container transportation Energy consumption for transport of loaded containers from the Far East to Europe: 1970200 g/TEU nm(diesel engine) 1976196 g/TEU nm(steam turbine) 1980120 g/TEU nm(diesel engine) 1983110 g/TEU nm 1988 70 g/TEU nm 1996 50 g/TEU nm 2007 25 g/TEU nm ? (subject average weight) 75% reduction during 26 years up to 1996, corresponding to an average annual reduction rate of 5,4%.

15. THE REGULATORY PROCESS INTERNATIONAL AND REGIONAL

16. THE INTERNATIONAL PROCESS Despite the low CO 2 -footprint of sea transportation relative to other transport modes, also international shipping need to be covered by some control mechanism as agreed in Article 2.2 of the Kyoto- protocol, not least because of the projected growth in sea transportation

17. KYOTO PROTOCOL Kyoto Protocol adopted on 11 December 1997. Article 2.2: The Parties included in Annex I shall pursue limitation or reduction of emissions of greenhouse gases not controlled by the Montreal Protocol from aviation and marine bunker fuel, working through the International Civil Aviation Organization and the International Maritime Organization, respectively.

18. THE IMO-PROCESS SO FAR Sept. 1997 A resolution is adopted requesting IMO to consider reduction strategies March 2000 IMO study of GHG-emissions published Dec. 2003 IMOs Assembly adopts policies for further work July 2005 Guidelines for CO2-indexing adopted by MEPC 53 Oct. 2006 MEPC 55 decides to carry out a new in-depth study July 2007 MEPC 56 establish a CG to discuss possible measures to address GHG-emissions

19. POSSIBLE REGULATORY MEASURES to limit or minimize the CO 2 -emissions Direct measures (standards) Technical requirements (prescribed technical solutions) Operational requirements (prescribed operational parameters) Performance requirements (prescribed CO 2 -index/benchmark) - Design index (based on fixed design parameters) - Operational index (based on actual performance – IMO-index) Indirect measures Different types of market-based measures providing economic incentives to minimize the CO 2 -emissions.

20. MARKET-BASED MEASURES – Include in an emission trading system (open or closed, regional or global, different allocation methods) – Paying a fee or charge for CO 2 -emissions (could be linked to the fuel purchase) – Differentiation or incentive systems representing carrots or sticks depending on a ship’s design or operational performance – Allocation of emission from ships to states (possible indirect measure) (for example to import countries – effect depends on the measures adopted by the countries and could thus differ from country to country)

21. KEY REQUIREMENTS TO CO 2 -REGULATIONS Flag neutral - to ensure level playing field between ships of different flags Goal based - to provide incentives to develop and implement the most cost-efficient CO2-reduction for each individual ship No separate cap - to allow for growth in international shipping in order to meet the projected increase in demand for seaborne transportation

22. THE EU POSITION

23. EU - POSSIBLE CLIMATE POLICIES FOR MARITIME TRANSPORT (CE DELFT) Voluntary commitments Reporting of IMO CO 2 index Requirement to meet a given CO 2 index limit value Inclusion of refrigerant gases in the CO 2 index Mandatory differentiation of port dues Inclusion of maritime transport in EU ETS (ref. aviation) Allocation of ship emissions to member states (7 options depending on flag state, geographical area, bunker sales, export/import country)

24. EU PROSPECTS If IMO is unable to agree a control mechanism by MEPC 59 in July 2009, EU has threatened to adopt regional measures, and the most likely measure is to include international shipping entering EU ports in the EU Emission Trading System as soon as possible after 2012.

25. SUMMARY AND RECOMMENDATIONS Sea transportation is the most energy-efficient mode of transport Energy-efficiency can be further improved by implementing existing measures, provided economic incentives or regulatory requirements Emissions from shipping should and will be regulated Regulations must inter alia be flag neutral Cost of CO 2 -emissions will increase in the future, partly because of increased fuel price and partly because of future regulatory measures. This will stimulated the development of new cost-efficient measures for further reduction of CO2-emissions from ships The shipping industry should take active part in the regulatory process to promote a practical and fair IMO-agreement by 2009, acceptable to EU. The maritime industry should work together to develop technical and operational options to reduce the CO 2 -footprint (CO 2 -index) of shipping.

26. ADDITIONAL BACKGROUND INFORMATION

27. GROWTH IN WORLD TRADE Figures in billion tonne-miles Average annual increase 1996-2005: 3,8 %

28. GROWTH IN WORLD TRADE Figures in million tonnes Average annual increase 1996-2005: 3,4 %

29. WORLD MERCHANT FLEET Ships of 100 GT and above Average annual increase 1996-2005: 2,5 %

30. GROWTH IN WORLD SEABORNE TRADE AND MERCHANT FLEET (index based) 3,8 % p.a. 3,4 % p.a. 2,5 % p.a.

31. IMO-PROCESS (1) 26.09.1997. Annex VI to MARPOL is adopted at a Diplomatic Conference, covering most emissions to air except CO 2. However, Resolution 8 request the Organization inter alia: a) to study the CO 2 -emissions from shipping for the purpose of establishing the amount and relative percentage of CO 2 emissions from ships as part of the global inventory of CO 2 emissions, and b) to consider what CO 2 reduction strategies may be feasible in light of the relationship between CO 2 and other atmospheric and marine pollutants, especially NOx since NOx emissions may exhibit an inverse relationship to CO 2 reduction.

32. IMO-PROCESS (2) March 2000. The IMO Study of Greenhouse Gas Emissions from Ships, carried out by a consortium involving MARINTEK, DNV, ECON and Carnegie Mellon, was published and discussed at MEPC 45 in October 2000, ref. document MEPC 45/8. CO 2 emissions from international shipping was estimated to account for about 1,8 % of the global CO2 emissions in 1996, based on marine bunker sales amounting to 138 Mton. The reduction potential of technical and operational measures was estimated. Also the feasibility and effectiveness of different market based mechanisms were assessed.

33. IMO-PROCESS (3) 05.12.2003. IMOs Assembly adopts “IMO policies and practices related to the reduction of greenhouse gas emissions from ships” (Resolution A.963(23)). The key element is: Urging MEPC to identify and develop mechanisms needed to limit or reduce GHG emissions from international shipping, giving priority to: - the establishment of a GHG baseline - the development of a GHG emission index focusing on CO2 - the development of guidelines on the practical application of the GHG index, and - the evaluation of technical, operational and market-based solutions

34. IMO-PROCESS (4) 22.07.2005 MEPC 53 adopts “Interim Guidelines for Voluntary Ship CO 2 Emission Indexing for Use in trials” (MEPC/Circ.471). The CO2 index expresses the actual CO2 emissions per unit of transport work and is thus an operational performance parameter that can only be determined for a given period in retrospect. The industry is urged to calculate the index in order for MEPC to assess the feasibility of the index at a future meeting of MEPC.

35. IMO-PROCESS (5) October 2006 MEPC 55 decides to carry out a new in-depth analysis of the GHG emissions from international shipping by 2010 in order to establish a more accurate baseline as requested in the policy document, resolution A.963(23). It also decides to continue the trials with the CO2-index and evaluate the results at MEPC 58 in October 2008, including a possible revision of the guidelines.

36. IMO-PROCESS (6) July 2007 MEPC 56 discusses possible technical, operational and market-based mechanism to limit or reduce the GHG emissions from international shipping as requested by the policy document. Considering the need for more input, a correspondence group is established to discuss possible approaches on technical, operational and market-based measures to address GHG emissions from ships and to submit a written report to MEPC 57 in March/April 2008.

37. OPERATIONAL CO 2 -INDICES (THEORETICAL)