UPDATE ON THE REVISION OF MARPOL ANNEX VI LATIN AMERICAN PANEL March 12-13, 2008 Miami Beach, Florida

IMO Process in 2008 February - BLG finalized its contributions April - MEPC 57 to approve the revision October - MEPC 58 to adopt the revision Enforcement – earliest February 2010

Outcome from BLG 11 SOx and PM emissions A. Status Quo - No change B. Sulphur Emissions Control Area (SECA): –A global sulphur cap (unchanged or lower value) –SECA sulphur cap lowered in two tiers: 1.0% in [2010] 0.5% in [2015] C1. Change to distillate fuels (ref. INTERTANKO): –Use of distillate fuels for all ships –A global sulphur cap in two tiers: 1.0% in [2012] 0.5% in [2015] –Include in MARPOL Annex VI the specification for the distillate fuel to be used by ships C2. Global cap – As C1 but allows use of residual fuel + scrubbers

Outcome from BLG 11 SOx and PM emissions USA PROPOSAL – EMISSION LIMITS AT [200] NM FROM SHORE AS FROM 2011 [0.1% SULPHUR CAP] BIMCO PROPOSAL - GLOBALLY - 3% SULPHUR CAP IN % SULPHUR CAP IN USE TREATMENT TECHNOLOGIES IN SECAs SHIPS SHOULD USE MDO ONLY - 1% SULPHUR CAP IN % SULPHUR CAP IN ALSO USE TREATMENT TECHNOLOGIES

Outcome from BLG 11 SOx and PM emissions RETAIN 6 OPTIONS, 4 FROM WG MTG PLUS US AND BIMCO OPTIONS; AND IMO SG WILL PROPOSE STUDY TO DETERMINE THE EFFECTS OF THE OPTIONS

Outcome from BLG 12 SOx and PM emissions Three options Option 1 – Global Sulphur cap –4.50% –1.00% as from 1 January 201[2] –0.50% as from 1 January 201[5] –Prior to 1 January 201[2] only: SECAs sulphur cap of 1.50% Fuel change over procedures & timing recorded Scrubbers/abatement technologies could be used as a means of compliance

Outcome from BLG 12 SOx and PM emissions Option 2 – Global/Regional –Global S cap 4.50% –SECA S cap 1.50% 0.10% as from 1 January 201[2] –Scrubbers/abatement technologies allowed with the limits: 6.0 g SOx/kWh 0.4 g SOx/kWh as from 1 January 201[2] waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Outcome from BLG 12 SOx and PM emissions Option 3 – Global/Regional with Micro- Emissions Control Areas –Global S cap 4.50% 3.0% from 1 January 201[2] –SECA S cap 1.50% 1.00% from 1 January 201[0] 0.50% from 1 January 201[5] –Scrubbers/abatement technologies allowed with the limits: 6.0 g SOx/kWh 4.0 g SOx/kWh as from 1 January 201[0] 2.0 g SOx/kWh as from 1 January 201[5] waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Outcome from BLG 12 SOx and PM emissions Option 3 – Global/Regional with Micro- Emissions Control Areas Micro-Emission Control Areas –up to [24] nm off the coast; better definition yet to be developed –conditions for declaring a Micro - ECA yet to be developed –S cap 0.10% (no date given so far) –scrubbers/abatement technologies allowed with the limit at 0.4 g SOx/kWh –waste streams cannot be discharged in ports unless documented it would not have an adverse impact on the local eco-systems (IMO issues guidelines with criteria for such an assessment)

Opinions submitted to MEPC 57 SOx and PM emissions INTERTANKO supports Option 1 INTERTANKO also suggests that as from 1 January 201[5], Annex VI should also add limitiations to lower the PM emissions such as –carbon residue content in the fuel used by ships –ash content in the fuel used by ships OCIMF, ICS and BIMCO support Option 3 IPIECA supports Option 2 but with a S cap in SECA set at 1.00% Governments we believe support Option 1: Norway, Germany, Sweden, Finland, Italy, Ireland, Greece, European Commission.

Possible outcome from MEPC 57? SOx and PM emissions Possible agreement on a hybrid solution It starts with Option 2 It then translates into Option 1 Other comments: –Greece indicated at BLG 12 they disagree that scrubbers are identified as a specific alternative compliance –Marshall Islands seem to share that opinion –Australia and Canada seem also to support Option 1

Outcome from BLG 12 NOx emissions – Pre-2000 engines Measures on engines installed onboard ships constructed between 1 January 1990 and 31 December 1999 The NOx emissions at Tier I level Applicaton date –at the first intermediate or renewal survey; or – [1 January 2010], which one occurs later Compliance through: –in engine modification (MEPC 57 has to choose between two options); or –abatement technologies

Outcome from BLG 12 NOx emissions – Pre-2000 engines Option 1 –applies to all (i.e – 1999) engines –if compliance through in-engine modifications not possible, a Port State could: require the ship to use distillate fuel; or deny port entry Option 2 – applies to larger (1990 – 1999) engines only ([displacement of and over [30/60/90] liters] or [power output of > 5000 kW]) – use of a certified ”upgrade kit”

Outcome from BLG 12 NOx emissions – Tier II (new engines) Tier II standards (emission reductions related to Tier I limits): –15.5% reduction (engines with n<130 rpm) (i.e g/kWh) – reductions between 15.5% and 21.8% depending on the engine’s rpm (engines with 130 rpm < n < 2000 rpm) –21.8% reduction (engines n > 2000 rpm) (i.e g/kWh) Applies to engines installed on ships constructed on and after 1 January 2011

Outcome from BLG 12 NOx emissions-Tier III (new engines) Tier III standards – 80% emission reductions from Tier I limits Tier III limits apply ONLY to engines installed on ships constructed on & after 1 January 2016 (a Party to Annex VI can apply the above limits to new engines of 130 kW and above) Tier III limits in ECAs only Outside ECAs - Tier II limits Emission levels for Tier III are as follows: –3.40 g/kWh (engines with n<130 rpm) –9*n(-0.2) g/kWh (engines with 130 rpm < n < 2000 rpm) –1.96 g/kWh (engines n > 2000 rpm

Outcome from BLG 12 Fuel Oil Quality Small but important changes and pending discusions The fuels required to be ”fit for purpose” MEPC 57 to clarify the meaning of ”fit for purpose” from a quality point of view IMO to invite ISO to revise marine fuels specifications in ISO 8217 Define fuel specification for a Global solution Possible inclusion of limitations of other parameters to reduce PM emissions BLG developed a standard procedure to interpret the actual test results of the sulphur content of the MARPOL sample

CONCLUSIONS Possible hybrid solution for SOx and PM emissions –starting with Option 2 (with a higher S cap in SECAs, say 1.00% from say 201[2]) –followed by Option 1 Early dates (i.e. 2015/2016) for enforcing Option 1 would be hard to negotiate INTERTANKO would be determined to avoid an outcome along the lines of Option 3 Fuel Oil Quality – INTERTANKO would make efforts to seek the revised MARPOL Annex VI provides a better definition of the quality of the fuels delivered to ships

CONCLUSIONS NOx limits for existing engines - not an easy task Use of MDO would give an easy NOx reduction by 10% to 15%. BUT without a global use of MDO, the penalty on old ships would be too high NOx Tier II - possible and rests with manufacturers NOx Tier III implies use of SCRs/abatement technologies Prudent that new ships consider compliance with Tier III and install SCRs/abatement technology prior to 2016 Still to be assessed –SCRs - the only technology to give an 80% reduction;... BUT –existing SCR technology not efficient at low engine loads –can compliance be achieved in ECAs irrespective the engine load (close to port, through estuaries and straits ships slow down)?

Questions?