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.

IMO GHG REGULATIONS COUNCIL Meeting London 5. October 2011

GHG – EEDI/SEEMP Regulation Part of the MARPOL Convention EEDI applies to new: Tankers, Bulk Carriers, Gas Tankers, Container Ships, General Cargo Ships, Refrigerated Cargo Carriers EEDI does not apply to: ships with diesel-electric propulsion, turbine propulsion or hybrid propulsion systems New tankers (> 400 GT): –building contract from 1 January 2013 and –delivery not later than 30 June 2015 SEEMP required for ALL ships

IMO Reference Line tankers = x DWT attained EEDI

GHG – EEDI/SEEMP Regulation Administrations may delay the enforcement of EEDI application with up to 4 years. (i.e. building contract before 1 January 2017) Parties to MARPOL Annex VI have agreed to allow ships with such waivers to call at their ports

IMO Guidelines Method for EEDI calculation Survey and Certification of the EEDI Interim Guidelines for determining minimum propulsion power and speed to enable safe manoeuvring in adverse weather conditions EEDI for larger size segments of tankers and bulk carriers Cubic capacity correction factor for chemical tankers

CONCLUSIONS INTERTANKO policy achieved Phase 0: many designs are compliant Phase 1: first 2 years possible waiver at owner’s request & Flag agreement No waivers from 1 January 2017 Lower speed design – easiest “solution” Intent of EEDI: better designs ~ less fuel necessary to transport same amount of cargo at the same speed as today

COUNCIL INVITED TO Consider INTERTANKO’s views on options to waive the application of EEDI up to 4 years If not in favour of such waivers – membership criterion? (e.g. all tankers contracted from 1 Jan 2013 EEDI compliant) Whether INTERTANKO may express any view with regard to use of lower design speed as means of compliance

RECOMMENDED INTERTANKO POSITION: 1.INTERTANKO welcomes the adoption by IMO of amendments to the MARPOL Convention mandating energy efficiency measures (EEDI/SEEMP regulations) on ships. 2.INTERTANKO believes that: a)In the implementation of the EEDI requirements, there should be a “level playing field” and that the EEDI requirements should apply equally to all applicable ships on the same effective date b)Compliance with EEDI should focus on improved hull design, propulsion efficiency and energy optimisation, rather than predominantly on reduced speed designs c)Any measures taken to comply with EEDI shall not jeopardise nor have an adverse effect on the safety of the ship

MARKET BASED MEASURES COUNCIL MEETING London 5. October 2011

QUESTIONS TO COUNCIL Would INTERTANKO see any justification for a MBM? No matter justified or not, should INTERTANKO support/be involved in development of the MBM legislation? If involved in IMO MBMs, which model should be supported? Alternatively, should a “fund free” alternative be supported? i.e. direct targeted emissions reduction from ships in operation

MARKET BASED MEASURES & ONE ALTERNATIVE Nine MBM proposals + one alternative The possible runners up: –International GHG FUND (Denmark) –Emissions Trading Scheme (Norway; UK; Germany and France) – EU ETS !! –Vessel Efficiency Incentive Scheme (EIS) (Japan/WSC) –Mandatory CO 2 emission cut targets through technical and operational measures (Bahamas)

GHG FUND ETSUNFCCC IMO GHG FUND SHIP MARKET IMO/ETS SHIP Levy. Credits Levy vs. Credits OFFSETTING BUYING CREDITS SUBMIT CREDITS CONTORL SE LLING

GHG FUND ETS centralised system CO 2 credit vs. Levy sets a target ship not trading CO 2 better predictability of costs no guarantee against increase levy levels Charterers involved World Scale sets a target credits up to the cap – free or auctioning additional credits – open market ( cap) ships trade “good ships” can sell no international market EU market very small cruise lines like ETS

VESSEL EFFICIENCY INCENTIVE SCHEME (EIS) No fee for ships meeting or exceeding applicable standard Fee applied if not meeting standard = ($Y/t fuel) x total tons of fuel Y = f (Δ) from the standard

CO 2 emissions cut targets Technical and operational measures only No penalties to pay, no rewards to be given, no funds to be collected New ships (EEDI compliant) Existing ships – targeted reductions No compliance – no trade Age (years)Up to 1515 – Cut20%15%10%5% Delivered< 2 years from rule enforcement > 2 years from rule enforcement Cut 20%25%

EISTARGETING direct reductions rewards efficiency EEDI relevant for operational efficiency? VA not accounted for slow steaming only if ME derated difficult to establish target cut levels limitation in using EEOI fee level (improve or pay?) monitoring/reporting measures actual GHG emissions targets each ship no fund collection Virtual Arrival & slow steaming will count caps ship’s activity ships stop trading? difficult to establish target cut levels monitoring/reporting

+ 64%?

IMPACT ON SHIPPING GHG FUND: 5% increased voyage costs* ETS: 11% increased voyage costs* MBMs high admin costs –who benefits? Shipping cannot absorb all cost increase MBM targets set just to collect funds? If the MBM scope is, limit the cost! * PwC Study – An analysis of the future impact of carbon regulations on environment and industry

CONCLUSIONS IMO will continue to discuss MBMs Choices: (a) collecting funds; (b) direct measures on ships in operations; or both Monitoring/verification of CO 2 emissions from each ship would be necessary Shipping fuel consumption: not known! Shipping lacks mechanism for proper recording of performance in operations Lack of such allows other parties to initiate ship indexing

CONCLUSIONS Class Societies developing models to assess/measure environmental efficiency Ports’ and charterers’ various Indexes Others (e.g. CWR) ship index calculators Shipowners may consider action Ships in operations (pre- & post-EEDI) would need to evaluate, demonstrate and report their energy efficiency Ships have necessary data (from SEEMP/EEOI, SOx, NOx and VOC)

QUESTIONS TO COUNCIL Is there justification for MBMs? If so, which MBM scheme?..... or “in operation” indexing? Industry indexing model? Industry to measure and report its ? If so, what and where to report? Please, discuss and decide !

RECOMMENDED INTERTANKO POSITION: An MBM is not justified at this time. The industry is already incentivised by high fuel prices If an MBM should be required, then this should: –be implemented through an international regime –be simple to enforce and to monitor –drive the right behaviour –provide sufficient transparency to maintain the current level playing filed –not be an unnecessary financial and operational burden on the industry

RECOMMENDED INTERTANKO POSITION Out the current proposals, the GHG FUND seems to be by far the simplest and most transparent from a ship owner point of view. INTERTANKO is not in favour of a trading scheme to reduce GHG emissions.