Leading the way; making a difference MONITORING REPORTING & VERIFICATION (MRV) OF DATA TO ASSESS THE ENERGY EFFICIENCY OF SHIPS IN OPERATIONS (FUEL CONSUMPTION & OTHER DATA)

Leading the way; making a difference BACKGROUND Climate Change/GHG Emissions reductions – HIGH level political item Kyoto Protocol – Regulatory frame work through UNFCCC – Parties commit to emissions reductions targets: primarily through national measures but also through additional MBM Aviation & Shipping not included due to their international character UNFCCC agreed measures are taken through ICAO and IMO, respectively ICAO decision: to suggest an ETS for aviation by 2016 with enforcement in 2020 IMO decisions: mandatory EEDI for new buildings & SEEMP for all ships SEEMP does not set a target for GHG emissions reduction of ship in operations Regulators want a target IMO considered developing MBMs for shipping but no agreement in sight Alternatively – Regulation to assess the energy efficiency of ships in operation First step – Monitoring, Reporting and Verification (MRV) of specific data

Leading the way; making a difference BACKGROUND IMO mandates Energy Efficiency Design Index (EEDI) for new buildings (1 January 2013) & Ship Energy Efficiency Management Plan (SEEMP) for all ships SEEMP does not set a target for GHG emissions reduction of ship in operations IMO considering Market Based Measures (MBM) for shipping but so far, no agreement Alternative: Amendments to MARPOL Annex VI to assess Energy Efficiency of ships in operation

Leading the way; making a difference ENERGY EFFICIENCY OF SHIPS The Concept: Three step phase-in legislation Phase I – data monitoring, reporting and verification (MRV); analyse and determine base line; determine target for improvement Phase II – trial period for verification of enforceability of the set target Phase III – enforcement The Proposals: - Proposals at IMO by: USA, Japan, Germany and EU/EMSA - Regional Proposal by EC

Leading the way; making a difference PROPOSED SCHEMES at IMO – USA Ship Efficiency Credit Trading (SECT) Data to be used: (a) joules of energy and (b) service hours Measure: Set required efficiency on joules/service hours for each ship type and size. A three phase-in measure as follows: Phase I:Data Collection; Submission, Verification and Analysis Phase Development of base lines based on data reported by ships over two years Development of Attained Efficiency Standards in terms of percentage improvements from the base lines Verifying Achievement of the Standard Phase II: Pilot Phase – rule is exercised but not enforced. Time to adjust requirements when some flexibility will be provided. Phase III: Full implementation Target: To be established after baseline is established Measure if not compliant: not addressed

Leading the way; making a difference Annual Energy Efficiency Operating Index (EEOI) !! Data to be reported: (a) fuel consumption and (b) distance Measure: Annual EEOI value calculated with a “standard cargo” (vessel’s DWT) Annual EEOI !! = Σ(Fuel consumption x C F ) / total distance / DWT Target: A defined target EEOI value based on data collected from ships. Three options: (a) an improvement compared with an average EEOI rolling average values for all ships of same type and same size established by IMO ; or (b) an improvement as compared with the previous year actual EEOI rolling average value (a ship based target) (c) hybrid - ship fails to meet the target as set in option (a) (say becauseof the trading pattern), compliant if its meets the target as set in option (b) Measures if not compliant: not addressed PROPOSED SCHEMES at IMO – JAPAN

Leading the way; making a difference PROPOSED SCHEMES at IMO – GERMANY Fuel Oil Reduction Strategy (FORS) Data to be used: (a) installed power (b) average Specific Fuel Oil Consumption (SFOC) (c) average annual operational time and (d) average annual cargo carried. ( NOTE: Installed Power to be taken from IHS-Fairplay; the rest of data taken from the IMO Second GHG Study (data for year 2007).) Measure: Reference Fuel Consumption for a ship type and size calculated as follows: RFC = (Installed Power) x (~ SFOC) x (~ operational time) x (~ cargo carried) Target: Standard (maximum) annual fuel consumption calculated as follows: Standard = RFC x (1 – Reduction Target in % to be defined) Measure if not compliant: not addressed, but it is suggested that, if ship is using more fuel than allowed by the standard, some flexibility for compliance is considered such as averaging consumption with ships within the same fleet or other means yet to be specified.

Leading the way; making a difference PROPOSED SCHEMES at IMO – EU/EMSA Individual Ship Performance Indicator (ISPI) Data to be reported: (a) annual fuel consumption (b) annual distance travelled Measure & Target: Efficiency Improvement Target (EIT) - actual permitted CO 2 emissions per nautical mile for each ship (each ship has own reference value!) EIT (grams of CO 2 /nautical miles) = CO 2 /D x (Y x Vc) Y is improvement in % Vc is Variance (ship’s past performance versus a reference line value – EIV/EESV) Data collection for 2 to 3 years to determine ship’s “past performance” Calculate each ship’s Estimated Index Value (EIV) in gCO 2 /n-mile (not yet developed) Determine Vc = compare EIV with the Energy Efficiency Standard Value (EESV) which seems to be the value from a regression/averaging line to be determined from the data collected for that ship type & size Measures if not compliant: not addressed.

Leading the way; making a difference Annex to MEPC 66/4/6 1. The ship’s efficiency measured through its EIV (which is the definition of the base lines set for defining EEDI) 2. Ship’s EIV value gives it a +/- correction factor Vc = EIV/EESV 3. Efficient Improvement Target (EIT) (g CO 2 /n- miles) = CO 2 /D x (Y x Vc) where Y is the reduction target in % (D is distance)

Leading the way; making a difference t/m INTERTANKO DATA – CO 2 /n-mile NOTE: this is the type of curve giving results on gCO 2 /n-mile (no cargo)

Leading the way; making a difference Applicability: All ships > 5,000 GRT calling to EU ports Reporting CO 2 emissions when ships travel: between EU ports, an incoming voyage from a non-EU to an EU port an outgoing voyage from an EU port to a non-EU port Data to be reported: fuel consumption, distance and cargo (Note: EP proposed only fuel consumption and distance) Measure: to monitor the ship’s average energy efficiency at least with the following criteria: Total annual CO 2 emissions / total annual distance travelled Total annual CO 2 emissions / total annual transport work EC REGIONAL PROPOSAL on MRV

Leading the way; making a difference EC REGIONAL PROPOSAL on MRV Proposed Dates for implementation: 1 July 2015 – enter into force 31 August 2017 – companies should submit to “verifiers” Monitoring Plan 1 January 2018 – starts first annual reporting period 2019 and after – by 30 April each year, companies shall submit a verified emissions report to the European Commission and to the Flag State – by 30 June each year, the European Commission will make the emissions reported by ships publicly available (Note: EP proposed data will not be made public)

Leading the way; making a difference No decision taken..... but - Agreed for a phase-in rulemaking with an initial global data collection INTERTANKO position: a phase-in rulemaking with an initial data collection; based on data collection, IMO could assess: (a) the necessity of developing the rule; (b) the standard to define efficiency; and (c) the target required for compliance - -A global data collection system could include elements such as: (a) identity of the ship (IMO number and Flag State Administration) (b) the shipowner and operator (name and address and place of business) (c) technical characteristics of the ship, for example DWT, engine power, reference/design speed, EEDI, etc. (d) total annual fuel consumption per fuel type; and (e) total annual transport work (tonne-miles) or transport work proxy, e.g. distance or service hours. - Consider to establish a centralised database for the purpose of data collection and it is preferable for this database to be hosted by the IMO Outcome from MEPC 66

Leading the way; making a difference To be further discussed - - Data reporting and collection: on voluntary basis or mandatory? - - Frequency of reporting – preference indicated for an annual reporting - - Should data include “transport work” (tonne-miles) or should use only a surrogate of such transport work such as “distance” or “service hours”? - further work to take into account the advantages and disadvantages of each of these options. INTERTANKO current view: there could be different ways on how best to define Energy Efficiency in Operation for different ship types. Therefore, at least for Phase I of the proposed regulation, INTERTANKO would like to propose that, for tankers only, the proposed rule should retain collection of data on the “total actual cargo” carried by tankers for further assessments before a final decision is made. - -The four options presented as possible mechanisms (core elements) for assessing the energy efficiency of ships in operations - these four options should be tested from the data collected Outcome from MEPC 66

Leading the way; making a difference Work ahead - - Established a Correspondence Group to carry on the matters addressed by MEPC 66 - Flag Administrations and organisations were encouraged to submit data on voluntary basis, thus facilitating the testing of the various proposed options to assess the energy efficiency of ships in operations. Concluding: although there were no concrete decisions taken by MEPC 66, the outcome may facilitate more concrete developments and progress to be presented at MEPC 67 (October 2014). Outcome from MEPC 66

Leading the way; making a difference INTERTANKO COUNCIL DECISIONS INTERTANKO supports collection of fuel consumption data to measure CO 2 emissions from ships Ship’s efficiency is the best method of measuring performance improvement, with fuel consumption being the critical parameter INTERTANKO should continue ongoing work to distinguish the difference between “ship efficiency” and “transportation efficiency” INTERTANKO will continue investigations and assessments of the best possible model for oil and chemical tanker operations with an objective of positively influencing any regulatory decisions. The model should attempt to remove the involvement/influence of other stakeholders (importers, charterers, cargo owners, etc.) To assist in developing this model, INTERTANKO members are encouraged to provide fuel consumption data to the Secretariat, FOR INTERTANKO’s INTERNAL USE ONLY

Leading the way; making a difference INTERTANKO ACTIVITY ON MRV Established a Joint Working Group (JWG) on MRV with participation from ISTEC & Environment Committee. JWG met 4 times and so far: Provided comments to the EU proposed MRV regulation Promoted views with the EU Commission, EU Parliament and EU Council Initiated and continues to collect data from members Explores means for a best approach to assess fuel efficiency of tankers in operations Attempts to develop a possible INTERTANKO model which removes from the assessment the involvement/influence of other stakeholders (importers, charterers, cargo owners, etc.) Plans to develop a guide for a standard model of a Monitoring Plan JWG reports to ISTEC/Environment Committee JWG activity monitored and guided by the Executive Committee INTERTANKO Council assesses progress and endorses further actions

Leading the way; making a difference INTERTANKO FURTHER COMMENTS ON MRV MRV should be discussed at IMO - Regional MRV will bring marginal benefit Regulators must consider thoroughly data and results before taking next step Simplicity in data collection Flexibility to allow for different approaches between shipping sectors, if justified For tankers, allow reporting of cargo transported for further assessments before a final decision is made

Leading the way; making a difference DATA COLLECTION FOR INTERNAL USE Vessel # (for confidentiality, ship’s name or IMO # not required) DWT (max. summer draught) Type tankers (oil, product, chemical/product, chemical) Total time on laden voyages (hours) / reporting period (one year)* Total distance in laden voyages (nm) / reporting period (one year)* Total number of voyages / reporting period (one year)* Total cargo onboard (tonnes) / reporting period (one year)* Total time on ballast voyages (hours) / reporting period (one year)* Total time at berth (hours) / reporting period (one year)* – Total fuel consumption at berth / reporting period (one year)* Total fuel consumption (tonnes) / reporting period (one year)* (HFO- LSHFO- MGO) Σ tonne-miles for all voyages / reporting period (one year)* * reporting period (one year) – INTERTANKO proposed definition: “All completed voyages in one calendar year during which emissions have to be monitored and reported”

Leading the way; making a difference INTERTANKO POSSIBLE MODEL Two-tier approach for assessing energy efficiency: The overall indicator reflecting the “transportation efficiency” (e.g. EEOI) An additional Energy Efficiency Tanker Indicator (EETI) indicating the ship’s technical efficiency considering only parameters under the ship owners’ control OBJECTIVES of EETI Enable a transparent performance benchmarking for the tanker If tankers fail to met the “target transportation efficiency value” (e.g. target/required EEOI value), it might prove compliance through the EETI. DEVELOPMENT OF EETI Derived from EEOI and represents the carbon intensity of a ship in a referenced condition Mathematically splits EEOI into a technical factor and a logistics factor

Leading the way; making a difference INTERTANKO possible model The technical factor relates the fuel consumption ( as reported in the calculation of the EEOI) with the ship’s design parameters, i.e. full load (dwt) and the designed speed (V des ) The logistics factor can be analysed into three elements: 1. 1.the “cargo utilisation” (actual cargo/over maximum cargo capacity m L /dwt), 2. 2.the “distance utilisation”(distance covered in laden condition versus the total distance [d L /(d L + d B )] 3. 3.the “speed utilisation” (actual average speed for the period used to calculate the EEOI/ design speed or V op /V des ) For the calculation of the EETI it is necessary to apply a correction for the fuel consumption, which has to be related to the design speed. Therefore a fuel consumption correction factor “fss” is used (which can be derived from S-P curves) but for most ships is adequate to assume: f ss =(V des / V op )^3 By applying all above factors to the EEOI, then the EETI is calculated as a “normalized” figure of the EEOI, somehow “neutralizing” the influence of commercial parameters in the logistics factor-