1. REDUCING GHG FROM SHIPS INTERTANKO Latin American Panel Cancun October 28/29, 2008

2. 2 CO 2 Emissions per Unit Load by Transport Mode Source:Ministry of Land, Infrastructure and Transport (Japan): The Survey on Transport Energy 2001/2002 MOL (Japan): Environmental and Social Report 2004 Large Tanker Large Containership Railway Coastal Carrier Small-size Commercial Truck Airplane Standard-size Commercial Truck 100200300400 398 226 49 11 6 3 1 0 Units Relative

3. BACKGROUND CO 2 emissions from all shipping is 3.3% of the total* CO 2 emissions from international shipping is 2.7% of the total*.... but GHG emissions from shipping estimated to doubled as from 1990* (emissions from aviation estimated increased by a third since 1990*) Shipping (and aviation) under pressures to be included into Kyoto Protocol *According to update IMO Study on GHG emissions (MEPC 58/INF.6)

4. BACKGROUND IMO has GHG on its agenda since 1998 Modest results during this time, i.e. –2000 Study on GHG emissions from ships –2003 IMO Assembly adopts Policies & Practices related to the reduction of GHG from ships; it tasks MEPC to develop mechanisms to reduce CO 2 –2005 Interim Guidelines for Voluntary Ship CO 2 Emission Indexing (MEPC/Cir.471) –2007 IMO Secretary General informs Assembly of his intentions to recommend to MEPC a way forward to expedite IMO work on GHG emissions from ships –2008 IMO SG presents expedited work plan which proposes completion of tasks by July 2009 UNFCCC meeting in Copenhagen end 2009 IMO needs a set of rules before Copenhagen

5. IMO ACTION Issues considered: Mandatory design index for new ships Ship Energy Efficiency Management Plan – for existing ships including: - Best practices to save energy used by the ship -Voluntary Operational Index (measure performance for each voyage & over a period of time/voyages) - Other voluntary operational measures - Energy inventory Market based incentives, such as: - Global fuel levy or hybrid mechanism - Emissions trading schemes (ETS) and/or clean development mechanism (CDM)

6. ENERGY EFFICIENCY DESIGN INDEX Mandatory for new ships Interim formulae agreed Definitions of terms used, almost completed Power for diesel-electric propulsion systems not finalised Corrections factors for ice-class & weather conditions still to be developed Verification in two steps: –Plan approval (model testing) –Sea trials (final check) Interim formulae on trials; to be re-assessed by the intersessional meeting, March 2009

7. DESIGN INDEX FORMULAE (presented here in a simpler form) P MEi Power of the Main Engine(s) – 75% of the MCR for each ME SFC MEi Specific Fuel Consumption of the ME (at 75% MCR) C FMAi/AE Carbon to CO 2 correction factor (i.e. how many tons of CO 2 would be emitted by burning one ton of carbon; “rule of thumb” 3.1 ton of CO 2 at 1 ton of carbon. It varies with the type of fuel, HFO/LSFO or MDO/MGO) P AE Required Auxiliary Engine power to supply normal maximum sea load when the ship is sailing at the voyage speed. Value given by: P AE = (0.025 x Σ MCR MEi ) + 250 if P MA at MCR of and above 10,000 kW P AE = 0.05 x Σ MCR MEi if P MA at MCR below 10,000 kW SFC AE Specific Fuel Consumption of the Auxiliary Engines (at 50% of MCR) Capacity = DWT at the deepest operational draught of the ship, V ref. Speed to be obtained. V ref., P and Capacity should be consistent with each other. f w “weather correction factor” – aimed to check whether ships are un-powered). Still to be defined. Until then, its value = 1

8. DESIGN INDEX FORMULAE All suggestions by INTERTANKO were agreed at MEPC 58: –Use value of ME power at 75% MCR –Use AE power at 50% MCR –SFCs at these values are given by the engine’s EIAPP Certificates –Sea trails to be part of the verification Verification process: – V ref. to be deducted from model testing at ship’s maximum draught and at 75% MCR –V ref. to be obtained at the sea trials –Should the owner/designer need a higher V ref., then this should be established at design approval stage and better hull forms or more power be designed in

9. SHIP EFFICIENCY MANAGEMENT PLAN Each ship in operation SEMP to contain: –Best practices to save energy used by the ship –Voluntary Operational Index (for each voyage & over a period of time/voyages) –Other voluntary operational measures –Energy inventory SEMP – INTERTANKO, ICS, BIMCO, INTERCRGO work on a model guidelines for IMO Best Practices – INTERTANKO works on a model to be approved by the Council (November 2008) OCIMF “Energy Efficiency and Fuel Management” – an appendix to TMSA 2 OCIMF opens for consideration of c/p clauses to optimise the voyage and other operations to save energy during transportation

10. GREENHOUSE GASES OCIMF Best Practice Guide “The Company is able to demonstrate that it is actively liaising with Charterers to optimise vessel speed and voyage schedules.” INTERTANKO Policy/Statement??? “INTERTANKO MEMBERS, as part of their commitment to reduce Greenhouse Gas emissions, inter alia, commit to actively liaise with Charterers to optimise vessel speed and voyage schedules and call upon ALL charterers to equally commit to this liaison and on OCIMF to help facilitate the adoption of optimal vessel speeds and voyage schedules.”

11. BEST PRACTICE ON TANKER EMISSIONS & ENERGY EFFICIECY 1. Programme for Measuring and Monitoring Ship Efficiency 2.Voyage Optimization Programme (ESP 2 - 4%) –Speed selection optimization –Optimised route planning –Trim Optimization 3. Propulsion Resistance Management Programme (ESP 1 - 6%) –Hull Resistance –Propeller Resistance 4. Machinery Optimisation Programme (ESP 1 - 2%) –Main Engine monitoring and optimisation –Optimisation of lubrication as well as other machinery and equipment 5. Cargo Handling Optimization –Cargo vapours control procedure on all crude tankers (80-90% reduction of cargo vapours) –Cargo temperature control optimization 6. Energy Conservation Awareness Plan (ESP 1%) –On board and on shore training and familiarisation of company’s efficiency programme –Accommodation-specific energy conservation programme

12. CAVEATS TO LISTED BEST PRACTICES Information from a broad spectrum of tankers Applicability/effectiveness of each measure dependant on company’s particular fleet characteristics The energy saving potential (ESP) of each category of measures is an approximation based on varying measures being assessed in isolation and will be open for correction and amendment as further experience is gained Charterer’s involvement as well as other external parties can not be underestimated when implementing, measuring and monitoring a tanker’s efficiency over time

13. OPTIMISING SPEED

14. ENERGY EFFICIENCY OPERATIONAL INDEX MEPC 58 agreed Operational Index is a voluntary tool to monitor each ship’s fuel consumption No link between Design & Operational Indexes Voyage Index calculated as per MEPC/Circ. 471 Monitoring in time by a Rolling Average Index For tankers, MEPC 58 agreed to the Rolling Index Average suggested by INTERTANKO, OCIMF and BIMCO Rolling Index Average for tankers calculates the fuel consumption per tone-miles for last 10 voyages

15. OPERATIONAL INDEX

16. ADVANTAGE OF THE ROLLING AVERAGE

17. MARKET BASED INCENTIVES Global fuel levy – Danish proposal Apply to all ships in international trade Revenue collected nationally and channeled to independent international GHG fund Revenue generated applied to: 1. acquisition of emission quotas/credits generated in other industrial sectors 2. funding projects in developing nations 3. funding IMO Technical Cooperation program Cap & Trade ?? Emission Trading ??

18. EU EMISSION TRADING SCHEME Aviation included from Jan. 1, 2012 Applies to all aircrafts landing and taking off from EU airports In 2012, the CO 2 cap at 97% of 2004-2006 emissions In 2013 and onwards, the cap set at 95% of these emissions 85% of the allowances will be allocated free of charge, based on a simple benchmark The remaining 15% will be auctioned

19. GHG EMISSION REDUCTIONS NEXT STEPS Correspondence Group on the Operational Index and SEMP Intersessional Meeting (9 to 13 March 2009) to finalise the Design Index, SEMP and Operational Index MEPC 59 (July 2009) which may: –Approve regulations on the Design Index –Conclude or approve SEMP and Operational Index –Decide on how to tackle MBI (to keep and develop or to drop them)

20. GREENHOUSE GASES Outstanding questions Will maritime transportation be included in a future global framework under the UNFCCC/Kyoto Protocol OR will IMO be allowed to address GHG from ships? Will it apply to all ships OR will a “common but differentiated responsibilities” prevail? If through IMO, will it be a revision of Annex VI of MARPOL or a new IMO treaty?