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11 November 2009 The Climate Effects of Transportation at Sea An INTERTANKO Position Climate Change According to data presented by the United Nations Framework Convention on Climate Change (UNFCCC), it is estimated that the surface temperature of the Earth has risen by around 0.6°C over the past 100 years and that, unless action is taken, it may increase by another 1.8°C to 4°C by the year 2100. There seems to be a broad political agreement that measures need to be taken to contain the temperature rise below 2°C until 2100. It is assumed that a major cause which triggered this climate change (also called global warming) is the excess of greenhouse gas emissions (GHG) from human activities such as manufacturing, agriculture, transportation, etc. Therefore, in order to contain the global warming, it is agreed that man-made GHG emissions need to be significantly reduced. 1. INTERTANKO agrees that each sector of the industry, including transportation should strive to deliver a significant contribution by reducing its Greenhouse Gas (GHG) emissions, particularly CO2 emissions. Greenhouse Gas Emissions from Shipping Although shipping is the most efficient means of transportation, much more efficient than rail, road and air transportation, it is of course accountable and responsible for the emissions it produces and it has the obligation to find ways to reduce its emissions. According to the Second IMO GHG Study (2009), the share of shipping accounts for 3.3% of the global CO2 emissions, out of which 2.7% comes from the international shipping. Such a modest contribution from shipping is not an excuse to limit the potential contribution to reducing CO2 emissions. However, these statistics are significant when planning the targets for emission reductions, particularly over a short term period. Shipping is a service industry. Its activity very much depends on the society’s need for transportation at sea. Achieving significant reductions in the international shipping trade will be particularly challenging as the amount of goods transported by sea is steadily growing. It is a fact that tankers have become extremely energy efficient - for every litre of fuel burned in its main engine, today’s oil tanker transports its cargo twice as far as 20 years ago. But achieving further large reductions in carbon emissions is challenging and particularly hard at a time when the amount of oil transported in the international tanker trade has, up to last year, been growing steadily – the tonne-mile oil trade has increased by 66% this decade compared to the 1980s. 2. INTERTANKO advocates measures that would result in CO2 and other GHG emissions reductions from tankers. Some measures, such as ship operations, are under direct control and thus the responsibility of tanker operators. However, some other measures, such as improved ship design, improved 1 technologies and improved logistics can only be obtained through a close and coordinated cooperation with other stakeholders and with Governments. 3. INTERTANKO believes that energy efficiency will be gained through better synergy, better coordination and systematic efforts towards optimising shipping movements jointly with the other stakeholders involved in the logistical chain. Regulatory developments The Maritime Industry has the best knowledge on efficient measures to reduce GHG emissions from ships. Flag Administrations and the Maritime Industry are therefore best placed to develop GHG emission reduction regulations through the International Maritime Organisation (IMO). An international regulatory regime is by far, more efficient than a variety of local regulations developed by authorities with potentially less knowledge and understanding of the shipping industry. 4. INTERTANKO supports the IMO process to develop real and sustainable GHG emission reduction regulations from ships that will not hinder international commerce. Regulating the reduction of GHG emissions from ships is however a political decision. There are two distinct viewpoints among Governments with regard to the “scope of application” of a new IMO regulatory framework. One view is that regulations should be “ship neutral”, meaning they apply equally to all ships regardless of flag, consistent with the “no more favourable treatment” principle that forms a fundamental and legally-binding element of IMO Conventions. The second viewpoint holds that any GHG agreement should apply to Annex 1 countries only as defined in the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) based on the Kyoto principles of “common but differentiated responsibilities”. These two perspectives represent fundamental differences on how various governments view controlling GHG emissions, and this political issue remains an important point of disagreement in the IMO debate. 5. INTERTANKO supports the idea that the GHG regulations should be “ship neutral” as the only way to address a global environmental issue. Differentiating vessels’ GHG obligations on the basis of a vessel’s flag would fail to make a meaningful environmental improvement. Measures for GHG emission reductions IMO is striving to develop a regulatory package for reducing GHG emissions from ships that will be presented at the UNFCCC meeting in Denmark in December 2009. These measures to date include an Energy Efficiency Design Index (EEDI), Ship Energy Efficiency Management Plan (SEEMP), Energy Efficiency Operational Indicator (EEOI) and potentially additional Market-Based Instruments (e.g., a GHG Compensation Fund (tax/levy), Emissions Trading Scheme or a combination of these). Energy Efficiency Design Index (EEDI) A ship Energy Efficiency Design Index (EEDI) will mandate a minimum acceptable fuel efficiency of new buildings. The EEDI will assess the “environmental cost” (i.e. the amount of CO2 emissions) a ship will have for the “benefit to the society” (i.e. amount of cargo transported). The assessment is based on a variety of design features. The intention of the EEDI is to promote more efficient designs and it is intended that the acceptable EEDI values 2 will move towards better efficiency in time. Since the EEDI will have an influence on new ships only, its impact will be noticeable some time in the future. INTERTANKO members have tested the EEDI formula and, except for refinement needed for some special tanker designs, consider that the formula has matured enough so ship operators are encouraged to test it and provide early feedback with regard to its robustness. 6. INTERTANKO supports the adoption of the Energy Efficiency Design Index (EEDI) as soon as possible. INTERTANKO also encourages IMO to use the EEDI formulae for an early establishment of target levels for CO 2 emission reductions for new ships. Ship Energy Efficiency Management Plan (SEEMP) Ships would be required to develop and maintain a Ship Energy Efficiency Management Plan (SEEMP), through which it explains the measures taken and the results obtained by using measures aimed at improving the energy efficiency of operations. It broadly covers the implementation plan, record-keeping, monitoring and self-evaluation. SEEMP should be individual for each ship and will include a list of best practices used to improve the ship’s energy efficiency. There would be a record-keeping on the implementation of best practices used to monitor/verify progress in reducing emissions possibly through use of the EEOI (Energy Efficiency Operational Indicator). The EEOI is however only useful as an aggregate internal KPI for monitoring ship’s progress in reducing GHG emissions but .it is not suitable as the basis for regulation as its values for any ship are considerably affected by many factors beyond the operator’s control. A significant issue regarding the energy efficiency performance of ships in operations is that some factors in planning a ship’s voyage (i.e., optimal voyage speed and schedules, minimizing ballast condition, etc.) which can improve the EEOI of a vessel are beyond the control of the vessel. It is essential that charterers should also be involved in the chain of responsibility to minimize CO2 emissions during a ship’s voyage. INTERTANKO has noted and welcomed the release by OCIMF of their Energy Efficiency and Fuel Management booklet. This contribution from OCIMF is recognized by INTERTANKO as providing, at least in the tanker sector, the basis for a voluntary approach between tanker operators and charterers for a joint planning of a ship’s voyage with a view to limiting CO2 emissions. This would involve the practical application of the EEOI and, in time, may also provide the basis on which emissions reduction targets may be set. 7. INTERTANKO supports the adoption of Ship Energy Efficiency Management Plan (SEEMP) by IMO. A growing number of INTERTANKO members apply operational measures aimed at improving ships’ fuel efficiency. 8. INTERTANKO has developed a SEEMP model specific for tankers which will be made available to its members before end of 2009. The guide for tankers will facilitate a harmonized and comprehensive recording, monitoring and reporting of the results. It will also provide a much better assessment of the usage of the Energy Efficiency Operational Indicator (EEOI). 9. INTERTANKO is actively involved in developing best industry practice together with other stakeholders, particularly charterers, for a better planning of the voyage with the view of reducing CO2 emissions. 3 Market-Based Instruments: (MBI) Market-based instruments proposals to IMO still need further development. It is too early to know which (if any) will be successful or be implemented. If the IMO decides to include MBIs as part of any regulatory package for the reduction of GHG emissions from ships, INTERTANKO will strongly request that the selection of any MBI should be based upon whether the specific proposals meet the IMO nine principles. 10. INTERTANKO is making an in-depth analysis of any concrete Market Based Instruments (MBI) proposal against a set of principles the Association has adopted and which embody the IMO nine principles. INTERTANKO believes that a MBI scheme should be: 1 Governed by the IMO and be specific for the shipping industry; 2 Effective in contributing to the reduction of total GHG emissions: any funds collected should be used as “offsets”, e.g. to stimulate JI (Joint Implementation) & CDM (Clean Development Mechanisms); should stimulate leading energy efficiency technologies; should provide incentives for improvement of ship’s energy efficiency through innovation and R&D; should stimulate stakeholders, such as charterers and ports, to employ ships in the most effective manner to reduce GHG emissions (e.g. by selection of voyage speed, minimizing ballast legs, minimizing waiting times and adopting larger average cargo/tonne miles ratios); 3 Environmentally sustainable without negative impact on global trade and growth should be cost effective; should not lead to competitive distortion; should not disadvantage operators or ships which have already taken actions resulting in GHG reductions; 4 Efficient and credible enforcement and monitoring should be binding and equally applicable to all ships; should be practical, transparent, fraud-free and easy to administer by the governing authority; should enable compliance to be demonstrated through proper monitoring (with the scheme based on actual fuel burned); and should ensure certainty and predictability.” 11. INTERTANKO will report the result of its evaluations and a comparison between various concrete alternative proposals as soon as more detailed presentations of these are provided. Targets for GHG Emissions Reductions INTERTANKO believes that, despite the complexity of the issues that need to be addressed in developing provisions to reduce CO2 emissions from both new and existing ships, IMO has achieved a great deal of progress. When enforced, the IMO forthcoming regulations could result in measurable reductions of GHG emissions from all ships. Without ignoring the political connotations and the links to the more general debate with regard to climate change negotiations in UNFCCC, INTERTANKO believes that IMO will 4 maintain its momentum and will shortly reach agreements in setting short term and long term targets on emission reductions from all ships. 12. Shipping is a service industry whose activity increase or contracts with the demand of the society. Therefore, INTERTANKO believes that GHG emission reduction targets should give due regard to optimising the supply chain. 13. INTERTANKO believes it is essential that stakeholders and regulators discuss and assess targeting levels for GHG emission reductions from shipping, on a short and long term basis. The target levels should be ambitious, but, they should also give realistic predictions and thus provide incentive for sustainable efforts to achieve them. 14. INTERTANKO believes it is more important to initiate the process of CO2 emission reduction from shipping as soon as possible and accept that the initial agreed target levels could be adjusted as experience is gained. 5