Maritime Current and Pending Regulations by GreenEcoTek LLC

California’s Regulations and Goods Movement Action Plan Clean Ships: Advanced Technology for Clean Air 2007 Michael H. Scheible Deputy Executive Officer California Environmental Protection Agency

Air Resources Board

Overview • Scope of goods movement • Progress on plan strategies • Funding mechanisms • What’s next

Across California On a typical day: • 30,000 containers arrive/leave via ship • 250,000 big-rig trucks plus 380,000 diesel local delivery trucks on roads • 1,200 locomotives operating Supported by: • 3,700 pieces diesel cargo equipment • 4,100 commercial harbor craft

2005 Health Impacts from Goods Movement Cases/Year Premature death* 2,400 Hospital admissions (heart) 830 Hospital admissions (lung) Acute bronchitis Asthma/other respiratory Absences/restricted days

2,000 5,100 62,000 4.4 million

*Uncertainty range is 720 to 4,100 deaths/year

International Cargo Triples by 2020

California’s Growth Adds to Demand 110%

2001 -2020 50% 25% Population

Truck Travel

Rail Cargo

Key Emission Sources • Diesel trucks • Locomotives • Cargo handling equipment • Harbor craft • Ships

Diesel PM from Goods Movement 2005

2020

Ships Trucks*

Trucks* Locomotives

Ships

Harbor Craft Cargo Equipment 53 tons/day * Includes TRUs

36 tons/day

NOx from Goods Movement 2005

2020 Ships

Trucks*

Trucks* Locomotives Ships

Harbor Craft Cargo Equipment 1,080 tons/day 720 tons/day * Includes TRUs

SOx from Goods Movement 2005

2020 Locomotives Others Trucks*

Ships

Ships Others 90 tons/day * Includes TRUs

180 tons/day

ARB Goals for Goods Movement (April 2006 Emission Reduction Plan) Reverse growth in emissions • By 2010, reduce emissions as much as possible, at least to 2001 levels Reduce diesel PM risk • Rapid reduction in community risk • By 2020, reduce statewide risk 85%

Goals for Goods Movement (cont.) Attainment of federal standards • Reduce South Coast NOx 30% in 2015 and 50% in 2020 (preliminary targets) • Apply strategies statewide to aid all regions in attaining standards Localized risk reduction • Reduce localized risk in communities adjacent to goods movement facilities

Regulations and Strategies • Regulatory actions are, and will, remain the framework for emission reductions • Incentive programs are essential • Leases, agreements, or trading are potential mechanisms

Truck Strategies • ARB regulations for:

– Port trucks (2007) – Privately-owned truck fleets (2007/2008)

• Enhanced enforcement of truck idling limits in communities • Enforcement of ARB rule for international trucks • Low sulfur diesel fuel in place

Rail Yard Locomotives Strategies • ARB / Railroad Agreements • Low sulfur diesel fuel in place • Upgrade switcher/local yard

locomotives • Tighter U.S. EPA emission standards for new engines (2008) • New locomotives brought to CA service • Rail yard risk assessments

Cargo Handling Equipment Strategies • ARB rule for new and existing equipment (2005) – 80% PM control – 80% NOx control

• ARB rule for gas

forklifts (2006) • Low sulfur diesel fuel in place • Port fleet upgrades

Harbor Craft Strategies • Low sulfur diesel fuel in place • ARB fleet rule for existing and new engines

(2007) • ARB shore power regulation (2007) • Current U.S. EPA standard achieves 30-45% control for new engines • Tighter U.S. EPA emission standards for new engines (2008)

Ships Background • Ship emissions will more than double by 2020 • International standards are inadequate • U.S. EPA standards limited to U.S. flagged ships • High sulfur fuels are used

Ship Strategies • ARB rule on auxiliary diesel fuel (2005) • ARB rule prohibiting incineration for cruise

ships and OGV (2005/2006) • Cleaner new engines and fuels • Upgrade/retrofit existing engines • Operational changes • Shore-based electrical power (cold-ironing)

Ship Engines

• Cleaner main engine fuel rule (2007) • Speed reduction rule (2007) • Bring cleaner ships to California service – Step 1: 30% lower NOx and PM emissions than existing standards, beginning 2010 – Step 2: Best technology at 90% NOx and at least 60% PM control, beginning 2015

Shore Power • ARB rule for shore power

(2007) • Most cost-effective for passenger, container, and refrigerated cargo ships • Prime candidate ports: LA, Long Beach, Oakland, San Diego, SF, Hueneme

Targets for at Dock Controls • Increasing percentage of ship visits to use shore power or alternatives

Ship Visits by Year 2010 2015 2020 Shore Power Alternate Measures

20% 20%

60% 40%

80% 20%

Partners for Cleaner Ships • International and Federal New Engine Standards

– United States needs to ratify Annex VI

• U.S. EPA to adopt more stringent standards: – Proposed rulemaking for U.S. flagged ships in 2007 – Consideration of foreign flagged ships if IMO reductions are not enough

• Ports

Funding Mechanisms

Proposition 1B Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006

• $1 billion to reduce emissions from

freight movement in trade corridors • Reductions not required by law or regulation • $200 million for cleaner school buses

Implementation • Legislature sets conditions and criteria • Legislature appropriates funds to ARB • ARB staff employs public process to develop recommendations • Board action on proposals • Projects funded and implemented

Moyer Funding for Goods Movement • District funding – Over 800 engines upgraded since 1998 – South Coast targeting $22 million/year

• 10% ARB set aside focuses on multi-

district projects and goods movement – $13 million funded in 2004-2006 – Locomotives (Bay Area, Roseville, SJV) – Ship retrofit/fuel (Bay Area, South Coast) – Tug boat (San Diego)

Other Funding • Ports of Los Angeles and Long

Beach - about $200 million each over 5 years • Possible port tariffs to raise additional monies • Minimal federal funding so far

What’s Next • Develop/enforce ARB rulemakings • Implement $1 billion funding program • Push federal/international standards • Support local initiatives

Prevention of Air Pollution from Ships Regulations for the Prevention of Air Pollution from Ships were adopted in the 1997 Protocol to MARPOL 73/78 and are included in Annex VI of the Convention. The Protocol of 1997 (MARPOL Annex VI) July 2005 amendments Review of Annex VI Greenhouse gases Background on air pollution and development of the MARPOL regulations Information resources on prevention of air pollution from ships The Protocol of 1997 (MARPOL Annex VI) The Protocol adopted in 1997 included the new Annex VI of MARPOL 73/78, which entered into force on 19 May 2005.

MARPOL Annex VI sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances.

The annex includes a global cap of 4.5% m/m on the sulphur content of fuel oil and calls on IMO to monitor the worldwide average sulphur content of fuel. Annex VI contains provisions allowing for special SOx Emission Control Areas (SECAS) to be established with more stringent controls on sulphur emissions. In these areas, the sulphur content of fuel oil used onboard ships must not exceed 1.5% m/m. Alternatively, ships must fit an exhaust gas cleaning system or use any other technological method to limit SOx emissions. The Baltic Sea Area is designated as a SOx Emission Control area in the Protocol. The North Sea was adopted as SOx Emission Control Area in July 2005. Annex VI prohibits deliberate emissions of ozone depleting substances, which include halons and chlorofluorocarbons (CFCs). New installations containing ozonedepleting substances are prohibited on all ships. But new installations containing hydro-chlorofluorocarbons (HCFCs) are permitted until 1 January 2020. Annex VI also sets limits on emissions of nitrogen oxides (NOx) from diesel engines. A mandatory NOx Technical Code, which defines how this shall be done, was adopted by the Conference under the cover of Resolution 2. The Annex also prohibits the incineration onboard ship of certain products, such as contaminated packaging materials and polychlorinated biphenyls (PCBs). July 2005 amendments The Marine Environment Protection Committee (MEPC) at its 53rd session in July 2005 adopted amendments to MARPOL Annex VI, including one on the new North Sea SOx Emission Control Area (SECA). The entry into force date for the North Sea SECA amendment is expected to be 22 November 2006, with its full implementation 12 months later. The Committee noted information gained from monitoring the worldwide sulphur content in fuel oils for 2004 which gave a three-year (2002-2004) rolling average of sulphur content in fuel oil worldwide of 2.67% m/m. The MEPC adopted Guidelines on on-board exhaust gas-SOx cleaning systems; Survey Guidelines under the Harmonized System for Survey and Certification for MARPOL Annex VI; Unified interpretations of MARPOL Annex VI; and Guidelines for Port State Control under MARPOL Annex VI. The MEPC also adopted amendments to update the NOx Technical Code.

The MEPC approved Interim Guidelines for Voluntary Ship CO2 Emission Indexing for Use in Trials. Review of Annex VI At its 53rd session in July 2005, the MEPC agreed on the need to undertake a review of Annex VI and the NOx Technical Code with a view to revising the regulations to take account of current technology and the need to further reduce emissions from ships. MEPC instructed the Sub-Committee on Bulk Liquids and Gases (BLG) to carry out the review by 2007, and specifically to: examine available and developing techniques for the reduction of em air pollutants; review the relevant technologies and the potential for reduction of NOx emissions and recommend future limits for NOx em review technology and the need for a reduction of SOx emissions and and recommend future limits for SOx emissions; consider the need, justification and possibility of controlling volatile o compounds emissions from cargoes; with a view to controlling emissions of particulate matter (PM), study emission levels of PM from marine engines, including their size distrib quantity, and recommend actions to be taken for the reduction of PM ships. Since reduction of NOx and SOx emission is expected to also r emission, estimate the level of PM emission reduction through this ro consider reducing NOx and PM emission limits for existing engines; consider whether Annex VI emission reductions or limitations should extended to include diesel engines that use alternative fuels and eng systems/power plants other than diesel engines; and review the texts of Annex VI, NOx Technical Code and related guidel recommend necessary amendments. MEPC 57 outcome Marine Environment Protection Committee (MEPC) - 57th session: 31 March - 4 April 2008 The Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) has approved proposed amendments to the MARPOL Annex VI regulations to reduce harmful emissions from ships. The main changes would see a progressive reduction in sulphur oxide (SOx) emissions from ships, with the global sulphur cap reduced initially to 3.50% (from the current 4.50%, effective from 1 January 2012; then progressively to 0.50 %,

effective from 1 January 2020, subject to a feasibility review to be completed no later than 2018. The limits applicable in Sulphur Emission Control Areas (SECAs) would be reduced to 1.00%, beginning on 1 March 2010 (from the current 1.50 %); being further reduced to 0.10 % , effective from 1 January 2015. Progressive reductions in nitrogen oxide (NOx) emissions from marine engines were also agreed, with the most stringent controls on so-called "Tier III" engines, i.e. those installed on ships constructed on or after 1 January 2016, operating in Emission control Areas. The revised Annex VI will allow for an Emission Control Area to be designated for SOx and particulate matter, or NOx, or all three types of emissions from ships, subject to a proposal from a Party or Parties to the Annex which would be considered for adoption by the Organization, if supported by a demonstrated need to prevent, reduce and control one or all three of those emissions from ships. In the current Annex VI, there are two SECAs designated, namely, the Baltic Sea and the North Sea area, which also includes the English Channel. Speaking at the close of MEPC, IMO Secretary-General Mr. Efthimios E. Mitropoulos praised the excellent progress made during the week-long MEPC session in IMO's long-standing efforts to limit and reduce pollution of the atmospheric environment and thanked and congratulated all the parties concerned (Member States and observer organizations) for their hard work and contribution to the results achieved. "The fact that representatives of some 100 Governments were able to reach decisions by consensus on complicated issues of great importance to the environment not only bears testimony to the responsible manner with which the Members address environmental matters nowadays but also to the great results that can be achieved when States, with the same concerns and determination to produce meaningful solutions to global problems, work together under the auspices of IMO. The co-operation of the shipping industry and environmentalist groups has been of great value and I thank them for that. I am confident that, once adopted as amendments to MARPOL Annex VI, in the coming October, the new measures will prove extremely beneficial to the environment and I commend the Committee wholeheartedly for its achievement in developing them," he said. "It will certainly be one of IMO's finest hours when this happens six months from now", he added. Mr. Mitropoulos also commended the progress in work on greenhouse gas emissions (GHG) from shipping operations, including the search for practical

means to devise any mechanisms deemed appropriate to address this important issue. He welcomed the MEPC's endorsement of his proposal to expedite the Organization's related work, in particular, as regards the CO2 Emission Indexing Scheme and the CO2 Emission baseline(s). "I wish also to express our gratitude to Norway for offering to host an intersessional meeting of the GHG Working Group at the end of June, which will give us all the opportunity to further progress the work in hand and, with that goal in mind, I commend the efforts of the Working Group to seek agreement on global solutions to further develop the action plan approved by the Committee, identifying practical next steps that will facilitate the completion of the plan's three elements within the newly-agreed timelines. Of course, these are issues which, although complex and intricate in nature, are by no means impossible to resolve, especially with the constructive engagement we have witnessed here this week. In this regard, I am confident that, as we look beyond Kyoto, we should be able to put in place a robust regime that will apply fairly to shipping while, at the same time, achieving our main objective of protecting the marine and atmospheric environment," he said. MARPOL Annex VI Regulations for the Prevention of Air Pollution from Ships entered into force in May 2005 and has, so far, been ratified by 49 countries, representing approximately 74.77% of the gross tonnage of the world's merchant shipping fleet. The proposed draft amendments to Annex VI and the NOx Technical Code will now be submitted to MEPC 58 (which meets from 6 to 10 October 2008) for adoption, in accordance with an agreed timetable. This would see the revised Annex VI enter into force in 2010. The work on greenhouse gases is scheduled for completion in 2009, in time for IMO to submit a position paper to the Copenhagen Conference (December 2009) called for by last year's Conference in Bali on climate change. SOx and Particulate Matter (PM) emissions from ships Following intense efforts to find a workable solution on a matter that had been highly controversial and the subject of extensive debate in its air pollution working group, the Committee agreed with a series of progressive standards in the amended regulation 14 Sulphur Oxides (SOx) and Particulate Matter (PM) that would result in significant reduction of SOx and PM emissions from ships. The principal elements are as follows: the sulphur limit applicable in Emission Control Areas beginning on 1 2010 would be 1.00% (10,000 ppm), reduced from the current 1.50

ppm); the global sulphur cap would be reduced to 3.50% (35,000 ppm), fro current 4.50% (45,000 ppm), effective from 1 January 2012; the sulphur limit applicable in Emission Control Areas effective from 2015 would be 0.10 % (1,000 ppm); the global sulphur cap would be reduced to 0.50% (5,000 ppm) effec 1 January 2020, subject to a feasibility review to be completed no la 2018. Should the 2018 review reach a negative conclusion, the effec would default to 1 January 2025; and introduction of a fuel availability provision under regulation 18 Fuel Availability and Quality that outlines what actions are appropriate ship be unable to obtain the fuel necessary to comply with a given re under regulation 14. Meanwhile, the MEPC approved an MEPC.1 Circular containing Unified Interpretations related to the verification of sulphur content in fuel oil. The Unified Interpretations should be applied until the 2008 amendments to MARPOL Annex VI enter into force. The circular also gives, in an appendix, Fuel Oil Verification Procedure for MARPOL Annex VI Fuel Samples. NOx regulations for new engines The MEPC agreed amendments confirming the proposed three-tier structure for new engines, which would set progressively tighter nitrogen oxide emission standards for new engines depending on the date of their installation. Tier I applies to a diesel engine which is installed on a ship constructed on or after 1 January 2000 and prior to 1 January 2011 and represents the 17 g/kW standard stipulated in the existing Annex VI. For Tier II, NOx emission levels for a diesel engine which is installed on a ship constructed on or after 1 January 2011 would be reduced to 14.4 g/kWh. For Tier III, NOx emission levels for a diesel engine which is installed on a ship constructed on or after 1 January 2016 would be reduced to 3.4 g/kWh, when the ship is operating in a designated Emission Control Area. Outside a designated Emission Control Area, Tier II limits apply. NOx standards for existing engines The MEPC agreed a NOx emission limit of 17.0 g/kW for a diesel engine with a power output of more than 5,000 kW and a displacement per cylinder at, or above, 90 litres installed on a ship constructed on or after 1 January 1990 but prior to 1 January 2000.

NOx Technical Code The MEPC approved draft amendments to the NOx Technical Code, to give a revised NOx Technical Code 2008. The draft amended NOx Technical Code, includes a new Chapter 7 based on the agreed approach for NOx regulation of existing (pre-2000) engines established in the draft amended MARPOL Annex VI. The draft amended NOx Code includes provisions for direct measurement and monitoring methods, a certification procedure for existing engines, and test cycles to be applied to Tier II and Tier III engines. Other matters Exhaust Gas Cleaning Systems The MEPC also agreed, with a view to adoption by an MEPC resolution, the draft revised Guidelines for Exhaust Gas Cleaning Systems. It was agreed to forward the interim washwater discharge criteria, to be included in the Guidelines, to the Joint Group of Experts on Scientific Aspects of Marine Environmental Protection (GESAMP) for its review and comment. The interim washwater discharge criteria will be revised in the future as more data becomes available on the contents of the discharged washwater and its potential effects on the marine environment, taking into account any advice given by GESAMP. Halons The MEPC approved a draft MSC-MEPC Circular on the decreasing availability of halons and forwarded it to the Maritime Safety Committee (MSC) for consideration and concurrent decision. The circular notes the decreasing availability of halons for marine uses and requests shipowners, ship operators, shipping companies and all other interested entities to take appropriate action to reduce their reliance on halons. Volatile Organic Compounds (VOCs) Draft guidelines for the development of a VOC management plan were approved, with a view to adoption at MEPC 58. The purpose of the VOC Management Plan is to ensure that the operation of a tanker, to which regulation 15 of Annex VI applies, prevents or minimizes VOC emissions to the extent possible. Regulation 15 requires a Party regulating tankers for VOC emissions to submit a notification to the Organization, which should include information on the size of tankers to be controlled, the cargoes requiring vapour emission control systems, and the effective date of such control. Liaison with ISO The MEPC instructed the IMO Secretariat to invite the International Standardization Organization (ISO) to consider the development of a fuel oil specification addressing air quality, ship safety, engine performance and crew

health, with recommendations for future consideration by IMO and, if feasible, to report back to the Committee at its 58th session in October. Greenhouse gas emissions from ships Reflecting the Committee's continuous determination to reduce green house gas (GHG) emissions emanating from shipping operations, the MEPC endorsed a proposal form the Secretary-General to expedite the Organization's work on GHG emissions, in particular as regards developing the CO2 (carbon dioxide) Emission Indexing Scheme and the CO2 Emission baseline(s). The report of the intersessional Correspondence Group on GHG-related issues, which was tasked with discussing and compiling possible approaches on technical, operational and market based measures to address GHG emissions from ships, was considered, along with other relevant submissions from Member Governments and non-governmental organizations in consultative status with IMO. The MEPC agreed that a coherent and comprehensive future IMO regulatory framework on GHG Emissions from ships should be: effective in contributing to the reduction of total global greenhouse emissions; binding and equally applicable to all flag states in order to avoid eva cost-effective; able to limit - or at least - effectively minimize competitive distortio based on sustainable environmental development without penalizing trade and growth; based on a goal-based approach and not prescribe specific methods supportive of promoting and facilitating technical innovation and R& entire shipping sector; accommodating to leading technologies in the field of energy efficien practical, transparent, fraud free and easy to administer. The Working Group on GHG Emissions from Ships developed practical next steps covering the development of short-term and long-term measures to address CO2 emissions from ships. The next steps were approved by the MEPC. Short-term measures include a proposal to establish a global levy scheme on marine bunker fuel to achieve GHG emission reductions. Under this scheme, all ships engaged in international voyages would be subjected to a bunker levy established at a given cost level per ton of fuel bunkered. With such a scheme in place, a baseline of fuel used and CO2 emissions would be obtained. The prospect of a global levy/credits scheme contributing to a GHG emissions reduction from

ships was found promising, although it was noted that several aspects would need to be clarified and worked on, including: the practical implementation of a global levy scheme; who would collect the levies and how; how would the revenues be distributed; the relation with existing environmental levies and tax regimes in ge would there be enough Clean Development Measures1 to buy with th and the potential for a modal shift in transport at the regional level. Other short-term measures listed for further consideration include: improvement of specific fuel consumption; Energy Efficiency Design and Management Plan/Using a Test Mode fo estimating CO2-index of new-build ships; onshore power supply; use of wind power; voluntary/mandatory requirements to report CO2 index values, infor exchange/outreach and rating performance of ships and operators; strict limitations on leakage rates of refrigerant gases; vessel speed reductions; measures to improve traffic control, fleet management, cargo handli operations and energy efficiency. Some of the measures could lead to immediate reduction of CO2 emissions and should be implemented as soon as possible. The MEPC endorsed the view of the Working Group that a resolution (to be adopted by the MEPC and/or Assembly), urging the shipping industry and other related entities to do so, should be developed at an intersessional meeting of the GHG Working Group to be held in Oslo, Norway, from 23 to 27 June 2008. The longer-term measures identified by the Working Group and approved by the Committee for further development include: technical measures for ship design; use of alternative fuels a CO2-Design Index for new ships; external verification scheme for CO2 operational index; unitary CO2 operational index limit, combined with penalty for non-co

Emissions Trading Scheme (ETS) and/or Clean Development Mechani and inclusion of mandatory CO2 element in port infrastructure charging. The Oslo intersessional meeting was instructed to further address market-based, operational and technical measures identified by the MEPC 57 Working Group on GHG-related issues, including: developing a CO2 Design Index for new ships with a view to approval and establishing the future use of this index, and its GHG reduction po reviewing the existing CO2 operational index guidelines (MEPC/Circ.47 view to finalization at MEPC 58 and, in particular, develop a methodolo CO2 baseline in terms of efficiency; and consider the purpose of the C operational indexing scheme; further developing mechanisms with GHG reduction potential for inter shipping, inter alia: global levy/hybrid mechanism; Emissions Trading (ETS) and/or Clean Development Mechanism (CDM); and reviewing be practices on the range of measures as identified by MEPC 57 and how be implemented by ship builders, operators, charterers, ports and oth partners to make all possible efforts to reduce GHG emissions, with th developing a resolution, as appropriate, with a view to selecting the m promising measures for consideration at MEPC 58; and considering the level of reductions that can be achieved, addressing th implementation, cost-benefit and regulatory/legal aspects as well as t for the shipping industry, the flag and port States and other stakehold appropriate, associated with each of these options. The intersessional group will submit a written report to MEPC 58. Other measures to reduce GHG emissions from ships will be considered by the Intersessional Correspondence Group on Greenhouse Gas Emissions from Ships, which was re-established to report to MEPC 58. MEPC 56 outcome The MEPC at its 56th session July 2007 endorsed a proposal by Secretary-General Mitropoulos to commission a comprehensive study, by an informal cross government/industry scientific group of experts, to review the impact on the environment, on human health and on the shipping and petroleum industries, of applying any of the proposed fuel options to reduce SOx and particulate matter generated by shipping and the consequential impact such fuel options could have on other emissions, including CO2 emissions from ships and refineries, taking into account the availability of CO2 abatement technologies.

The study will be funded by donations from Member States and non-governmental organizations. An initial contribution from IMO, of 20,000 US dollars, will come from the balance of funds from the Onassis Foundation Prize for the Environment, which was awarded to the Organization in 1997. The group has already begun its work with a view to reporting to the twelfth session of the Sub-Committee on Bulk Liquids and Gases (BLG) in February 2008 and the MEPC in March-April 2008. The MEPC working group on air pollution continued work on reviewing MARPOL Annex VI and the NOx Technical Code, following the April 2007 session of the BLG Sub-Committee, which developed a number of options for revising the regulations in relation to the emissions of NOx, SOx, volatile organic compounds and particulate matter. BLG 12 is expected to finalize the preparation of draft amendments to MARPOL Annex VI, taking into account the report of the aforementioned scientific study. The aim is to have the draft amendments approved at MEPC 57, in the Spring of 2008, and to adopt them at MEPC 58, in the Autumn of 2008. The amendments to MARPOL Annex VI could then enter into force 16 months after adoption, in accordance with the tacit acceptance procedure stipulated in Article 16 of the MARPOL Convention. Ships' fuel sulphur content continues downward trend The Committee noted the results of the ships' fuel sulphur monitoring programme for 2006. It revealed the average sulphur content for the year was 2.59%, a reduction from the 2005 average of 2.70%. The three year (2004-2006) rolling average was 2.66%, a slight reduction from the previous year's rolling average of 2.70%. Update of the 2000 IMO Greenhouse Gas (GHG) Study The MEPC confirmed the need to update the 2000 IMO GHG Study, and agreed a timeframe, scope and terms of reference for that purpose. The study, it agreed, should cover current global inventories of GHGs and relevant substances emitted from ships engaged in international transport; any methodological aspects and future emission scenarios; identify progress made to date in reducing GHG emissions and other substances; identify possible future measures to reduce emissions of GHGs and undertake a cost benefit analysis, including environmental and public health impacts, of options for current and future reductions in GHG emissions and other relevant substances from international shipping. Finally, it should identify the impact of emissions from shipping on climate change. The aim is to submit the updated study to the 59th session of the MEPC.

Meanwhile, the MEPC established an Intersessional Correspondence Group on GHG Related Issues to discuss and compile possible approaches on technical, operational and market based measures to address GHG emissions from ships and present a written report to MEPC 57 in March-Arpil 2008. MEPC 55 outcome The Marine Environment Protection Committee (MEPC) at its 55th session in October 2006 agreed a work plan, with a timetable, to identify and develop the mechanisms needed to achieve the limitation or reduction of carbon dioxide (CO2) emissions from ships, noting that climate change caused by greenhouse gas emissions from the burning of fossil fuel is a steadily growing concern for most countries. The MEPC noted that shipping, although an environmentally friendly and fuel-efficient mode of transport, nevertheless, needs to take action on greenhouse gases (GHG). The work plan provides for the further development of the CO2 Emission Indexing Scheme, with Member States and the industry asked to continue to carry out trials in accordance with the Interim Guidelines for Voluntary Ship CO2 Emission Indexing for Use in Trials (MEPC/Circ.471, issued in 2005); the consideration and evaluation of methodology for CO2 emission baseline(s); and the consideration of technical, operational and market-based methods for dealing with GHG emissions. The aim is to complete the work by 2008/2009. Following discussions in the Working Group on Air Pollution, the MEPC moved forward with other issues relating to air pollution as follows: it agreed eight unified interpretations relating to the implementatio enforcement of MARPOL Annex VI, the NOx Technical Code and rela guidelines; it approved the standard form of the Sulphur Emissions Control Are Compliance Certificate to facilitate uniform enforcement and port S control; it approved the establishment of a correspondence group to develo washwater discharge criteria for exhaust gas SOx cleaning systems regarding standardization of on-shore power supply connections wi agreed that a global standard would benefit the shipping industry b to await the finalization of such a standard before taking any decisi possible inclusion in the revised MARPOL Annex VI, noting that the International Organization for Standardization (ISO) and the Intern Electrotechnical Commission (EIC) have established a working grou standardization of on-shore power supply for ships at berth; and it agreed that that co-operation between the secretariats of the Int

Civil Aviation Organization (ICAO) and IMO should be strengthened developments related to GHG emissions in both Organizations shou communicated to each other. The Sub-Committee on Bulk Liquids and Gases (BLG) is currently undertaking a comprehensive review of MARPOL Annex VI and the NOx Technical Code and an intersessional meeting of the BLG Air Pollution Working Group was held from 13 to 17 November 2006 in Oslo, Norway, to progress the work further. Sulphur monitoring The MEPC noted the results of monitoring of the worldwide average of sulphur content of residual fuel oils, which indicated that in 2005, almost 90% of the samples had sulphur contents between 1.5 and 4% m/m. Almost 50% was between 2 and 3% m/m. 219 out of 79,592 (0.3%) of the samples were over 4.5% m/m sulphur, and 5 samples contained more than 5% sulphur (compared to 7 samples in 2004). The sulphur content of residual fuel measured for 2003, 2004 and 2005 gave a three year rolling average for the period of 2.7%. The rolling average for 2002-2004 was 2.67%. MEPC 54 outcome At its 54th session in March 2006, a working group was established to consider issues relating to the prevention of air pollution from ships, including follow-up action to the IMO Policies and practices related to the reduction of greenhouse gas emissions from ships (resolution A.963(23)). Following the work by the group, the MEPC approved two circulars aimed at assisting implementation of MARPOL Annex VI: 1. The MEPC Circular on Bunker Delivery Note and Fuel Oil Sampling, to clarify how to comply with regulation 18, which places requirements on ship owners and fuel oil suppliers in respect of bunker delivery notes and representative samples of the fuel oil received and on Parties to the 1997 Protocol to regulate the bunker suppliers in their ports. The circular urges all Member States, both Parties and non-Parties to the 1997 Protocol, to require fuel oil suppliers in their ports to comply with the requirements and to raise awareness of the necessity to enhance implementation and enforcement of regulation 18 of Annex VI. 2. The MEPC circular on Notification to the Organization on ports or terminals where volatile organic compounds (VOCs) emissions are to be regulated, which notes that regulation 15 of Annex VI requires Parties to inform the Organization of their intention to introduce requirements for the use of vapour emission control systems and to notify the Organization of ports and terminals under their jurisdiction where such requirements are already in force. However, many

terminals are implementing or operating such practices without notification to the Organization. The Committee shared the concern that, since there is no circulation of such information, it is difficult for owners and operators to prepare for these changes at ports and terminals. The circular reiterates that Parties to the 1997 Protocol are required to notify the Organization without delay with information on ports and terminals under their jurisdiction at which VOCs emissions are or will be regulated, and on requirements imposed on ships calling at these ports and terminals. Any information received by the Organization on the availability of vapour emission control systems will be circulated through MEPC circulars so that owners and operators will have up to-date information on current and future requirements for the utilization of such systems. As instructed by MEPC 53, the Sub-Committee on Bulk Liquids and Gases (BLG) will undertake a review of MARPOL Annex VI and the NOx Technical Code with a view to revising the regulations to take account of current technology and the need to further reduce air pollution from ships. The progress of this work will be reported to the next session of the MEPC. The Committee and its Working Group on Air Pollution had long and extensive debates on how to follow up resolution A.963(23) on IMO Policies and Practices related to the Reduction of Greenhouse Gas Emissions from Ships. By the resolution, the Assembly urged MEPC to identify and develop the necessary mechanisms needed to achieve the limitation or reduction of GHG emissions from international shipping. Among the items considered was whether only emission of CO2 or of all six greenhouse gases identified by the Kyoto Protocol should be included. The MEPC agreed to consider the follow-up actions to resolution A.963(23) in a technical and methodological perspective and to concentrate the work on CO2 emissions. The Committee also agreed to continue the work at the next session and, in particular, to consider further a draft work plan to identify and develop the mechanisms needed to achieve the goal set by the Assembly. Greenhouse gases In November 2003, IMO adopted resolution A.963(23) IMO Policies and practices related to the reduction of greenhouse gas emissions from ships. At its 52nd session in October 2004, the Marine Environment Protection Committee (MEPC) made progress on developing draft Guidelines on the CO2 Indexing Scheme and urged Members to carry out trials using the scheme and to report to the next session. One purpose of developing guidelines on CO2emission indexing is to develop a simple system that could be used voluntarily by ship operators during a trial period.

The Committee agreed that a CO2 indexing scheme should be simple and easy to apply and take into consideration matters related to construction and operation of the ship, and market based incentives. At its 53rd session in July 2005, the MEPC approved Interim Guidelines for Voluntary Ship CO2 Emission Indexing for Use in Trials. Meanwhile, the Committee recognized that IMO guidelines on greenhouse gas emissions have to address all six greenhouse gases covered by the Kyoto Protocol (Carbon dioxide (CO2); Methane (CH4); Nitrous oxide (N2O); Hydrofluorocarbons (HFCs); Perfluorocarbons (PFCs); and Sulphur hexafluoride (SF6). The MEPC at its 56th session July 2007 confirmed the need to update the 2000 IMO GHG Study, and agreed a timeframe, scope and terms of reference for that purpose. The study, it agreed, should cover current global inventories of GHGs and relevant substances emitted from ships engaged in international transport; any methodological aspects and future emission scenarios; identify progress made to date in reducing GHG emissions and other substances; identify possible future measures to reduce emissions of GHGs and undertake a cost benefit analysis, including environmental and public health impacts, of options for current and future reductions in GHG emissions and other relevant substances from international shipping. Finally, it should identify the impact of emissions from shipping on climate change. The aim is to submit the updated study to the 59th session of the MEPC. Meanwhile, the MEPC established an Intersessional Correspondence Group on GHG Related Issues to discuss and compile possible approaches on technical, operational and market based measures to address GHG emissions from ships and present a written report to MEPC 57 in March-Arpil 2008. Background on air pollution The issue of controlling air pollution form ships - in particular, noxious gases from ships' exhausts - was discussed in the lead up to the adoption of the 1973 MARPOL Convention. However, it was decided not to include regulations concerning air pollution at the time. Meanwhile, air pollution was being discussed in other arenas. The 1972 United Nations Conference on the Human Environment in Stockholm marked the start of active international cooperation in combating acidification, or acid rain. Between 1972 and 1977, several studies confirmed the hypothesis that air pollutants could travel several thousand kilometres before deposition and damage occurred. This damage includes effects on crops and forests.

Most acid rain is caused by airborne deposits of sulphur dioxides and nitrogen oxides. Coal and oil-burning power plants are the biggest source of sulphur dioxides while nitrogen oxides come from car, truck - and ship - exhausts. In 1979, a ministerial meeting on the protection of the environment, in Geneva, resulted in the signing of the Convention on Long-range Transboundary Air Pollution by 34 governments and the European Community. This was the first international legally binding instrument to deal with problems of air pollution on a broad regional basis. Protocols to this Convention were later signed on reducing sulphur emissions (1985); controlling emissions of nitrogen oxides (1988); controlling emissions of volatile organic compounds (1991) and further reducing sulphur emissions (1994). During the 1980s, concern over air pollution, such as global warming and the depleting of the ozone layer, continued to grow, and in 1987 the Montreal Protocol on substances that Deplete the Ozone Layer was signed. The Montreal Protocol is an international environmental treaty, drawn up under the auspices of the United Nations, under which nations agreed to cut consumption and production of ozone-depleting substances including chlorofluorocarbons (CFCs) and halons in order to protect the ozone layer. A Protocol was adopted in London in 1990 - amending the original protocol and setting the year 2000 as the target completion date for phasing out of halons and ozone-depleting CFCs. A second Protocol was adopted in Copenhagen in 1992, introducing accelerated phase-out dates for controlled substances, cutting short the use of transitional substances and the introduction of phase-out dates for HCFCs and methyl bromide(a pesticidal gas which depletes the ozone layer). CFCs have been in widespread use since the 1950s as refrigerants, aerosol propellants, solvents, foam blowing agents and insulants. In shipping, CFCs are used to refrigerate ship and container cargo, insulate cargo holds and containers, air condition crew quarters and occupied areas and refrigerate domestic food storage compartments. Halons, manufactured from CFCs, are effective fire extinguishers used in portable fire extinguishers and fixed fire prevention systems. IMO begins work on air pollution At IMO, the Marine Environment Protection Committee (MEPC) in the mid-1980s had been reviewing the quality of fuel oils in relation to discharge requirements in Annex I and the issue of air pollution had been discussed.

In 1988, the MEPC agreed to include the issue of air pollution in its work programme following a submission from Norway on the scale of the problem. In addition, the Second International Conference on the Protection of the North Sea, held in November 1987, had issued a declaration in which the ministers of North Sea states agreed to initiate actions within appropriate bodies, such as IMO, "leading to improved quality standards of heavy fuels and to actively support this work aimed at reducing marine and atmospheric pollution." At the next MEPC session, in March 1989, various countries submitted papers referring to fuel oil quality and atmospheric pollution, and it was agreed to look at the prevention of air pollution from ships - as well as fuel oil quality - as part of the committee's long-term work programme, starting in March 1990. In 1990, Norway submitted a number of papers to the MEPC giving an overview on air pollution from ships. The papers noted: Sulphur emissions from ships' exhausts were estimated at 4.5 to 6.5 million tons per year - about 4 percent of total global sulphur emissions. Emissions over open seas are spread out and effects moderate, but on certain routes the emissions create environmental problems, including English Channel, South China Sea, Strait of Malacca. Nitrogen oxide emissions from ships were put at around 5 million tons per year - about 7 percent of total global emissions. Nitrogen oxide emissions cause or add to regional problems including acid rain and health problems in local areas such as harbours. Emissions of CFCs from the world shipping fleet was estimated at 3,000-6,000 tons - approximately 1 to 3 percent of yearly global emissions. Halon emissions from shipping were put at 300 to 400 tons, or around 10 percent of world total. Adoption of resolution Discussions in the MEPC and drafting work by a working group, led to the adoption in 1991, of an IMO Assembly Resolution A.719(17) on Prevention of Air Pollution from Ships. The Resolution called on the MEPC to prepare a new draft Annex to MARPOL 73/78 on prevention of air pollution. The new draft Annex was developed over the next six years - and was finally adopted at a Conference in September 1997. It was agreed to adopt the new Annex through adding a Protocol to the MARPOL 73/78 Convention, which included

the new Annex. This enabled specific entry into force conditions to be set out in the protocol.

U.S. EPA Activities Related to Marine Air Pollution

Merrylin Zaw-Mon, Director Transportation and Regional Programs Division Office of Transportation and Air Quality US Environmental Protection Agency

Diesel Emissions • Reducing emissions from diesel engines is one of the most important air quality challenges facing the country • Even with more stringent standards set to take effect in the next decade, over the next 20 years millions of in-use engines will continue to emit large amounts of pollution 2

Driver: Exponential Increase in Global Trade Since 1948 W orld T rade Merchandise T otal Global Imports + Exports $25,000

Billions U.S. Dollars

$20,000

$15,000

$10,000

$5,000

$1948

1956

1964

1972

1980

1988

1996

2004

Years WT0, 2006

Growth in Shipping Impacts Air Quality • US international waterborne freight is expected to double by 2020 – 95% of US overseas cargo goes through ports – 50% of goods are transported to regions outside of state via rail & truck – Will require new vessels, majority not US flagged ships • Cruise ships leaving US Ports increased by 10% in 2004 • Dock-side expansion to accommodate growth – Ports spent $2.8 billion on capital improvements in 2001-2 – Increased interest from environmental & community groups • Many ports actively engaged in reducing diesel emissions

Source: ‘Sources of Transport of Air Pollution from Ships: Current Understanding, Implications, and Trends’, Dr. James J. Corbett & Dr. Paul Fischbeck.

Regulatory Strategy for New Diesel Engines and Fuel Highway

Tier 2 Lightduty (1999)

2007/2010 Heavy-duty (2001) Clean Nonroad Diesel (2004)

Common Aspects of existing regulations-• Systems approach– ULSD enables clean technologies • Very large environmental benefits • By 2030, PM reduced by ~250,000 tons/year, NOx by ~4 million tons/year • Annual benefits expected to exceed $175 billion versus costs of approximately $11 billion

Nonroad Locomotive/Marine and C3 Marine 6

Highway Heavy-duty Diesel Emission Standards (g/bhp-hr) 2010

0.7

2007 (average)

1990

1988

0.6 0.5 0.4

PM 0.3

1991

0.2

2004

1998

0.1

1994

0 0

NOx

10 7

2030 US Mobile Source PM-2.5 ( 250,000 tons total)

Highway 27%

Locomotives, Category 1 & 2 Diesel Marine 20%

Ocean-going Marine Vessels 21% (53,000 tons)

Other Off-highway/Nonroad Engines 32%

2030 US Mobile Source NOx (4.5 million tons total)

Highway 35%

Other Offhighway/Nonroad Engines 18%

Locomotive, Category 1 and 2 Diesel Marine 35%

Ocean-going Marine Vessels 12% (530,000 tons)

2030 US Mobile Source SOx (480,000 tons total)

Highway 10%

Locomotives, Category 1 & 2 Diesel Marine 1%

Other Off-highway/Nonroad Engines 6%

Ocean-going Marine Vessels 83%

Ocean-going Vessels • Ships are key to global commerce – Flagged by many nations

• Regulated internationally by IMO

• Current round of negotiations at IMO is an opportunity to solve a serious environmental problem, and provide long-term certainty for the marine industry 11

IMO Annex VI Negotiations • The United States Government has consistently stated that IMO – Look to the long-term and base standards for PM, SOx and NOx on advanced technology – Provide the industry with appropriate lead time – Show leadership in order to eliminate the need for nations and sub-national governments to develop independent regulatory requirements for ocean-going vessels

• We are hopeful that IMO will use this approach and establish long-term standards to address PM, NOx and SOx from ocean-going marine vessels 12

MARPOL Annex VI Next Steps • Next IMO subcommittee meeting – London, April 2007 – Subcommittee expected to report back to Marine Environmental Protection Committee – July 2007

• Key outcomes for consideration – Near- and long-term NOx requirements for new vessels – NOx limits for existing vessels – Address PM and SOx emissions from all ocean-going vessels 13

US EPA Regulation for Category 3 Vessel Engines • 2003 US EPA Regulation under Clean Air Act – As with current IMO Tier 1, NOx only standards, effective 2004

• US EPA is committed to regulatory action – Environmental need compelling – Technology is feasible and can achieve substantial reductions – Pressure from many stakeholders in the US for EPA to set more stringent standards – Applicability to foreign-flagged vessels that enter US ports a central issue

• However, we are committed to the IMO Annex VI negotiation process, and believe it is the most appropriate forum for achieving global environmental objectives for ocean-going vessels 14

Summary • Technology is available and feasible • Cargo Owners are looking for creative ways to reduce emissions • Stakes are high for local communities • Large public health benefits are achievable • International consensus for meaningful, long-term standards is necessary 15

European perspective Ships: clever and clean Clean Ships: Advanced Technology for Clean Air February 7-9, 2007 Coronado Island Resort Marriott, San Diego Presentation Hans Meijer, European Commission

European perspective Ships: clever and clean

• Ships emit less CO2 than other transport modes (per

t/km). A key argument in favour from environmental perspective.

• That’s also the reason ships still have a ‘green image’.

• However, this image is fading away now. – By 2020 ships will emit as much SOx and NOx in EU seas as all land based sources in the EU put together.

European perspective Ships: clever and clean Ships contribute to air pollution with effects on: • Health: Fine Particles (PM2.5) & Ozone (NOx and VOCs)

– Respiratory effects, premature death; also cardiovascular effects. No known thresholds for effects

• Acid rain (SO2, NOx)

– Affects freshwaters and terrestrial ecosystems

• Eutrophication (NOx)

– Causes change to & loss of biodiversity.

• Ozone (NOx and VOCs) non health

– Damages trees and plants including agricultural crops; – damages buildings/materials.

• Local, regional and global air pollution problems.

European perspective Ships: clever and clean Relative contribution sulphur deposition from ships 2000 and 2020

European perspective Ships: clever and clean

• Many measures taken on land based sources to

reduce polluting emissions, ships have had easy ride. Sulphur levels in different fuels: – Marine bunker fuel: 27,000 ppm

– SECA fuels: 15,000 ppm – Ships at berth EU (2010): 1000 ppm – Inland navigation EU: 1000 (300 ppm - 10 ppm) – Road transport diesel EU: 50 ppm (10 ppm)

• Measures on ships much cheaper than measures on land-based sources to meet Health & Environment objectives

European perspective Ships: clever and clean

• EU regulatory framework: Directive 2005/33/EC on the sulphur content of marine fuels: - SOx emission control areas – 1.5% S fuels

- Marine gas oils used at berth from 2010 (0.1%)

• Recommendation on Port Side Electricity • Directive on Air Quality (96/62/EC)

– AQ standards from PM10, PM2.5 (new) SO2

• Thematic Strategy on Air Pollution

– New Health & Environmental objectives for 2020

European perspective Ships: clever and clean Fine particles PM2.5 Loss of life expectancy with measures foreseen: 8.1 months in 2000, 5.5 months in 2020 Life years lost: 3.6M in 2000 2.5M in 2020 Premature deaths 350,000 in 2000 272,000 in 2020 1997 Met. year

European perspective Ships: clever and clean

• Council Conclusions on the marine emissions strategy of 2002

“RECOGNISES that progress within IMO depends on the input of IMO

member states and therefore URGES the EU Member States to submit concrete proposals on tighter NOx standards under MARPOL Annex VI and on the different aspects of the IMO GHG Strategy. RECOGNISES the need to investigate specific EU actions with respect to the reduction of NOx and GHG emissions by marine transportation; INVITES the Commission to consider a proposal for tighter NOx standards by the end of 2006 if IMO has not made any proposals for tighter standards by that date”

• Reconfirmed in the Council’s conclusions on the thematic strategy on air pollution adopted at the March 2006 Environment Council

European perspective Ships: clever and clean

Outlook upcoming negotiations:

• Aim for an amendment of Marpol Annex VI

which stands for longer period. • That will need ambitious reduction targets. • That might imply setting certain emission targets global and others regional or local. • That will also imply anticipating future technical improvements.

European perspective Ships: clever and clean Example of possible gain life expectancy in months by PM2.5 reduction at $ 7 bn/year (With in parallel reduction of 80% SOx and 90% NOx) (interim report IIASA, Oct 2006)

European perspective Ships: clever and clean

What if not ambitious?

• Increase in transport will out weight reductions! • There will soon be calls to reopen negotiations again, leading to uncertainty for operators. • Countries and regions will be forced to take national or regional measures leading to scattered obligations for ships and thus high compliance costs. • Applying only today's technology tomorrow means applying outdated technology then. • No one wins!

European perspective Ships: clever and clean

• Ship emissions of CO2 are 1.8% of world total and believed to be increasing.

• These emissions will need to be addressed as well, preferably at international level.

• As will other greenhouse gases from ships like refrigerant gases (HFC) and N2O.

• Here also there is a need for clever solutions.

European perspective Ships: clever and clean Further information:

• Ship emissions policy and technical studies

http://ec.europa.eu/environment/air/transport.htm

• Thematic Strategy on air pollution & CAFE

http://ec.europa.eu/environment/air/cafe/index.htm

• Cost-effective measures to reduce air pollution from ships (BLG-WGAP 1/INF.2, 19 October 2006)

Questions: env-ships@ec.europa.eu

Thank you for your attention!

Japan’s Geographic Concept for NOx Regulations February 8, 2007 National Maritime Research Institute, Japan Tetsuya Senda, Ph.D.

Background • Reduction of NOx emission is often accompanied by increase in CO2 emission. • NOx affects locally while CO2 globally. • NOx is rapidly removed from atmosphere while CO2 stays longer.

• Geographical concept: - Std 1: NOx emission is reduced near shore. - Std 2: CO2 emission is reduced in the ocean.

Schematic of the concept co a (lo sta w lm NO od e x)

land

oceanic mode (low CO2) coastal mode

land

red ships: in the coastal mode for Std 1 (Low NOx) blue ships: in the oceanic mode for Std 2 (low CO2)

Diffusion of NOx • •

Effect of NOx for human health is primarily related to its concentration as photochemical oxidant formation. Gaussian plume model: Concentration decreases exponentially with increase of distance from the emission point. ⎛ y 2 ⎞⎡ ⎛ ( z − He) 2 ⎞ ⎛ ( z + He) 2 ⎞⎤ ⎟⎟ + exp⎜⎜ − ⎟⎟⎥ exp⎜ − 2 ⎟⎢exp⎜⎜ − C= 2 2 ⎜ ⎟ 2πσ yσ z u 2σ z ⎠ 2σ z ⎠⎦ ⎝ ⎝ 2σ y ⎠⎣ ⎝ Q

Relative NOx concentration

Q: emission intensity (m3/s) u: wind velocity (m/s) He: plume height (m) y: direction perpendicular to wind (m) z: vertical distance (m) σy: horizontal dispersion parameter(m) σz: vertical dispersion parameter(m)

He= 50m u= 5m/s σy, σz: Stability class D

0.8

0.6

0.4

0.2

8 10 12 14 Distance from emission point (km)

Increase in CO2 emission - Fuel penalty Technologies

CO2 increase

NOx reduction

In-Engine

10-15%

1-2%

EGR

30-40%

2-3%

Emulsification

15-25%

Up to 2%, Need to heat water

Water injection

40%

Up to 4% Need to heat water

Humidification

Up to 40%

Up to 2-8%

S.C.R.

80-85% or higher

Back pressure 1% reaction product from urea to ammonia revised from BLG 10/WP.3

Uniform and Geographic Stds. - A case study • Basic standard (e.g. IMO Tier II) • Advanced standard (e.g. IMO Tier III) - Case I: Uniform standard - Case II: Geographical standard In oceanic area, the basic standard is applied while advanced one for other area.

• How much does NOx concentration increase? How much does total CO2 emission decrease? What is the optimum distance from shore for the boundary between the two standards?

A simulation NOx Concentration at 1km from Shore

Emission of CO2

Port A

Port B

Std 1 Distance rom Port A：x x=0

Land

Ocean

Land

Std 1

Std 2

x=xc(10～200 km)

x=5,000-xc

x=5,000 km

• NOx concentration on the ground at 1 km from shore Total CO2 emission during voyage

Calculation conditions • Ship operations - constant traffic of container ships for 5,000 km sailing along a linear route from Port A to Port B - ship’s speed and engine power are low near ports (<20 n.m.) while full (85%) in ocean (27 kt) - auxiliary engines for generators are operated in lowspeed operations • Atmospheric conditions: - wind velocity: 5 m/s (constant) - wind direction: unidirectional from ocean to shore - Pasquill’s stability class: D (neutral) • METI-LIS - a simulation model based on Gaussian plume model modified from ISC (Iudustrial Source Complex Dispersion Models) and evaluated by METI (Ministry of Economy Trade and Industry Japan)

Emission profiles NOx

Std 2 Std 1

CO2

Geographical Std. (Case II)

NOx

CO2

Uniform Std. (Case I)

x Std 1

Std 2

Std 1

Effects of transition distance - Calculations for sailing period • NOx concentration decreases exponentially. • Total CO2 emission increases linearly. Additional NOx conc. to Unif. Adv. Std. NOxCO2 reduction/ CO2toincrease (%) Additional emmision Basic Std.

100 NOx CO2

80 60 40 20 0

Basic

100 200 300 400 500 uniform 600 Distance of transition from shore (km)

Geographically advanced

Uniformly advanced

Effects of transition distance - including hotelling at portAdditional NOx conc. to Unif. Adv. Std. Additional CO2 emmision to Basic Std. NOx reduction/ CO2 increase (%)

• Emission from auxiliary engines operated during hotelling at the port is critical. 100 NOx CO2

80 60 40 20 0

mooring time: 23.6 h

100 200 300 400 500 uniform 600 Distance of transition from shore (km)

Discussion on the model • A plume model is usually applied for short distance simulations. - Atmosphere is stable on the ocean. - Surface roughness is small. • A worst case scenario - Plume model gives overestimation. - Uni-directional wind is assumed (less diffusive). - No reaction or deposition is considered. The model can be available for the present estimation.

Implementation • Switching technologies between coastal and oceanic modes Ocean

Coastal Waters

Electronically controlled fuel Injection Low NOx position

Low BSFC position

Emulsion fuel Emulsification system operated

Emulsification system not operated

Selective Catalytic Reduction Operated

Not operated/by-passing

• Compliance - Record books - On-board monitoring log

Conclusions • Applying the geographical concept for NOx regulations, CO2 emission can be considerably reduced with a minimized increase of NOx concentration. • The concept can be applied as an optional choice for ship owners when advanced standards are introduced (e.g. Tier III). • It would be recommendable to take 50 n.m. (100 km) as the transition distance from coastal to oceanic modes. -- Acknowledgement -This work has been carried out as a study of the project for prevention of air pollution (MP3) in Japan Ship Technology Research Association under the support of Nippon Foundation in 2006.

Air Pollution from Shipping – an update on legislative developments. 1.

Introduction.

As part of their expanded coverage on marine fuels, the International Fuel Quality Center (IFQC) published in February 2007 a Special Report on air pollutant emissions from shipping, which examined the main regulatory developments worldwide. That Report provides useful background to this current Report. The International Maritime Organization (IMO) is in the process of reviewing its Annexe VI to MARPOL, the “Regulations for the Prevention of Air Pollution from Ships”. The review is not yet complete, but there have been some significant developments with regard to SOx and NOx control since February. In addition, there is a growing awareness that the industry needs to urgently address the emissions of greenhouse gases (GHG), particularly CO 2. This requirement often conflicts with the measures proposed to reduce SOx and NOx emissions. To explore how these conflicting requirements might be resolved, IFQC and the oil industry environmental organisation IPIECA jointly organised a one-day Roundtable in London UK on 1st October 2007. This Special Report provides an update on the recent developments at IMO, and summarises views and discussions from the IFQC-IPIECA Roundtable. (Note that acronyms used in this Report are defined in Appendix I.)

Progress at IMO.

The previous Special Report noted that the IMO’s Marine Environment Protection Committee (MEPC) was committed to a review of the MARPOL Annexe VI legislation which regulates air pollution from shipping. At the time that was written, the Working Group on Air Pollution within IMO’s Bulk Liquids and Gases (BLG) sub-committee was considering four different options for amending the Annexe VI provisions relating to SOx emissions. They were expected to narrow down choices at a subsequent meeting of the sub-committee (BLG 11) in April 2007. In fact, this did not happen. Some new proposals were introduced ahead of BLG 11. At BLG 11, it proved impossible to achieve consensus on the way forward. The meeting ended with six different options on the table, which are summarised in Table 1. In an effort to break the deadlock, the Secretary-General of IMO proposed that a cross-government/industry Expert Group be convened, to gather factual information to facilitate decision-making at the BLG and MEPC meetings. MEPC endorsed the Expert Group proposal, and the Group has now commenced its work. The Expert Group will report by mid-December 2007, so that its results are available to the BLG 12 meeting in February 2008, and the MEPC 57 meeting in March/April 2008. MEPC 57 is expected to finalise the new draft Annexe VI regulations. (With regard to SOx reduction, the regulations could be a combination of various features from different options shown in Table 1.) It is envisaged that the draft regulations will then be adopted at MEPC 58 in October 2008. If adopted, they could enter into force under IMO’s tacit acceptance procedure by February 2010. This timeline is extremely

Page 1 of 8

tight and demanding, particularly given the scope, complexity and wide-ranging potential impact of the issues. In addition to the proposals in Table 1 for reducing SOx, the revision of Annexe VI is likely to introduce tighter controls on NOx emissions for new engines in a tiered approach, and may extend NOx controls to some existing engines. Furthermore, emissions of greenhouse gases (GHG), particularly CO2, from shipping are of increasing concern, and will be addressed by IMO. Although IMO already had a GHG reduction programme in place, MEPC 56 agreed that an update of IMO’s earlier 2000 GHG study was needed. This update, together with proposals on measures to reduce CO2 emissions, will be discussed at various IMO committees, with a target completion date in 2009.

Table 1. Sulfur control options specified at IMO’s BLG 11 meeting in April 2007. IMO option ► nomenclature

Reference baseline

Option B

Option B1

4.5%, or possibly lower.

4.5 %

Option B2

Option C

Option C2

1.0 % by 2012 0.5% by 2015

1.0 % by 2012 0.5 % by 2015

previously Option A

Sulfur global cap at: Geographic extent of tighter SOx emission controls. Fuel sulfur limit in controlled geography

4.5% SECAs as designated by IMO.

1.5%, or equivalent emissions

SECAs as designated by IMO.

1.0 % by 2010 0.5 % by 2015 , or equivalent emissions.

Within defined distance (200 nm?) of designated shorelines. 0.1 % , or equivalent emissions.

3.0 % by 2012 1.5 % by 2016

Designated Global SECAs, estuaries, ports and port approaches . 1.0 % in 2011 0.5 % in 2015 , or equivalent emissions.

Global

Same as global cap limits.

Allowed fuel types.

Any

Any fuel globally. Only distillate allowed in SECAs unless cleanup is used.

Any fuel globally. Only distillate Only d istillate fuel is allowed, allowed in SECAs, globally. ports etc. unless cleanup is used.

Any, including heavy fuel oil, if cleanup is used.

Scrubbing / exhaust gas cleanup accepted ?

Yes

Yes, for complying No. with both global cap and SECA limits.

Yes

Comments

Current structure. Additional SECAs can be created to achieve further reductions in SOx.

Current regulatory structure but with tighter limits. Additional SECAs can be created.

Based on a USA proposal. Offers choice of compliance route (exhaust cleanup, or distillate fuel). Will include controls on particulates.

Based on a proposal by BIMCO. Offers a choice of compliance route (exhaust cleanup, or distillate fuel).

Achieves same emission limits as Option C, but offers a choice of compliance routes.

Based on a proposal by Intertanko, requiring all shipping to burn only distillate fuel at all times.

Note: several implementation dates, some sulfur limits, and some geographic limits, are tentative.

Source: John Liddy, IFQC 2007, based on IMO documents.

Page 2 of 8

Report of the IFQC-IPIECA joint Roundtable.

Emissions of CO2 are of increasing concern globally, but measures to produce cleaner fuels and/or reduce ship emissions often conflict with objective to reduce CO 2 emissions. For example, desulfurisation of residual fuel, or incremental production of distillates, requires additional energy input in the refining process, leading to an increase in CO2 emissions. As can be seen in Table 1 above, the main focus of the IMO and global policy makers for SOX reduction is a decrease in sulfur levels in marine fuels. This is contrary to CO2 reduction efforts. To address such issues, IFQC and IPIECA jointly organised a one-day meeting in London on 1 October 2007. It featured speakers from regulatory bodies, shipping organisations, a major marine engine builder, energy consultancy organisations, and the oil industry. About 50 delegates, many from IFQC member organisations, attended. The agenda is shown in Appendix II.

3.1

Regulators’ views.

Captain Eivind Vagslid from the IMO Secretariat reviewed IMO’s progress on reducing SOx and NOx emissions. CO 2 emissions are now a major concern to IMO. Shipping is recognised as a very fuel-efficient form of transport, and (with a share of 1.8%, based on 1996 figures) a minor contributor to total global emissions of CO2. However, it was accepted that the shipping industry must play its part in reducing emissions, particularly given the recent very rapid growth in shipping (especially containers), and projected future growth. IMO has agreed a work plan, stretching to 2009, to address CO2 emissions. IMO believes that technical measures (such as hull shape and propeller optimisation, ship power plant improvements, and fuel switching to distillate) together might have the potential to reduce fuel consumption by up to 30% for new ships, or by up to 20% for existing ships. Operational measures (such as improved voyage planning, and optimised cargo handling) could be even more effective, but will often require cooperation between shipowners and other parties such as charters, cargo owners and port operators. Hans Meijer from the European Commission noted that the EU’s success in reducing emissions of pollutants such as SOx, NOx, and particulate matter from land-based sources, coupled with rapid growth in shipping, meant shipping’s share of overall pollutant emissions was increasing quickly. If shipping emissions are left unchecked, the attainment of the targets for year 2020 in the EU’s air pollution strategy would be jeopardised. Time pressures are tight. The EU is committed to a review of Directive 2005/33/EC and its predecessors (which set inter alia sulfur limits on marine fuels). Unless IMO has made progress on its revision of Annexe VI by 2008, the EU may act unilaterally. Similarly, on CO2 emissions, the Commission needs to see definite progress from IMO by 2009, to avoid the need for unilateral EU action. So far, the Commission has not included shipping emissions in the proposed EU emissions trading scheme, because they would prefer to see a global solution for shipping. They also recognise the conflict between lowering sulfur levels in fuel, and curbing CO2 emissions. However, he felt that an increase in CO2 emissions from refining caused by production of cleaner marine fuels was acceptable, given that the estimated size of the increase from refining (1 – 5 %) was comparable to the increase in CO2 emissions arising from the growth in shipping traffic over a period of only 4 - 20 months. 3.2

Engine builder’s views.

Kjeld Aabo from marine engine builder MAN confirmed the regulator’s outlook of continuing rapid growth in shipping, by stating that ships’ engines on order for delivery in the next 4 years equate to 40% of the installed power in the existing world fleet. He went on to present the

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possibilities for reducing CO2 emissions from marine engines. Because the efficiency of modern two-stroke marine diesel engines is near the thermodynamic limit, there is little scope for improving the combustion process itself. However, use of various waste-heat recovery schemes can raise the overall energy efficiency of the propulsion system significantly, for example from 49.3% (for MAN’s 12K98MC engine at full load, without waste heat recovery) to 54.2% (with waste heat recovery). This equates to a potential fuel saving of nearly 10% for a given shaft power output. Several practical and proven so-called Thermo Efficiency Schemes (TES) from MAN were outlined. However, MAN observed that in spite of positive economics for TES, in over one hundred recent newbuild orders received by them, not one had specified TES. One reason he suggested was the reluctance of shipyards to tender competitively for non-standard items, at times when their order books are full.

3.3

Intertanko’s views.

The independent tanker owners’ organisation Intertanko created controversy when they presented their “distillate fuel only” proposal (Option C in Table 1) to IMO in November 2006. Although the largest impact lies in the reduction of SOx emissions, combustion of distillate produces less CO2 per unit energy than does heavy fuel oil (due to distillates’ lower carbon : hydrogen ratios). Dr. Tim Gunner from Intertanko presented their bottom-up estimate of current annual fuel consumption by the world fleet, showing that a switch to distillate would reduce emissions from combustion of bunker fuels by 31.5 million metric tons of CO 2 p.a., a 2.5% reduction when compared to today’s use of fuel oil. (This figure does not make any allowance for the additional energy required to produce such fuels.) It was suggested there was a further secondary CO 2 benefit arising from the lower SOx emissions from burning distillates, namely that the release of CO2 from the oceans would be reduced (due to changes in the buffering chemical reactions.) It was suggested this could give a further reduction of 27 million metric tons p.a. in CO 2 released to the atmosphere.

3.4

Impact on refining.

The refining impacts of lower fuel sulfur limits, and of switching all marine fuel to distillates, were reviewed by speakers from CONCAWE (Conservation of Clean Air and Water in Europe) (covering only the European situation), the IEA, and the consultancy EnSys. Similar themes emerged from all three papers. At present in much of the world, growth in overall fuel demand is led by middle distillates, and their production is becoming constrained by refining capacity in some regions. Therefore, a proposal which creates a large additional demand for middle distillate would severely disrupt the refining industry. It would require huge investment for new conversion plant and/or additional refining capacity. Even if such an investment were attractive to refiners, the tight availability of process engineering resources for new plant construction would result in lead times of perhaps 10 years or more. The option of more widespread requirements to use low-sulfur fuel oil creates similar issues of huge investment requirements and long lead times. The CONCAWE study further showed that investment in residue desulfurisation would be attractive to the refiner only if the price of low-sulfur fuel oil approaches that of distillate fuel. All three studies found that producing either low-sulfur fuel oil, or switching all marine demand to distillate, would increase the net CO2 emissions (taking into account the additional CO2 from incremental refinery processing, partly countered by reduced CO 2 from burning lighter fuels). In the all-distillate scenario, CONCAWE estimated a net increase for Europe of 20 million metric tons of CO2 p.a. Globally, IEA estimated the net increase could be as high as 100 – 150 million metric tons of CO2 p.a.

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3.5

Discussions.

Many issues were raised in the lively discussions following the various papers. The more significant ones were:  There is huge divergence between different parties’ estimates of global bunker fuel demand (which determines the amount of CO2 emissions attributed to shipping). Estimates for total world marine fuel demand (including distillates) range from 150 million to approximately 400 million metric tons p.a. This divergence will need to be resolved within the IMO’s Expert Group.  In response to a question on the merits of prescriptive versus goal-based legislation, both the European Commission and IMO indicated a preference for the latter, which specifies a desired outcome but leaves open various options for compliance.  Several parties observed that regulations must be developed in a coherent approach which takes into account all the consequences of proposed changes. Constructive and pro-active input from all stakeholders is required to guide the regulators, which some felt may not have always occurred in the past. Stakeholders should move from a position of raising concerns about proposals, to one of suggesting coherent and workable solutions. One contributor urged the industry to adopt the mindset of “measure, monitor, then manage” when considering shipping emissions.  It was suggested lessons be learned from regulatory approaches adopted in other sectors. For example, the European Auto-Oil programme viewed vehicle-based measures and fuel restrictions as a complete system in order to arrive at an optimised solution for reducing emissions. Other speakers cautioned against taking such parallels too far as reductions in sulphur in marine bunker fuel are much more difficult to achieve for refiners than reductions in gasoline or automotive diesel.  The merits of using seawater scrubbing to reduce SOx emissions, versus removing sulfur from the fuel, were debated. Intertanko believed that refinery investment in desulfurisation and/or incremental distillate production would be more cost-effective than fitting scrubbers to ships. In contrast, another contributor estimated that the one-off cost of fitting scrubbers to the world’s fleet could be around $70 billion, whereas the savings to the shipping industry from being able to use heavy fuel oil rather than distillate would equate to $90 billion in a single year (at today’s fuel price differentials).  One speaker wryly observed that views on cost-effectiveness often come down to the question of who is paying. Several contributors observed that commercial practice in the industry, whereby the shipowner pays for the investment in shipboard equipment while the charterer pays for the fuel (in cases where a ship is chartered out), can drive the decisionmaking process. It was suggested this might be a reason for the low uptake of the systems for improving propulsion efficiency described by MAN. It would also affect decisions on fitting scrubbers.  The effectiveness of ship speed reductions for reducing fuel consumption, and hence emissions of pollutants including SOx and CO2 , was noted. A 10% speed reduction can give fuel savings of approximately 25%.

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 To date, concerns with SOx and NOx emissions had centred on their local effects on human health, and the local/regional impact of acid rain and acidification on land. The regulators indicated they were now increasingly concerned by the prospect of acidification of oceans.  Carbon capture and sequestration (CCS) was discussed briefly. There are considerable technical, logistic, economic, and legal hurdles to be overcome. Even if these are resolved, CCS is unlikely to offer a universal solution for CO2 removal.  Finally, the political pressure for both IMO and the EU to demonstrate progress in curbing emissions from shipping means that many important decisions have to be made to very tight timescales. The decisions will have major effects on the shipping and the refining industries, and probably even wider, for decades to come.

Reference.

1. IFQC Special Report, “Global – Shipping Emissions, Impact and Legislative Outlook”, February 26, 2007.

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Appendix I. List of acronyms used in this report.

Acronym

Stands for -

Meaning

BIMCO

Baltic and International Maritime Council

The world's largest private shipping organisation, headquartered in Denmark, which provides maritime services to over 2400 member and organisations.

BLG

Bulk Liquids and Gases sub-committee

A sub-committee of MEPC within IMO which is responsible inter alia for drawing up detailed measures to control air pollution from shipping. (Note that each regular meeting of BLG is designated by a sequential numbering system, as BLG xx.)

CCS

Carbon Capture and Sequestration (or Storage)

A process by which CO2 emissions are captured and permanently stored to prevent their escape into the atmosphere.

CONCAWE

Conservation of Clean Air and Water in Europe

The oil companies' European association for environmental, health, and safety issues in refining and distribution.

GHG

Greenhouse gases

Components of the atmosphere that contribute to the greenhouse effect, leading to global warming. For shipping, CO2 is the GHG of most concern currently.

European Commission.

The executive branch of the European Union.

IEA

International Energy Agency

An autonomous agency providing energy policy advice to its 26 member countries.

IMO

International Maritime Organization

The agency of the United Agency dealing with international maritime affairs.

INTERTANKO

International Association of Independent Tanker Owners

The association representing non-oil-company and non-state-controlled owners of petroleum and chemical tankers.

IPIECA

International Petroleum Industry Environmental Conservation Association

The industry association which addresses global environmental and social issues related to the petroleum industry.

MARPOL

Marine Pollution Convention

The IMO convention of 1973/78 governing various aspects of marine pollution, of which the recent Annexe VI on air pollution forms a part.

MEPC

Marine Environment Protection Committee

The committee within IMO responsible for environmental protection affairs. (Note that each meeting of MEPC is designated by a sequential numbeing system, as in MEPC xx.)

NOx

Nitrogen oxides

Generic term for oxides of nitrogen, primarily NO and NO2.

SECA

Sulfur Emission Control Area

Currently, an area designated by IMO in which fuel with a maximum of 1.5 wt% S must be used, or equivalent abatement measures adopted. In future regulations, tighter restrictions and different geographic criteria might apply.

SOx

Sulfur oxides

Generic term for oxides of sulfur, primarily SO2 but can also include SO3.

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Appendix II. Agenda for the IFQC – IPIECA Joint Meeting

Joint IFQC & IPIECA Roundtable: Impact of CO 2 Emissions from Refining & Shipping London Chamber of Commerce London, England Monday, 1 October, 2007

09:00 Registration opens