Maritime Environmental Issues and Regulatory Status Seog Tae

Maritime Environmental Issues and Regulatory Status Seog Tae, KANG Marketing Manager, Global Marketing & Customer Support, DNV Maritime KNECC, 20 October 2009, Busan

Key Environmental Issues n Recent environmental regulatory developments cover more than CO 2; - n Ballast Water SOx / NOx / PM VOC Scrapping / Recycling However, CO 2 is pre-eminent on the regulatory and political agenda © Det Norske Veritas AS. All rights reserved 15 September 2009 2

IMO BWM Convention, 2004 n All ships shall have on board: - Ballast water management plan - Ballast water record book n Ballast Water Management - Exchange - Treatment n Entry into force - 12 months after signing by: - 30 States - 35% of world merchant shipping tonnage n Status of the Ballast Water Convention July 2009: - 18 states - 15, 36 % of world merchant shipping tonnage n Will have retroactive validity © Det Norske Veritas AS. All rights reserved 15 September 2009 3

Ballast Water Regulations (B-3) Keel laid BW [m 3] 15005000 DWT / Ship type 2008 2009 3400 – 15000 / Tanker 4200 – 14200 / Bulk 4100 – 14000 / General cargo 2010 2011 2012 2013 2014 D 1/D 2 2015 2016 D 2 a) < 2009 < 1500 > 5000 ≥ 2009 < 2012 ≥ 2012 <3400 >15000 / Tanker <4200 >14200 / Bulk <4100 >14000 / General cargo < 5000 <15000 / Tanker <14200 / Bulk <4000 / General cargo > 5000 >15000 / Tanker >14200 / Bulk >14000 / General cargo D 1/D 2 D 2 a) D 2 MEPC 59 concluded that there are enough technologies available in the market for ships constructed in 2010 and that no postponement is needed. © Det Norske Veritas AS. All rights reserved 1515 September January 2022 2009 Slide 4

Latest MARPOL Annex VI Revision - SOx Update IMO MEPC 58 - Adopted 9 October 2008 – Entry into force 1 July 2010 Sulphur limit for fuel oil 1 2 Sulphur content Enforcement Global 4. 50% 3. 50% 0. 50% [Prior to 1 January 2012] [1 January 2020]1 ECA (SECA) 1. 50% 1. 00% 0. 10% [Prior to 1 July 2010] [1 January 2015] 2 Subject to a review of fuel availability in 2018, with the option to delay the 0. 5% sulphur global cap by five years Also applies to all EU ports and inland waterways from Jan. 1 2010 (EU Directive 99/32 Amendment) Abatement technology (eg Scrubbers) is an "equivalent measure". This means that an Administration may allow abatement technologies, but the Administration (and not the ship) has to acknowledge that: ØThey have equivalent efficiency in terms of SOx, PM and NOx emissions ØThat they operate within the requirements of the IMO guidelines ØThat they do not harm the environment (potential water discharge issue) © Det Norske Veritas AS. All rights reserved 15 September 2009 5

Latest MARPOL Annex VI Revision - NOx Update IMO MEPC 58 - Adopted 9 October 2008 – Entry into force 1 July 2010 NOx limits Requirement Tier I 17. 0 g/k. Wh (=todays) Tier II 14. 4 g/k. Wh Tier III 3. 4 g/k. Wh Enforcement Ships built 1 -Jan-00 to 1 Jan-11 Ships built after 1 -Jan-16 and operating in ECAs Ships (>5 MW) built 1 -Jan-90 to 1 -Jan-00 to comply with Tier I, provided approved method for NOx reduction is available and cost effective © Det Norske Veritas AS. All rights reserved 15 September 2009 6

New ECA – MEPC 59 Developments n The proposal to designate an ECA for the coastal waters of USA and Canada was approved with a view to adoption at MEPC 60 n May be in force from Aug. 2012 n Mexico, Bahamas likely to join n Significantly increases impact of MARPOL Annex VI revision from 2015 / 2016 © Det Norske Veritas AS. All rights reserved 15 September 2009 7

Californian Regulations - CARB OAL approved the rulemaking and filed it with the Secretary of State on May 29, 2009. The regulation became effective on June 28, 2009 (Compliance for the Phase I fuel requirements began on July 1, 2009) These regulations would require operators to use the following low sulfur marine distillate fuels in auxiliary diesel and diesel-electric engines, main propultion diesel engines, and auxiliary boilers on ocean-going vessels within 24 n-miles; Effective date Fuel** Phase I Requirement July 1, 2009 Marine Gas Oil (DMA) at or below 1. 5% sulfur; or Marine Diesel Oil (DMB) at or below 0. 5% sulfur Phase II Requirement January 1, 2012 Marine Gas Oil (DMA) or Marine Diesel Oil (DMB) at or below 0. 1% sulfur **DMA and DMB are marine grades of fuel as defined in Table I of International Standard ISO 8217: 2005 © Det Norske Veritas AS. All rights reserved 15 September 2009 8

Californian Regulations - Port of Long Beach n Under the rules for its construction, vessels must adhere to stringent emission reduction measures to minimise or eliminate the environmental impacts of shipping operations. n All container cargo vessels calling at the terminal will be required to plug into shoreside electricity and turn off their main and auxiliary engines n In addition, all vessels will adhere to other port's Vessel Speed Reduction Program, which will cut their fuel consumption and reduce their exhaust emissions from 40 miles offshore. n Compliance most likely required in 2014 © Det Norske Veritas AS. All rights reserved 15 September 2009 9

CO 2 - The shipping industry can’t wait n Shipping will have to reduce CO 2 emissions – as all other industries. n Shipping has to act now in order to influence frame conditions n If shipping does not act, regulators outside shipping will define the actions n More cargo can be moved from air, trucks and rail to ships n More, and more efficient, shipping is part of the global solution © Det Norske Veritas AS. All rights reserved 15 September 2009 10

EU Position – Strong Commitment © Det Norske Veritas AS. All rights reserved 15 September 2009 11

Most reductions in shipping can happen with Global emissions scenarios existing technologies GAP 1 - Already known technical, operational and structural means, enabling § 50% reduction for vessels delivered in 2030 § 70% reduction for vessels delivered in 2050 GAP 2: Break-through technologies to be made commercial beyond 2020 © Det Norske Veritas AS. All rights reserved 15 September 2009 12 12

Regulatory Drivers EU Climate Change Political Developments n Softening commitment to EU 2020 goals (some countries) due to financial instability n However, "The European Council confirms its determination to honour the ambitious commitments on climate and energy policy“. Complex agreement finalised December ’ 08. Practical ramifications and impact not clear, but goals for land-based industry are weakened. n European Parliament (EP) agreed revised carbon trading system (ETS) in 2008. Airlines to be included. EP instructed the Commission to consider including shipping by 2013. n Commission has given IMO until end 2011 to act, if not EU will act unilaterally, imposing regional regulations by 2013. In practical terms this is a decision that is both binding and non -revocable. © Det Norske Veritas AS. All rights reserved 15 September 2009 13

GHG Regulatory Drivers – IMO Politics n IMO under strong pressure to deliver results by UNFCCC Copenhagen climate conference (COP 15) December 2009 n Political barriers - clashing IMO and UNFCCC principles - Significant differences in national positions as regards IMO’s role in curbing ship emissions of GHG in relation to the mandate of the UNFCCC and Kyoto protocol - Developing countries (non-Annex I) generally in consensus that IMO must adopt the principles of UNFCCC / Kyoto, i. e. “Common But Differentiated Responsibilities (CBDR)” - This is strongly opposed by delegations of the developed countries (Annex 1), invoking the IMO principle of “No More Favourable Treatment” - So far not possible to break this impasse, in-depth discussions on application of CO 2 regulations, as well as on introduction market based instruments (MBI’s), deferred until MEPC 60 (March ’ 10) - Disagreements among MBI advocates on instrument most appropriate for international shipping - bunker tax or emission trading © Det Norske Veritas AS. All rights reserved 15 September 2009 14

Green House Gases –MEPC 59 Achievements n No agreement on regulatory matters – decisions deferred to MEPC 60 earliest (March 2010) n Discussion on market based instruments deferred until MEPC 60, pending developments at UNFCCC COP 15 (Dec. 09), MEPC work plan indicates decision at MEPC 62 earliest n Finalisation of guideline for Energy Efficiency Operational Index (EEOI) to be used on a voluntary basis (IMO Circ. 684) n Consensus reached on interim guidelines for Energy Efficiency Design Index (EEDI) and verification scheme, to be used on a voluntary trial basis (IMO Circ. 681 and 682) n Consensus on draft guidance on the development of a Ship Energy Efficiency Management Plan (SEEMP) to be used on a voluntary basis (IMO Circ. 683) n Developments at COP 15 (Dec. ’ 09) will be instrumental for further progress on ship GHG regulations © Det Norske Veritas AS. All rights reserved 15 September 2009 15

The Evolution of an EEDI n The principle: n Japan: MEPC 57/4/12 n Denmark: GHG-WG 1/2/1 n MEPC 58/4 n USA: MEPC 58/4/35 n MEPC 58/23 n GHG WG 2 © Det Norske Veritas AS. All rights reserved 15 September 2009 16

Present EEDI Formulation Main Engine Ice strenghtening factor Aux. Engine Waste heat and shaft motors Transport work capacity Weather factor n The basic principle is retained but complexity increased n Minor adjustments can be expected but no major changes n No discussion on application and requirements yet © Det Norske Veritas AS. All rights reserved 15 September 2009 Efficient design options 17

Possible Timeline for Mandatory EEDI n MEPC 59 - July 2009 - EEDI formula finalised and agreed as voluntary measure n MEPC 60 – March 2010 - EEDI possibly approved as mandatory measure, including application issues (scope of application, requirement levels, verification issues, non-compliance consequences, entry into force date, etc. ) - Diesel electric ships possibly included n MEPC 61 – October 2010 - Decision of MEPC 60 adopted n Entry into force – assuming MARPOL Annex VI is used as legal instrument; somewhere between 2013 - 2018 © Det Norske Veritas AS. All rights reserved 15 September 2009 18

Recycling Convention Adopted in May 2009, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships places responsibility on: -ship owners -ship builders -recycling facilities -and national authorities will become mandatory for all ships above 500 GT to establish and maintain an Inventory of Hazardous Materials Entry into force 10 -15 years? © Det Norske Veritas AS. All rights reserved 15 September 2009 19

Recycling of Ships – MEPC 59 Developments n Draft Guidelines for the Inventory of Hazardous Materials were finalized and adopted. n Due to the significant amount of work remaining for development of the facility guidelines, the intersessional correspondence group was re-established and tasked to continue work with the view of finalization during MEPC 60. © Det Norske Veritas AS. All rights reserved 15 September 2009 20

New Requirements Prohibited Materials (prohibited from new installation): Asbestos PCB Ozone Depleting Substances (some ok until 2020) Anti-fouling system inconsistent with the AFS Convention Surveys Initial, Renewal, Additional, Final New Ships Material Declarations (MD) and Supplier Declarations of Conformity (SDo. C) for all products, systems and equipment installed on the vessel form the basis of Part 1 Existing Ships Ship owners shall draw upon expert assistance for creating Part 1. IACS Unified Requirement being developed for service suppliers engaged in visual/sampling checks and testing for hazardous materials. © Det Norske Veritas AS. All rights reserved 15 September 2009 21

The Future…Key Regulatory Issues n CO 2 – key political regulatory issue for the immediate future, shape of regulations yet to be agreed n SOx/NOx/ECA implementation – operational and design implications of great significance n Ballast Water – retroactive entry into force will cause yard retrofit capacity issues, potentially leading to non-compliance problems for numerous ships n Recycling of Ships – finalisation of facility guidelines and the resulting content will have direct impact on the industry, will be an issue at MEPC 60 n Particulate Matter – increasing concern over particulates, and growing realisation that low sulphur fuels does not eliminate the problem makes this a likely area of increasing focus © Det Norske Veritas AS. All rights reserved 15 September 2009 22

© Det Norske Veritas AS. All rights reserved 15 September 2009 23