Policy instruments for the abatement of emissions from ships. European Maritime Day 2012 Per Kågeson

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1 Policy instruments for the abatement of emissions from ships European Maritime Day 2012 Per Kågeson

2 CO2-emissions from maritime transport Administrative instruments - Energy Efficiency Design Index (EEDI) -Ship Energy Efficiency Management Plan (SEEMP) Market-based measures - Emissions trading (METS) - Taxes/charges (possibly in combination with GHG Fund) - Base-line and tradable credits (affecting specific emissions) -

3 Need for more than one instrument? To cut maritime emissions substantially over the next few decades policy instruments must affect: - Specific emissions from new buildings - Retrofitting of existing ships - Operation of all ships (including slow-steaming) This is difficult to achieve by just one instrument

4 Conflicting principles The UNFCCC is based on the principle of common but differentiated responsibility An important principle of the UN Convention on the Law of the Sea (UNCLOS) is no more favourable treatment of ships. The IMO has not been able to agree on this matter

5 All countries must contribute Common but differentiated responsibility means industrialized nations are expected to do more than could expected from developing countries But it does not mean developing countries should not contribute As countries develop they need to do more

6 Temporary relief or compensation LDCs may be exempt Other developing countries may be temporarily exempt Certain goods may be exempt (e.g. grain) Funds created can be used for compensation Any decision on a MBM must be long-term

7 GDP per capita at PPP. Country (forecast) China 1,847 6,778 12,449 Brazil 6,846 10,499 14,429 Saudi Arabia 16,535 23,271 28,721 Ukraine 2,982 6,330 9,149 Poland 8,548 18,050 24,811 Rumania 5,923 11,183 15,396 Portugal 15,574 22,670 25,759

8 EU Commission to assess 4 options Emissions Trading Tax on Emissions Compensation funds - Mandatory Compensation Fund (Levy & Fund) - Industry-managed Compensation Fund Mandatory emissions reductions (baseline)

9 NOx-emissions from maritime transport Globally ca 25 Mt in 2007 = 30% of total NOx European waters (2000) 3.7 Mt Tier II and Tier III (NECA) will cut emissions compared to BAU but reduce them below current levels only by 2030

10 Provide incentive to pre-existing ships Tier III (NECA) will come into force in 2016 and applies only to new builds full fleet compliance around 2045 Risk that the incremental cost of compliance will slow down renewal of the pre-existing fleet Risk that some companies will order new ships to be delivered just prior to 2016 in order to avoid Tier III

11 NOx abatement technologies Technology Reduction efficiency % Basic IEM 20 Advanced IEM 30 Direct Water Injection (DWI) 50 Humid Air Motor (HAM) 70 Selective Catalytic Reduction (SCR) >90 Miller cycling 50 Exhaust Gas Recirculation (EGR) Liquefied Natural Gas (LNG) 95

12 Technologies that can meet Tier III SCR (use of urea increases the variable cost) Combination of EGR and DWI (raises fuel consumption) LNG New concepts such as CSNOx?

13 Flexibility and equal treatment Pre-existing ships vary with regard to: - conditions onboard - remaining life - share of journeys within NECAs Technologies that do not fully meet Tier III can also contribute towards lower emissions

14 Economic instruments for flexibility Differentiated fairway and port dues NOx emissions trading Base-line and tradable credits Charge or tax on specific NOx emissions Distance related NOx charge

15 Tax or charge the preferred option Could be applied to level of specific emissions or to real emissions taking distance into account Revenues may be recycled to the industry Norway has created a NOx Fund that helps financing NOx reducing measures

16 A NOx charge that takes distance into account Based on real emissions as measured or on fuel consumption multiplied with specific emission per ton or on a default value at based on distance and the assumption that a certain percentage of engine capacity is used during the voyage

17 Participation and administration A common registry based on IMO numbers A common administration AIS may be used for monitoring ship movements Random Port State control

18 Finding the right level of the charge The current differentiation of Swedish port and fairway dues correspond to less than 100/ton NOx The Norwegian charge is equivalent to approximately 500 per ton 500 per ton may be the right level for a Baltic Sea and/or North Sea charge

19 Sulphur emissions from maritime transport IMO s SECA decision for 2015 is being challenged Scrubbers, LNG and MGO are potential solutions By dragging feet shipping companies may be able to delay implementation they should not be allowed to benefit from becoming free riders A gradual introduction by means of a market-based measure would have been more flexible

20 Thanks for listening! Per Kågeson