Emission Trading System for Shipping - Proposal and outline

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					Emission Trading System for Shipping -
         Proposal and outline




             Sveinung Oftedal
              Senior adviser
                                                 ETS for international shipping
                   What is the needed
                       Change?

    Climate Change:

    • Is it a major or minor challenge for mankind?

    • Is a major or minor response from mankind needed?

    • Is a major or minor response from shipping needed?




2        Norwegian Ministry of the Environment, December 2009
                                            ETS for international shipping




                                                      The long-term
                                                      Challenge




3   Norwegian Ministry of the Environment, December 2009
                                                    ETS for international shipping

        The MBI race towards success - Why
        bet on ETS?

    • The ETS responds precisely to the need for emission
      reductions by establishing a Cap on emissions

    • The ETS regulates the ship using well established
      IMO principles and approaches

    • Will meet the needs of developing countries because
      the ETS will establish a Fund.

        And……
    •   State leaders know it, and several are strong
        supporters of ETS
    •   Already introduced – more to come
    •   Experience already gained
    •   Have a chance to enter into force.

4           Norwegian Ministry of the Environment, December 2009
                                                    ETS for international shipping



    Myth: ETS is Complicated for shipping

          No! – just focus on your own responsebilities in the
       system. The Industry should not worry on elements in the
                system which are for authorities only



      The Ship         Authorities will get clear           The
                       obligations and rights and a
      will get a set                                        ETS
                       robust system for
      a of clear and
                       enforcement.                         Market
      ”familiar”                                            is already
      requirements                                          in
                       The Administrative                   operation
                       Body will get clear tasks


5           Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

        Draft International Convention for Reduction of Greenhouse Gas
        Emission from Ships – Option for a legal structure



                                             Preamble


                    en
                       t                      Articles
                  m
               end                     ” establish the main legal
          t am
    p lici ure                               mechanisms “
 E x ced
   pro
                           Regulations – ” contains technical requirements”
               t
           m en Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
         nd
       me
      a re
                 General    Emission Requirements Administrative Emission The Fund
  c it u         provisions Cap      for ships    Body           Trading
Ta ced
 pro              Appendices – ”contain forms for certificates, record books etc”


                  Guidelines – ”mainly procedures to assist the requirements”

  6                 Norwegian Ministry of the Environment, December 2009
                                               ETS for international shipping




    Emission Cap

    • The Cap is for the sector:
      i.e. all ships the system applies to.


    • Not a specific cap for the Party
    • Not a specific cap for the individual
      ship




7      Norwegian Ministry of the Environment, December 2009
                                                    ETS for international shipping

       Principles for the establishment of a cap
    • Precise and effective in limiting
      emissions and thus contributing to limiting
      global warming

    • Robust throughout time in order to
      enable shipping to respond to climate
      change in years to come

    • Transparent in order to
      – allow all stakeholders and the public in
         general to understand the cap
      – communicate the response to climate
         change by shipping

    • Perceived as fair by
      – balancing the reduction potential and
         abatement costs for the industry
      – ensuring that shipping is not unfairly
         burdened compared to other industries
8           Norwegian Ministry of the Environment, December 2009
                                                    ETS for international shipping

       Methodology for setting the cap
    • In order to take an informed decision
      on an emission cap a methodology is
      needed

    • A step-by-step approach has been
      developed to provide proposals for a
      cap

    • Based on principles used by IPCC
      (cost effectiveness)

    • This approach is based on the
      following principle:

       The marginal cost of limiting shipping
      emission should be equal to the marginal
              cost for other industries

9           Norwegian Ministry of the Environment, December 2009
                                                                                            ETS for international shipping

               Marginal cost – the cost of reducing the
               next tonne of CO2
Marginal cost curve: marginal cost as a
function of reduction amount – increases with                                                                When reductions become too
                                                                                                             expensive, allowances will be




                                                                                      Cap
higher reduction levels
                                                                                                             bought
               Cost per tonne CO2




                                               The first reductions will be cheap,
                                               even economically profitable because           As the low hanging fruits are
                                               of fuel savings                                exhausted more expensive
                                                                                              technologies will be needed

10                                  Norwegian Ministry of the Environment, December 2009
                                                                          ETS for international shipping

                The global reduction requirement and cost
                is used to set a cap for shipping (total)
            CO2/year                         Baseline
                                                         Abatement need           Marginal reduction cost:
   Global                                                     50%                 50$/tonne CO2
(all sectors)


                                             Target
                                                                                         Fairness
                       2000                2020                                          principle



           CO2/year

                                             Baseline
Shipping                                                Abatement potential        Marginal reduction cost:
                                                              20%                  50$/tonne CO2
                                              CAP


                       2000                2020




11                      Norwegian Ministry of the Environment, December 2009
                                                              ETS for international shipping




                                                                  Temperature/
                                                                stabilisation target




                                                        1       Global CO2 target      Global CO2 baseline




                                                                 CO2 abatement             Global CO2
                                                                   required              abatement cost


      A step-by-step methodology                        2

                                                               Maximum cost per
                                                                  tonne CO2

     - from a global temperature target         All sectors


            to a cap for shipping               Shipping
                                                                                          Shipping CO2
                                                                                         abatement cost
                                                                                                             3




                                                                  Shipping CO2            Shipping CO2
                                                         4       abatement level            baseline
                                                                                                             5




                                                                  Shipping CO2
                                                         6       emission target
                                                                  (Cap in 2020)




12            Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

            Step 1:
            Finding the global baseline and reduction target
     –   A global CO2 target should be agreed at                                       Temperature/
                                                                                     stabilisation target

         UNFCCC. This can be based on a temperature or
         CO2 concentration stabilization target.
                                                                               1     Global CO2 target      Global CO2 baseline
     –   Determine a baseline (business-as-usual) for
         future emissions (all sectors) and the target
         level needed to achieve the temperature target.
     –   IPCC has developed baselines based on                                        CO2 abatement
                                                                                        required
                                                                                                                Global CO2
                                                                                                              abatement cost

         different scenarios and estimated the level                           2
         needed for achieving different stabilization
                                                                                     Maximum cost per
         targets.                                                                       tonne CO2

                                                                       All sectors

                                                                       Shipping
                                                                                                               Shipping CO2
                                                                                                              abatement cost
                                                                                                                                  3




                                                                                       Shipping CO2            Shipping CO2
                                                                                4     abatement level            baseline
                                                                                                                                  5




                                                                                       Shipping CO2
                                                                                6     emission target
                                                                                       (Cap in 2020)


                                        Source: IPCC 4th assessment report


13              Norwegian Ministry of the Environment, December 2009
                                                                ETS for international shipping


           Step 2: Finding the maximum abatement cost
           for global CO2 reduction                                                     Temperature/
                                                                                      stabilisation target

     –   Determine marginal abatement cost of
         bridging the gap between baseline and target
                                                                                1     Global CO2 target      Global CO2 baseline
         (all sectors) – what is the cost of reducing the
         last (marginal) tonne of CO2 in order to reach
         the stabilization target?
                                                                                       CO2 abatement             Global CO2
                                                                                         required              abatement cost

     –   IPCC has estimated the cost of reducing CO2                            2
         globally in 2030.
                                                                                      Maximum cost per
                                                                                         tonne CO2

                                                                        All sectors

                                                                        Shipping
                                                                                                                Shipping CO2
                                                                                                               abatement cost
                                                                                                                                   3




                                                                                        Shipping CO2            Shipping CO2
                                                                                 4     abatement level            baseline
                                                                                                                                   5




                                                                                        Shipping CO2
                                                                                 6     emission target
                                                                                        (Cap in 2020)


                                         Source: IPCC 4th assessment report


14               Norwegian Ministry of the Environment, December 2009
                                                                                                                          ETS for international shipping

         Step 3-4: Finding the marginal abatement cost for shipping
         and the potential reduction
     –                                 Determine marginal abatement costs curves                                                               Temperature/
                                                                                                                                             stabilisation target

                                       for shipping emissions – what level of
                                       reduction is achievable at which cost level?
                                                                                                                                       1     Global CO2 target      Global CO2 baseline
     –                                 The marginal abatement cost for shipping
                                       should be equal to the global marginal cost
                                       and the reduction potential for shipping can
                                       then be determined.                                                                                    CO2 abatement
                                                                                                                                                required
                                                                                                                                                                        Global CO2
                                                                                                                                                                      abatement cost

     –                                 Marginal abatement cost curves for shipping                                                     2
                                       have been developed by IMO GHG study
                                                                                                                                             Maximum cost per
                                       update and DNV.                                                                                          tonne CO2

                                                                                                                               All sectors
                                                            Marginal CO2 abatement cost curve for world fleet
                                                 200                                                                           Shipping
                                                                                                                                                                       Shipping CO2
                                                                                                                                                                      abatement cost
                                                                                                                                                                                          3
         Cost per tonne CO 2 averted ($/tonne)




                                                 150

                                                 100

                                                  50
                                                                                                                                               Shipping CO2            Shipping CO2
                                                   0                                                                                    4     abatement level            baseline
                                                                                                                                                                                          5

                                                  -50

                                                 -100

                                                 -150                                                                                          Shipping CO2
                                                                                                                                        6     emission target
                                                                                                                                               (Cap in 2020)
                                                 -200
                                                        0            50          100            150           200   250
                                                                           Mill tonnes CO2 reduced per year


15                                                             Norwegian Ministry of the Environment, December 2009
                                                             ETS for international shipping


         Step 5: Finding the baseline for CO2 emission from shipping
                                                                                       Temperature/
                                                                                     stabilisation target
     •   Determine a baseline (business-as-usual)
         for future shipping emissions.
     •   The IMO GHG Study has developed                                       1     Global CO2 target      Global CO2 baseline


         scenarios for future shipping emission
         based on the same assumptions as IPCC.
                                                                                      CO2 abatement             Global CO2
                                                                                        required              abatement cost


                                                                               2

                                                                                     Maximum cost per
                                                                                        tonne CO2

                                                                       All sectors

                                                                       Shipping
                                                                                                               Shipping CO2
                                                                                                              abatement cost
                                                                                                                                  3




                                                                                       Shipping CO2            Shipping CO2
                                                                                4     abatement level            baseline
                                                                                                                                  5




                                                                                       Shipping CO2
                                                                                6     emission target
                                                                                       (Cap in 2020)


                                        Source: IMO GHG study update


16             Norwegian Ministry of the Environment, December 2009
                                                        ETS for international shipping


      Step 6: Determining the cap
                                                                             Temperature/
                                                                           stabilisation target
      •   Subtract shipping reduction level from
          baseline for future shipping emissions to
          determine cap.                                             1     Global CO2 target      Global CO2 baseline




     CO2/year                                                               CO2 abatement
                                                                              required
                                                                                                      Global CO2
                                                                                                    abatement cost


                                                                     2
                                            Baseline
                                                                           Maximum cost per
                                                                              tonne CO2

                                                             All sectors

                                                             Shipping
                                                                                                     Shipping CO2
                                             CAP                                                    abatement cost
                                                                                                                        3




                                                                             Shipping CO2            Shipping CO2
                                                                      4                                                 5
            2000                         2020                               abatement level            baseline




                                                                             Shipping CO2
                                                                      6     emission target
                                                                             (Cap in 2020)




17              Norwegian Ministry of the Environment, December 2009
                                             ETS for international shipping




                  Practical example




18   Norwegian Ministry of the Environment, December 2009
                                                      ETS for international shipping

     EXAMPLE using available data for deciding the cap in 2020
     • Assuming a global stabilization target of                    Temperature/

       2°C/450 ppm                                                stabilisation target




                                                                                                               The IPCC figures applies to 2030 while the shipping numbers applies to 2020.
                                                                    2°C/450 ppm




     • Global CO2 target                                          Global CO2 target      Global CO2 baseline
                                                                  26.9 GT CO2-eq         B2: 53.8 GT CO2-eq
       – IPCC: 26.9 GT CO2-eq

     • Global CO2 baseline
                                                                   CO2 abatement             Global CO2
       – IPCC scenario B2: 53.8 GT CO2-eq                              required            abatement cost
                                                                   26.9 GT CO2-eq               IPCC



     • Global CO2 abatement required: 26.9 GT




                                                                                                               This should be consistent in future calculations.
       CO2-eq                                                     Maximum cost per
                                                                     tonne CO2
                                                                   50 $/tonne CO2

                                                    All sectors

     • Maximum cost per tonne CO2                   Shipping                                Shipping CO2
       – IPCC: 50 $/T CO2                                                                  abatement cost
                                                                                             IMO GHG



     • Shipping CO2 abatement potential
       – IMO GHG Study: 185 MT CO2                                  Shipping CO2
                                                                   abatement level
                                                                                            Shipping CO2
                                                                                               baseline
                                                                  20 %/185 MT CO2          B2: 925 MT CO2



     • Shipping CO2 baseline
                                                                    Shipping CO2
       – IMO GHG Study scenario B2: 925 MT CO2                     emission target
                                                                    (Cap in 2020)
                                                                     740 MT CO2


     • Shipping CO2 cap: 740 MT CO2

19           Norwegian Ministry of the Environment, December 2009
                                                   ETS for international shipping


        Summary – Setting the Cap
     • A step-by-step methodology for determining an
       effective and fair cap for shipping

     • Further development of marginal abatement
       cost curves will improve the precision of a cap




20         Norwegian Ministry of the Environment, December 2009
                                               ETS for international shipping

                                     There you see, we did not need the
                                     cap. A boat will fix this problem!




                                                           Foto: Jan M. Lillebø, Bergens Tidende




21   Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

        Draft International Convention for Reduction of Greenhouse Gas
        Emission from Ships – Option for a legal structure



                                             Preamble


                    en
                       t                      Articles
                  m
               end                     ” establish the main legal
          t am
    p lici ure                               mechanisms “
 E x ced
   pro
                           Regulations – ” contains technical requirements”
               t
           m en Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
         nd
       me
      a re
                 General    Emission Requirements Administrative Emission The Fund
  c it u         provisions Cap      for ships    Body           Trading
Ta ced
 pro              Appendices – ”contain forms for certificates, record books etc”


                  Guidelines – ”mainly procedures to assist the requirements”

 22                 Norwegian Ministry of the Environment, December 2009
                                                                                                                  ETS for international shipping



                                                                                                                         Total increase
                                                                                                                             Reduction through other
                                                                                                                             sectors (other credits)
                                                                                                                                     Reductions through




                                                                                      Actual shipping emissions
                                                                                                                                                   CDM




                                                                                                                                                                 Reductions through
                                                                                                                                 Compliant emissions in an ETS




                                                                                                                                                                                      The Fund
          Total shipping emissions




                                                    Emission Cap for Shipping                                                                                                         OK



                                                        r                                                                            r
                                                     ea                                                                            ea
                                                                                         r
                                                                                   25 ea
            r




                                                    y                                                                             y
            a




                                                                                20 et y




                                                  et 5                                                                          et 5
         ye




                                                g                                                                             g
                                              ar 202                                                                        ar 202
      se




                                                                                   rg




                                                                                                                          T
                                                                                                                                                                         OK
                                                                                Ta
     Ba




                                            T
23                                   Norwegian Ministry of the Environment, December 2009
                                                  ETS for international shipping

                                             Registered in the




                                                                                  te
                                                                                 ica
                                             International ETS Registry
                     (ETS) Permit




                                                                                if
                                             System in place to




                                                                            ert
 ETS for the




                                                                            SC
                                             operate in the ETS




                                                                          ET
   Ship
                      Allowance             The ETS
                       (Quota)              Market Place




24       Norwegian Ministry of the Environment, December 2009
                                             ETS for international shipping




                     The Market Place

                  Buyer meets the Seller




25   Norwegian Ministry of the Environment, December 2009
                                                ETS for international shipping



     Easy access to the market!




        www.ets-for-shipping.com

26      Norwegian Ministry of the Environment, December 2009
                                                     ETS for international shipping


      Price Volatility – a concern?
     • Prices are volatile but environmental effect is guaranteed
     • Volatile prices not new to shipping sector
     • In past years, volatility of allowance prices has been similar to
       volatility in fuel prices

                       EUA sett 2012 (22-4-2005 = 1)
                       Crude oil (Eur/barrel, 22-04-2005 = 1)




              22-04-2005      24-04-2006      20/04/2007      20-05-2008     19-05-2009


27           Norwegian Ministry of the Environment, December 2009
                                             ETS for international shipping




                                                                     2010




                                                                     2020




28   Norwegian Ministry of the Environment, December 2009
                                                  ETS for international shipping


     Shipping ETS:
     What will be the need for extra quotas in 2020?
                                                                     Example
     TOTAL ETS Market in 2020?
     Prediction by the presenter: 8300 MT CO2

                                  Extra quotas needed by shipping:

                                              A1B Scenario:          1057 MT
                                            - 8% Reduction:            85 MT
                                            - Auctioned Quotas        870 MT
                                            = Need in other markets: 102 MT



                                 1.2 % of the total Market
                                  The Fund is not taken into account

29        Norwegian Ministry of the Environment, December 2009
                                                  ETS for international shipping

                                             Registered in the




                                                                                    te
                                                                                  ica
                                             International ETS Registry
                     (ETS) Permit




                                                                                   if
                                             System in place to




                                                                               ert
 ETS for the




                                                                             SC
                                             operate in the ETS




                                                                           ET
   Ship
                      Allowance             The ETS
                       (Quota)              Market Place                  Auction rules
                                                                          Trading rules
                                                                          Price




30       Norwegian Ministry of the Environment, December 2009
                                                       ETS for international shipping

                                                                           •No/less need
                                                   Reduce emissions and    for extra
     Faced with                                    the need for            Allowances
     the costs -                                   Allowances through      •Sell or bank
                                                                           Excess
     Options for           Auctioning              Reduction Measures      Allowances
      the Ship             of Emission                                    Available at the
                           Allowances               Buy extra             Market because
                                                    Allowances offered    of cheaper
                                                    by other Shipping     measures in
                                                    Companies             these Companies

                                                     Buy extra             Need for
                                                     Allowances            trading rules
                                                     offered by other      and access to
                                                     sectors               other systems
     In an ETS the Ship has several
       options to find the emission                 Buy extra
      reduction measures with the                   Allowances             Need for
               lowest costs                         available through      trading rules
                                                    CDM

31             Norwegian Ministry of the Environment, December 2009
                                                  ETS for international shipping

                                             Registered in the




                                                                                    te
                                                                                  ica
                                             International ETS Registry
                     (ETS) Permit




                                                                                   if
                                             System in place to




                                                                               ert
 ETS for the




                                                                             SC
                                             operate in the ETS




                                                                           ET
   Ship
                      Allowance             The ETS
                       (Quota)              Market Place                  Auction rules
                                                                          Trading rules
                                                                          Price
                     Record                   Transaction log
                                              BDN
                     keeping                  Log consumption
                                                                           ETS
                                              Flag/RO approves             Certificate
                     Surrendering             emission reports
                                                                           Renewal
                                              Periodic surrendering of
                                           allowances to ETS Registry      Endorsement


                                             Periodic cancelling of the
                     Cancelling            quotas done by the Registry



32       Norwegian Ministry of the Environment, December 2009
                                                   ETS for international shipping


     Two models for Compliance
                                                                  Point of
                                        Compliance
     1. Constant positive                                         surrendering
                                          period
        balance

                                                                         Allowances

                                                                         Bunkers
                                                                         consumption


     2. Periodic positive
        balance




33         Norwegian Ministry of the Environment, December 2009
                                                   ETS for international shipping


     Phasing in the Cap in an ETS
                                    Pilot Phase begins one year after
                                    entry into force. Ships begin
                                    reporting emissions
       Pilot
                                 Ti                 Emissions reported in pilot
          Baseline                  m               phase used to set baseline
                                     e              emissions (2 to 3 years
                                                    reporting)
               Interim targets
                                                                 Emissions reported
                    & cap                                        during ETS compliance
                                                                 cycle used to reality
                 adjustment                                      check cap and interim
                                                                 targets




34      Norwegian Ministry of the Environment, December 2009
                                                                                           ETS for international shipping


         ETS Compliance Cycle -

                                                                                             3rd compliance period


                         3                                    2nd compliance period


      2P                       1st compliance period

             i
             l
 1   EF +1       EF +3   ETS yr 1   ETS yr 3       ETS yr 5      ETS yr 8      ETS yr 10




     1. Entry into Force
     2. Pilot phase based on reporting
     3. Multi-year compliance cycle—
        interim targets set on five year basis

35                  Norwegian Ministry of the Environment, December 2009
                                                        ETS for international shipping


           Phases in introducing ETS

                                                                                next
                                                                             3rd
                 First commitment period                               2nd

     eif                                                100 % auctioning
                                              0   0%
                                            s1
                                        ard
                                   n tow
                               se i ing
                             ha ion
                            P t
                                c
                             au
           Reporting




36              Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

        Draft International Convention for Reduction of Greenhouse Gas
        Emission from Ships – Option for a legal structure



                                             Preamble


                    en
                       t                      Articles
                  m
               end                     ” establish the main legal
          t am
    p lici ure                               mechanisms “
 E x ced
   pro
                           Regulations – ” contains technical requirements”
               t
           m en Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
         nd
       me
      a re
                 General    Emission Requirements Administrative Emission The Fund
  c it u         provisions Cap      for ships    Body           Trading
Ta ced
 pro              Appendices – ”contain forms for certificates, record books etc”


                  Guidelines – ”mainly procedures to assist the requirements”

 37                 Norwegian Ministry of the Environment, December 2009
                                                 ETS for international shipping



     Chapter 1 General Provisions -
     Application
     • Applies to ships entitled to fly the flag of a Party

     • The Party has the right to introduce the
       requirements in its waters

     • Do not apply to warships etc. (UNCLOS art. 236)
     • Do not apply to ships below [Size] GT

       Note: A phase in regime for ships of various sizes
       [and types]may be established

     • No more favourable treatment of non-Party ships




38       Norwegian Ministry of the Environment, December 2009
                                                                                                                                                 ETS for international shipping
                                  450

                                  400
                                               This study

                                               IMO Expert Group (Freight-Trend), 2007
                                                                                                                                           • 400 GT = 60,000
                                  350
                                               Endresen et al., JGR, 2007
                                                                                                                                             ships covering about
Fuel Consumption (Million tons)




                                               Endresen et al (Freight-Trend)., JGR, 2007

                                  300          EIA Total marine fuel sales                                                                   91% of the total
                                  250
                                               Point Estimates from the Studies

                                               This study (Freight trend)
                                                                                                                                             CO2 emissions
                                  200

                                  150
                                                                                                                                           • 500 GT = 45,000
                                  100
                                                                                                                                             ships covering about
                                   50
                                                                                                                                             87% of the total
                                    0
                                    1950         1960                1970                   1980        1990            2000        2010     CO2 emissions

                                                                                                      Domestic
                                                                                                                                           • 2,000 GT = 30,000
                                                                             International
                                                 International
                                                    Aviation
                                                                               Shipping
                                                                                 2,7 %
                                                                                                     shipping &
                                                                                                       fishing                               ships covering about
                                                                                                       0,6 %
                                                     1,9 %
                                                                                                                                             80% of the total
                                           Other Sectors
                                              11,6 %                                                            Main Activity                CO2 emissions
                                                                                                                Electricity and
                                                                                                               Heat Production
                                           Transport                                                               35,0 %
                                            21,7 %
                                                                                                                                           • 10,000 GT = 16,000
                                                                                                                     Unallocated
                                                                                                                    Autoproducers
                                                                                                                        3,7 %
                                                                                                                                             ships covering about
                                                            Manufacturing                      Other Energy
                                                            Industries and                      Industries                                   67% of the total
                                                             Construction                         4,6 %
                                                               18,2 %                                                                        CO2 emissions


39                                                               Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

        Draft International Convention for Reduction of Greenhouse Gas
        Emission from Ships – Option for a legal structure



                                             Preamble


                    en
                       t                      Articles
                  m
               end                     ” establish the main legal
          t am
    p lici ure                               mechanisms “
 E x ced
   pro
                           Regulations – ” contains technical requirements”
               t
           m en Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
         nd
       me
      a re
                 General    Emission Requirements Administrative Emission The Fund
  c it u         provisions Cap      for ships    Body           Trading
Ta ced
 pro              Appendices – ”contain forms for certificates, record books etc”


                  Guidelines – ”mainly procedures to assist the requirements”

 40                 Norwegian Ministry of the Environment, December 2009
                                                 ETS for international shipping




     The Administrative Body

     • Administrative tasks only (identified in the
       instrument).

     • Establish and maintain an ETS Registry

     • Establish the Market Place and ensure balance
       (quotas vs consumption)
       – Put the emission allowances on the Market, and
       – Register surrendered emission allowances, and
       – Cancel quotas.
       – Emissions monitoring

     • Administration of the FUND

     • Report to the Executive Board and the Assembly
41       Norwegian Ministry of the Environment, December 2009
                                                               ETS for international shipping

        Draft International Convention for Reduction of Greenhouse Gas
        Emission from Ships – Option for a legal structure



                                             Preamble


                    en
                       t                      Articles
                  m
               end                     ” establish the main legal
          t am
    p lici ure                               mechanisms “
 E x ced
   pro
                           Regulations – ” contains technical requirements”
               t
           m en Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6
         nd
       me
      a re
                 General    Emission Requirements Administrative Emission The Fund
  c it u         provisions Cap      for ships    Body           Trading
Ta ced
 pro              Appendices – ”contain forms for certificates, record books etc”


                  Guidelines – ”mainly procedures to assist the requirements”

 42                 Norwegian Ministry of the Environment, December 2009
                                                 ETS for international shipping




     The Fund generated by the ETS


     • How to use the Fund will need to be thorougly
       discussed, however emission reduction measures
       and compensation of developing countries are
       identifieed as reasonable options through

       – Mitigation by CDM projects, and

       – Adaption in developing countries

     • In addition relevant R&D activities in the maritime
       sector is a candidate




43       Norwegian Ministry of the Environment, December 2009
                                                  ETS for international shipping


     Basic elements of an ETS for
     international shipping – Summing up
     •   New legal instrument
         Includes a cap/caps and target year(s) and a pathway
         (precedure) for the next step(s) long-term solution
     •   Applies to all ships above [Size] GT in international
         trade
         Various phase in schemes are possible
     •   Basic requirement: The ship shall obtain an emission
         allowance
         – Build upon the regular survey and certification regime
         – Continous positive balance or periodic balance
             (because of PSC)
     •   An international entity undertaking administrative
         tasks needs to be established, e.g. a trading agency
     •   Non-party ships needs access because of no-more
         favourable treatment clause
     •   Aiming for an open system


44        Norwegian Ministry of the Environment, December 2009
                                                    ETS for international shipping


     Key messages regarding an ETS for shipping

       •   Global – and in line with the IMO principles
       •   Precise Emission Control – A Cap
       •   Cost effective mechanism
       •   The emissions is the basis for the legal
           requirement – regulates the ship
       •   Robust over time (2020-2030-2040-2050….)
       •   Simple and clear for the industry – ”If you can
           buy bunkers you can trade in an ETS.”
       •   Will create a fund
       •   New legal instrument
       •   and it is essential that a market based
           instrument can be ratified by Member States
           ….it will enter into force


45          Norwegian Ministry of the Environment, December 2009
                                             ETS for international shipping




                     Thank you
                              for
                 your attention!



46   Norwegian Ministry of the Environment, December 2009