A Global Emissions Trading System for International Shipping€¦ · A Global Emissions Trading...

A Global Emissions Trading System A Global Emissions Trading System for

International Shipping International Shipping

ByFrance, Germany, Norway and the UK

ETS for international shipping

Why?Why?

2 IMO - March 2011

Example:Shrinking glaciers

Reduced melt water in summer will influence h l f h 1 billi lthe water supply for more than 1 billion people

Particularly serious in SE Asia (Indus, Ganges, Mekong, Brahmaputra, Yangtze, The Yellow River)

Glacier in the Khangschung Valley E of Mt Everest, Tibet Photo 25 July 2005 by Harry Jans (from John Birks)


COP 16 in Cancun:

“The Conference of the Parties,

Paragraph 4. Further recognizes that deep cuts in global greenhouse gas emissionscuts in global greenhouse gas emissions are required according to science, and as documented in the Fourth Assessment Report of the Inter-governmental Panel on Climate Change, with a view to reducing l b l hglobal greenhouse gas emissions so as to

hold the increase in global average temperature below 2°C above pre-temperature below 2 C above pre-industrial levels, and that Parties should take urgent action to meet this long-term

4 IMO - March 2011

g ggoal, (continues)…;

.“


Why develop an ETS for international Why develop an ETS for international shipping?

Th ETS d i l d t ffi i tl t th • The ETS responds precisely and cost-efficiently to the need for emission reductions

h l h h ll bli h d• The ETS regulates the ship using well established IMO principles and approaches

• Will meet the needs of developing countries because the ETS will generate revenues.

• The mechanism can be designed to include various political interests (”soft” or ”hard”)

• Predictable ([10] year commitment period)• Feasible• Already introduced with success - experience gained

5 IMO - March 2011

• Already introduced with success experience gained


Total increaseReduction through other sectors (other credits)

R d i h h

ssio

ns

ETS

Reductions through CDM

roug

h

mis

sion

s

OK

ng e

mis

Ship

ping

ns in

an

E

duct

ions

thr

unds

ppin

g em

ship

pin

Cap

for S

nt e

mis

sion

Red Fu

Tota

l shi

p

Act

ual

Emis

sion

Com

plia

n

T E C

6 IMO - March 2011 OK


Registered in the

(ETS) Permit International ETS Registry System in place to

operate in the ETSETS for theShip

Allowance(Quota)

The ETS Market Place

Ship

(Q ) Market Place

7 IMO - March 2011


The Market Place

Buyer meets the Seller

8 IMO - March 2011


Good experiences withff ti d i

Easy access to the market!effective and easiy

accessable marketplaces in existing ETS which areestablished by private established by private

organizations. Lowadministrative costs.

www.ets-for-shipping.com

9 IMO - March 2011


Registered in the



Allowance(Quota)


Ship

A ti l(Q ) Market Place Auction rules

Trading rulesPrice

10 IMO - March 2011


Reduce emissions and •No/less need

Auctioning

Reduce emissions and the need for Allowances through Reduction Measures

for extra Allowances•Sell or bankExcess

Faced with the costs -

Options for Auctioning of Emission Allowances

Reduction MeasuresAllowances

Buy extra All t th

Available through regular

Options for the Ship

Allowances at the Primary Market

g gauctions

Buy extra Allowances at the S d M k t

Always accessible

Secondary Market

In an ETS the Ship has several ti t fi d th i i Buy extra

Allowances available through

Always accessible

easy options to find the emission reduction measures with the

lowest costs

11 IMO - March 2011

CDM


Registered in the



Allowance(Quota)


Ship

A ti l(Q )

Record

Market Place Auction rulesTrading rulesPrice

Transaction log BDNkeeping BDN Log consumption

Flag/RO approvesETS C tifi t

Surrendering Flag/RO approves

emission reports Periodic surrendering of allowances to ETS Registry

Certificate

RenewalEndorsement

Cancelling Periodic cancelling of the quotas done by the Registry

12 IMO - March 2011


Phases in introducing ETS

next

First commitment period 2nd3rd

next

Agreed level of auctioningeif

Reporting

13 IMO - March 2011

ETS for international shippingPhase in proposal by UK

sis

sion

sEm

i

14 IMO - March 2011Time


The main legal obligation is put on the ship emssions and the shipowner/operator will be faced with the costs

1 C t l t $$1. Cost element $$2. Cost element $$3 Cost element $$

The ETS will provide for clear 3. Cost element $$

4. CO2 costs $$5. Cost element $$

identification of a specific cost in the ships’ accounts will6. Cost element $$ ships accounts will trigger innovation on how to reduce § Regulatory experience Robust legalthese costs

§ Regulatory experience. Robust legal links regarding responsibility as wellas robust enforcement practices. No

15 IMO - March 2011

plegal obstacles.


Emitting CO2 becomes an additional cost itemEmitting CO2 becomes an additional cost item

16 IMO - March 2011


Emission minus reductions from external allowances and

1200

1400

35000

40000using the fund for emission mitigation

35000

40000

800

1000

20000

25000

30000

mill to

nnes)

ts (m

ill $)

20000

25000

30000

(mill $)

400

600

10000

15000

20000

Emissions (m

Cost

10000

15000

20000

Costs (

0

200

0

5000

0 %20 %40 %60 %80 %100 %0

5000

%

Costs Emissions

17 IMO - March 2011

ETS for international shippingModel 1France/Germany/

Norway

Total Ship EmissionAllowances defined in the

instrument and madeinstrument and madeavailable to ships by the

Adminstrative Body Parties requirehi t Adminstrative Body ships to

surrender allowances

18 IMO - March 2011

ETS for international shippingModel 2UK

Party 1Party y

5

Party 4Party 2P ti k th ShiParties make the ShipEmission allowances

available to their ships

Party 6

Party 3Party 3

19 IMO - March 2011


Application• Applies to ships entitled to fly the flag of a Party

Th P t h th i ht t i t d th • The Party has the right to introduce the requirements in its waters

D l hi (UNCLOS 236)• 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

• Exemption clause

20 IMO - March 2011


• 400 GT = 60,000 400

450This study 400 GT 60,000

ships covering about 91% of the total CO2 emissions250

300

350

400 (M

illio

n to

ns)

IMO Expert Group (Freight‐Trend), 2007

Endresen et al., JGR, 2007

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

EIA Total marine fuel sales

Point Estimates from the Studies

This study (Freight trend) 2

• 500 GT = 45,000 ships covering about 100

150

200

Fuel

Con

sum

ptio

n This study (Freight trend)

p g87% of the total CO2 emissions0

50

1950 1960 1970 1980 1990 2000 2010

• 2,000 GT = 30,000 ships covering about 80% of the total

International Shipping

2,7 %International

Aviation1,9 %

Domestic shipping &

fishing0,6 %

CO2 emissions

• 10,000 GT = 16,000

Main Activity Electricity and

Heat Production35,0 %Transport

21,7 %

Other Sectors 11,6 %

, ,ships covering about 67% of the total CO2 emissions

Manufacturing Industries and Construction

18,2 %

Other Energy Industries

4,6 %

Unallocated Autoproducers

3,7 %

21 IMO - March 2011

2


The Administrative Body

• Administrative tasks only (identified in the instrument).

• Establish and maintain an ETS Registry

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

Ad i i t ti f th FUND/f d• Administration of the FUND/funds

• Report to the Executive Board and the Assembly

22 IMO - March 2011


Funds will be generated by the ETS

• How to use the Fund/funds raised by the auctioning f i i ll ill d t b th l of emission allowances will need to be thorougly

discussed, however emission reduction measures and compensation of developing countries are identifieed as reasonable options throughidentifieed 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 as well as other relevant TC-activities such as training and capacity bilding

23 IMO - March 2011


How an ETS will serve all countries

• All countries will benefit in reduced effects of climate change because of emissions reductions caused by an ETS for international shipping caused by an ETS for international shipping. Especially developing countries because of the severe impacts of climate change in these countriescountries.

• The more energy efficient shipping, the less pressure on the fuel marketpressure on the fuel market.

• If not further emission reductions are undertaken by international shipping more actions are needed by international shipping more actions are needed within other sectors (Annex I countries and non-Annex I countries) in order to meet the temperature target agreed in Cancun

24 IMO - March 2011

temperature target agreed in Cancun.


How an ETS can serve developing countries• Will directly provide for funding of climate change

actions in developing countries including the use of CDMCDM.

• Funds provided by an ETS can be used (for climate change purposes) in developing countries In total change purposes) in developing countries. In total, these countries will be a net receiver of funds.

If d id d th t i l d ti • If so decided, the system can include an exemption clause for trades to and from some small island developing states. It must be ensured that the exemption clause does not lead to carbon leakage exemption clause does not lead to carbon leakage and distortion of competition.

Technical cooperation

25 IMO - March 2011

• Technical cooperation.

ETS for international shippingCDM | A mechanism with global reach

2924 registered projects in

71 developing countries>2.7 billion certified emission reductionsp g

Plus about 2.700 more projects in pipeline

565 million CERs issued to date

emission reductionsexpected to the endof 2012 (high estimate)

Status: March 2011Status: March 2011

26 IMO - March 2011

ETS for international shippingEstimation of costs to various economies

Presented by Germany in MEPC 60/4/54In general the assumptions made for these estimates are in the

”high end” of the scale

27 IMO - March 2011


Key Assumptions Key Assumptions • It is important to note the assumptions for the study on

Impacts on the Shipping Sector, Countries and Regions:

– 100 % auctioning of allowances

– Allowance price of USD 14-22 per metric tonne of CO2 which is approximately the USD value of the EU ETS in the 12 monts is approximately the USD value of the EU ETS in the 12 monts to March 2010

– Fuel Price of USD 450 per metric tonne

d i– Trade routes remain constant

– All costs are borne by the importer

– No ballast voyagesNo ballast voyages

– No efficiency improvements

– Equal fuel prices around the world

• In reality, these assumptions are unrealistic, but it will provide for an indication of impacts on economies.

28 IMO - March 2011


29 IMO - March 2011

Source: CE Delft et al., 2010


30 IMO - March 2011

Source: CE Delft et al., 2010


Import value increase (assuming no improvement in fuel p ( g pefficiency)

Examples of individual products:Coffee from Brazil to Europe: 0 1 % Cereals from Argentina to Europe: 1%

31 IMO - March 2011

Coffee from Brazil to Europe: 0.1 %, Cereals from Argentina to Europe: 1%


Summary – Costs to economies• Costs of increased import values are in first order:

– Low (<0.15% of GDP) for most regions and country groupsE ti Af i S th E t A i SIDS

y

– Exceptions: Africa, South-East Asia, SIDS

• Costs are low with regard to different product groups and individual productsindividual products

• In reality, costs for developing countries are likely to be lower, due toto– (1) Increased efficiency of maritime transport

e.g.: CE Delft et al. (2009) estimates by 2030, 30% efficiency improvement is possible in a cost-effective wayimprovement is possible in a cost effective way

– (2) trade imbalance: lower costs of transport to developing economies than to developed economies

– (3) GDP growth outpaces maritime transport volume growth(3) GDP growth outpaces maritime transport volume growth

• Under most market conditions, a major share of the cost increase can be passed on to consumers

32 IMO - March 2011


Basic elements of an ETS for Basic elements of an ETS for international shipping – Summing up

• New legal instrumentIncludes a cap/caps and target year(s) and a pathway (procedure) for the next step(s) long-term solution

• Applies to all ships above [Size] GT in international tradeVarious phase-in schemes are possibleBasic requirement: The ship shall obtain an emission • Basic requirement: The ship shall obtain an emission allowance– Build upon the regular survey and certification regime

periodic surrendering– periodic surrendering• An international entity undertaking administrative

tasks needs to be established, e.g. a trading agency• Non-party ships needs access because of no-more • Non party ships needs access because of no more

favourable treatment clause• Aiming for an open system• A Fund/funds

Can be designed to delivervarious outputs and effects

33 IMO - March 2011

A Fund/funds various outputs and effects

ETS for international shippingConcluding remark

ETS for international shipping can deliver for:

Policy interests:

The The Ship: Administrations:

interests:

The mechanism

Environment:

Emission

1. Be certified2. Report

i i

Traditionalregulatory

mechanismcan respondto various

li Emissiontargets can

be met

emissions3. Surrender

allowances

regulatoryapproach to

shipping

policy interestsincludingthose of

developingcountries

34 IMO - March 2011


Thank you

for

your youattention!

35 IMO - March 2011

A Global Emissions Trading System for International Shipping€¦ · A Global Emissions Trading...

Documents

Transcript of A Global Emissions Trading System for International Shipping€¦ · A Global Emissions Trading...