1

Analysis on the Potential of Reducing Greenhouse Gas Emissions from

International Marine Transport

Mitsubishi Research Institute Inc.

Environment & Energy Division

Global Warming Research Group

Abstract

2

Objective

• Analyze the impact of limiting CO2 emissions from international marine fuel consumption in 2050 at 2007 levels

3

Items of Study

• １． Review of IMO scenarios– (1) Describe the outline of IMO Study– (2) Analyze the impact of freight tonnage increase – (3) Project the future trend of emission factor of transport (CO2 emi

ssion / tonne mile freight transport)

• ２． Calculation of the degree of change of speed necessary to stabilize CO2 emission– (1) Stabilization by all international marine transport– (2) Stabilization by ships whose flag state is an Annex I country

• ３． Analysis of economic measures (ETS)– (1) Impact on the world fleet– (2) Impact on the Japanese fleet

4

1. Review of IMO scenariosStructure of IMO Study

Estimation of current situation

Navigation data based on AIS

Ship data based on Lloyd’s Fairplay

Estimation of activity data

Estimation of energy consumption and CO2 emission

Projection of future CO2 emission6 IPCC scenarios * 3 transport projections * 3 technological improvement projections * 3 speed change projections = 162 scenarios

Estimation of future growth trends

Selection of IPCC Scenarios

Identification of GDP growth in each scenario

Identification of transport growth in each scenario

Consideration of technological improvement and speed change

5

1. Review of IMO scenarios Outline of IPCC scenarios

• Extracts 6 scenarios

• A1 ： High growth scenario– A1F1 ： Emphasis on fossil fuel – A1B ： Balanced energy– A1T ： Emphasis on non-fossil

fuel

• A2 ： Differentiated world scenario• B1 ： Sustainable development

scenario• B2 ： Regional integration scenario

Source: IPCC SRES

6

1. Review of IMO scenarios (1) Outline of IMO scenarios

• Category– Ocean-going （ Large ships used for large quantities and intercontinental trade ）– Coastwise （ Ships used in regional (short sea) shipping for international transport;

mostly small ships and ferries, etc. ）– Container （ Container ships of all sizes ）

• Freight transport– Based on projected GDP growth under IPCC scenarios– 3 growth scenarios are estimated for the years 2020 and 2050

• Technological improvement– E.g. Improvement of propeller efficiency, low-resistance hulls.– 3 scenarios are estimated for the years 2020 and 2050.

• Speed change– Anticipates that ships may implement speed reduction due to increase in fuel price– 3 scenarios are estimated for the years 2020 and 2050.

7

1. Review of IMO scenarios (1) Outline of IMO Study

• Efficiency improvement from technological change

• Degree of speed change

2020 2050

High Base Low High Base Low

Ocean-going -4 % -2 % 0 % -35 % -20 % -5 % Coastwise -4 % -2 % 0 % -45 % -25 % -5 % Container -4 % -2 % 0 % -30 % -17.5 % -5 %

2020 2050

High Base Low High Base Low

Ocean-going -10 % -5 % 0 % -20 % -10 % 0 % Coastwise -10 % -5 % 0 % -20 % -10 % 0 % Container -20 % -10 % 0 % -40 % -20 % 0 %

8

1. Review of IMO scenarios (1) Outline of IMO Study (CO2 emissions)

• Current CO2 emissions– 2007 ： 847*Mt-CO2

• Estimated CO2 emissions– 2020 ：

• 0.85 to 1.7 times 2007 level

– 2050 ： • 0.88 to 8.7 times

2007 level

2020 2050

LL HH BB LL HH BB

A1 B 1,447 770 1,075 7,344 885 3,029

A1 F1 1,440 770 1,073 7,228 880 2,989

A1T 1,447 771 1,076 7,341 879 3,021

A2 1,275 740 987 5,426 804 2,392

B1 1,252 734 970 5,081 781 2,273

B2 1,160 719 926 4,407 746 2,036

Estimated CO2 emissions （ Mt-CO2 ）

*This Global emission was presented by International Consortium at the 1st Intersessional WG on GHG in Oslo (June ‘08), and amended to 843Mt-CO2 in their final report submitted to MEPC58(Oct. ‘08).

9

1. Review of IMO scenarios (2) Impact of freight tonnage increase

• Freight tonnage projection under IMO Study

A1B scenarioTech. improvement =

0%Speed change = 0%

• Impact of speed change (high reduction, base reduction, low reduction) are analyzed.

2007 2020 2050

Ocean-going 537 954 1,784

Coastwise 81 95 178

Container 126 348 1,615

Total 744 1,397 3,577

(Million GT)

Conditions

10

1. Review of IMO scenarios (2) Impact of freight tonnage increase

Results– Assumes that

shipbuilding capacity will be doubled by 2020 and quadrupled by 2050

– Increase in shipbuilding demand as a result of speed change is about 13% to 14% compared to the case when speed is not reduced.

2020 2050

Degree of speed change

Category Case∖ Base High Low Base High Low

Ocean-going -5% -10% 0% -10% -20% 0%

Coastwise -5% -10% 0% -10% -20% 0%

Container -10% -20% 0% -20% -40% 0%

Required increase in fleet size

Category Case∖ Base High Low Base High Low

Ocean-going 5% 11% 0% 11% 25% 0%

Coastwise 5% 11% 0% 11% 25% 0%

Container 11% 25% 0% 25% 67% 0%

Total 6.7% 14.6% 0.0% 17.4% 43.8% 0.0%

Percentage of additional ships to be built (as a proportion of total fleet)

Category Case∖ Base High Low Base High Low

Ocean-going 0.40% 0.81% 0.00% 0.25% 0.52% 0.00%

Coastwise 0.40% 0.81% 0.00% 0.25% 0.52% 0.00%

Container 0.81% 1.73% 0.00% 0.52% 1.20% 0.00%

Total 0.50% 1.05% 0.00% 0.37% 0.85% 0.00%

Proportion of additional shipbuilding demand (in relation to shipbuilding capacity under no speed change)

Category Case∖ Base High Low Base High Low

Ocean-going 5.05% 10.40% 0.00% 4.06% 8.61% 0.00%

Coastwise 5.05% 10.40% 0.00% 4.06% 8.61% 0.00%

Container 10.40% 22.13% 0.00% 8.61% 19.78% 0.00%

Total 6.41% 13.44% 0.00% 6.18% 14.05% 0.00%

11

0

20

40

60

80

100

120

2000 2010 2020 2030 2040 2050 2060

Year

Tra

nspo

rt E

ffici

ency

(200

7=10

0)

1. Review of IMO scenarios (3) Emission factor of transport (CO2 emission

/ tonne mile freight transport)• Implementation of high degree of technological improvement and high degre

e of speed change (case High-High)– CO2 emission per tonne mile is expected to be reduced by 66% by 2050 from 2007.

• Implementation of intermediate degree of technological improvement and intermediate degree of speed change (case Base-Base)

– CO2 emission per tonne mile is expected to be reduced by 40% by 2050 from 2007.

Base-Base

Low-Low

High-High

12

2. Change of speed necessary to stabilize CO2 emission

(1) Stabilization by all international marine transport

• 2020• Speed need to be

reduced to the following level (compared to 2007) under IPCC A1 scenario

　　　　（ freight transport: base estimate ）

– Ocean-going:81%– Coastwise: 81%– Container: 72%

Low-Low(LL)

Base-Base (BB)

High-High (HH)

HH-10% HH-20%

Ocean-goingRate of

reduction

0% -5% -10% -19% -28%

Coastwise 0% -5% -10% -19% -28%

Container 0% -10% -20% -28% -36%

600

700

800

900

1000

1100

1200

1300

2007 LL BB HH HH- 10% HH- 20%

2020 Emission scenarios

CO

2 Em

issi

on (M

t-C

O2)

ActualA1 BA1 F1A1TA2B1B2

13

2. Change of speed necessary to stabilize CO2 emission

(1) Stabilization by all international marine transport• 2050 ：

– Stabilization under A1 scenario is not possible

– Stabilization only possible when a high degree of speed reduction is achieved under low emission (B1, B2) scenarios.

　　　 （ freight transport: base estimate ）

– Reduction of speed below a certain level results in increase of emissions due to emissions from auxiliary engines, which is proportional to duration of navigation.

Low-Low(LL)

Base-Base (BB)

High-High (HH)

HH-20% HH-30% HH-40%

Ocean-goingRate of

reduction

0% -10% -20% -36% -44% -52%

Coastwise 0% -10% -20% -36% -44% -52%

Container 0% -20% -40% -52% -58% -64%

0

500

1000

1500

2000

2500

3000

3500

2007 LL BB HH HH-20% HH-30% HH-40%

2050 Emission scenarios

CO

2 em

isso

ins

(Mt-

CO

2)

ActualA1 BA1 F1A1TA2B1B2

14

2. Change of speed necessary to stabilize CO2 emission

(2) Stabilization by ships whose flag state is an Annex I country • Share of ships whose flag state is an Annex I country– Option 1: Constant tonnage…Annex I ships remain fixed at 2006 level (i.e. 5% of all fleet in 2050)– Option 2: Constant proportion…Proportion of Annex I ships remain fixed at 2006 level (i.e. 26% of

all fleet in 2050)• Both cases indicate that it is impossible to stabilize emissions at 2007 levels by actions ta

ken by Annex I ships alone• An effort by all ships would be called for, regardless of their flag states

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

1990 1995 2000 2005 2006 Option 1 Option 2 World

year

Flee

t(10

00 g

ross

ton

nes)

Annex IWorld

Option 1: Constant tonnage at 2006 level (5% of all fleet in 2050)

Option 2: Constant proportion at 2006 level (26% of all fleet in 2050)

15

３． Analysis of economic measures

• Objective: Calculate cost of purchase of emission reduction credits (ERCs) in order to stabilize CO2 emissions

• Method:– Scenario 　： IPCC A １ B– Cost of ERC ： 20 Euro/t-CO2 (low estimate)

60 Euro/t-CO2 (high estimate)

• (1) Impact on the global shipping industry

20072020 2050

BB HH BB HH

CO2 Emissions 　　 (Mt-CO2) 847 1,106 972 2,182 1,396

Emission in excess of 2007 levels (Mt-CO2) 　 (Mt-CO2) 0 259 125 1,335 549

Emission reduction credit at 20 Euro/t-CO2: Total purchase price (billion JPY)

- 2,490 1,204 12,820 5,267

(billion Euro) 5.2 2.5 26.7 11.0

Emission reduction credit at 60 Euro/t-CO2: Total purchase price (billion JPY)

830 401 4,273 1,756

(billion Euro) 15.6 7.5 80.1 32.9

16

３． Analysis of economic measures (2) Impact on the Japanese

shipping industry• Conditions– Freight transport: Proportion of world fleet fixed at 2006 level (12.9%) – Analyzed the effect on corporate performance– Revenue assumed to be proportional to freight transported

• Results– Purchase of ERCs to offset emissions in excess of 2007 level can severely affect the operation of the shipping industry– For Base-base (BB) case, the cost is roughly the same level as ordinary profit (which averaged 8.1% from 2001 to 2006)– For High-High case, the cost is roughly the half of ordinary profit

2007 2020 2050

BB HH BB HHCO2 emissions (Mt-CO2) 109 143 125 282 180

Emission in excess of 2007 levels (Mt-CO2) 0 34 16 173 71

Projected freight transport and revenue（ 2007＝ 100） 100 147 147 411 411

Operating income (billion JPY) 3,491 5,131 5,131 14,360 14,360

Emission reduction credit at 20 Euro/t-CO2Total purchase price (billion JPY)

107 52 552 227

(billion Euro) 0.7 0.3 3.4 1.4

　 Ratio to operating revenue 2.1% 1.0% 3.8% 1.6%

Emission reduction credit at 60 Euro/t-CO2Total purchase price (billion JPY)

322 156 1,656 681

(billion Euro) 2.0 1.0 10.3 4.2

　 Ratio to operating revenue 6.3% 3.0% 11.5% 4.7%

17

３． Analysis of economic measures

(2) Impact on the Japanese shipping industry• Cost of ERC purchase to stabilize emissions at 2007 level (at high e

stimate of ERCs) can be at the same level as ordinary profit

0%

3%

6%

9%

12%

15%

2020 2050

Pro

port

ion

of o

pera

ting

reve

nue

BBHH

線形Average ordinary profit to revenue ratio