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SUB-COMMITTEE ON BULK LIQUIDS AND GASES 17th session Agenda item 11 BLG 17/11/4 14 December 2012 Original: ENGLISH

REVIEW OF RELEVANT NON-MANDATORY INSTRUMENTS AS A CONSEQUENCE OF THE AMENDED MARPOL ANNEX VI AND THE NOX TECHNICAL CODE Equivalents under regulation 4 of MARPOL Annex VI and emissions trading Submitted by the Clean Shipping Coalition (CSC) SUMMARY Executive summary: This document provides comments on certain aspects of document BLG 17/11, the report of the correspondence group relating to the development of guidelines pertaining to, among other things, equivalents set forth in regulation 4 of MARPOL Annex VI 7.3 7.3.1 7.3.1.1 Paragraph 13 BLG 17/11; MEPC.1/Circ.789; MEPC 57/4/23, MEPC 57/21 and BLG 12/6

Strategic direction: High-level action: Planned output: Action to be taken: Related documents:

1 This document is submitted in accordance with the provisions of paragraph 6.12.5 of the Committees' Guidelines on the organization and method of work of the Maritime Safety Committee and the Marine Environment Protection Committee and their subsidiary bodies (MSC-MEPC.1/Circ.4/Rev.2) and comments on document BLG 17/11 (United States). 2 BLG 16 established a correspondence group to address, among other things, the development of additional guidelines needed for the implementation of the revised MARPOL Annex VI. 3 The terms of reference for the correspondence group included the instruction to "develop other relevant draft guidelines pertaining to equivalents set forth in regulation 4 of MARPOL Annex VI and not covered by other guidelines" (BLG 16/16, paragraph 8.59.3). 4 The correspondence group did in fact consider the development of equivalency guidelines under regulation 4, and has submitted a report of its discussions under document symbol BLG 17/11.

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BLG 17/11/4 Page 2 5 One aspect of those discussions focused on the question of whether emissions trading should be allowed as an equivalent compliance method under regulation 4. However, the majority of the group opposed the allowance of emissions trading, and no agreement on the issue was reached (BLG 17/11, paragraphs 13 and 14; and BLG 17/INF.5, Question II-3, pages 16-18 of annex). The Clean Seas Coalition (CSC) participated in the correspondence group and also expressed its opposition to the allowance of emissions trading as an equivalent method of compliance under regulation 4. 6 During the course of these correspondence group discussions, the Bahamas notified IMO that it was approving a sulphur emissions trading scheme among a fleet of cruise ships as an alternative method of compliance with the sulphur requirements of regulation 14 in the North American Emission Control Area (ECA), and indicated that such a scheme had been accepted by certain administrative bodies of the United States and Canada (MEPC.1/Circ.789). 7 This emissions trading agreement was not brought to the attention of the correspondence group, which thus did not have an opportunity to consider it. 8 CSC is concerned that the particular emissions trading scheme reflected in MEPC.1/Circ.789 carries the potential to seriously weaken the integrity of MARPOL Annex VI, including regulation 4, as well as the effectiveness of the ECA sulphur requirements of regulation 14. A major concern is that compliance will be extremely difficult to monitor, verify and enforce. This concern is enhanced by the fact that MARPOL Annex VI regulations are designed to apply to each individual ship, not a collection or an "average" of many ships. 9 Given the complexity of the emissions trading issue, and the potential for any particular emissions trading scheme to compromise the robustness of the regulation 14 sulphur requirements, a thorough discussion of any emissions trading scheme should occur prior to the implementation of such a scheme. 10 Regulation 4 does not provide a specific process for determining the validity of a compliance method that is purportedly allowed by a Party, but rather provides only that any alternative compliance methods are to be "circulated to Parties particulars thereof, for their information and appropriate action, if any". 11 However, it is clear that neither regulation 4 nor regulation 14 was ever intended to permit emissions trading. In fact, the subject of emissions trading (particularly in the context of regulation 14) was specifically discussed during the MARPOL Annex VI amendment negotiations and rejected by the BLG and the MEPC as follows: .1 MEPC 57/4/23, paragraph 11.5: "The group considered the introduction of market-based instruments and trials under the annex, but fundamental questions remained. Recognizing the number of questions surrounding the proposal, the working group concluded that it could not recommend to the Sub-Committee that a market-based instrument or trials for such instruments be included in the amendments to MARPOL Annex VI."; MEPC 57/21, paragraph 4.26.9: "The Committee noted in particular that BLG 12 could not recommend introducing market-based instrument in the revised MARPOL Annex VI."; and

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BLG 17/11/4 Page 3 .3 BLG 12/6, paragraphs 5.50-5.53: It is also clear that the term "market-based instruments" includes emissions trading, aggregate emissions ceilings and similar schemes.

12 In view of the above, CSC proposes that an explicit moratorium be placed on approval or adoption of any sulphur emissions trading, aggregate emissions ceilings or similar scheme for application in the North American ECA or elsewhere, unless and until the MEPC reverses its 2008 decision not to allow emissions trading under MARPOL Annex VI. Action requested of the Sub-Committee 13 The Sub-Committee is invited to consider the information contained in this document and to take action as appropriate and, more specifically, to impose a moratorium on approval or adoption of any emissions trading scheme pending complete resolution of the issues discussed above.

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