impacts of energy efficiency design index

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Impacts of Energy Efficiency Design Index(A Thesis for the degree of M aster of Science in Marine Transport with M anagement)

Kanu Priya Jain (109248343)

School of Marine Science and TechnologyNewcastle UniversityNewcastle upon TyneUnited Kingdom

Supervisor: Mr Paul Stott

Submission date: Aug 09, 2012


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MSc Marine Transport with Management Kanu Priya Jain

Impacts of Energy Efficiency Design Index Page ii

Abstract

International shipping, despite being the most efficient mode of commercial transport in

terms of amount of CO2 emitted per tonne-km of cargo carried, accounted for about 3.3% of

the global CO2 emissions in 2007 (Buhaug et al., April 2009) and in the absence of effective

policy measures, by 2050 CO2 emissions from international shipping are likely to become

two to three folds of 2007 levels (Buhaug et al., April 2009). Thus, International Maritime

Organization (IMO) considering its responsibility to reduce the impact of shipping on climate

change, adopted mandatory measures in July 2011, making the Energy Efficiency Design

Index (EEDI) and Ship Energy Efficiency Management Plan (SEEMP) mandatory for newships and all ships above 400 GRT respectively.

The EEDI formula is the measure of total CO2 emission per tonne mile. The amount of CO2

emitted depends upon fuel consumption and fuel consumption depends upon the total power

requirement which means the EEDI formulation eventually has certain impact on ship design

parameters which are closely related to the economic performance of the ship. This work

analyses the concept of EEDI by studying all the components of EEDI formula separately in

order to quantify the impact, on the ship owners, of the changes adapted to ship design to

meet the EEDI requirements. This work also reviewed the feasible options available to ship

owners to meet the EEDI requirements and assessed available methods and approaches which

can be used to measure the cost effectiveness of CO2 abatement options. Outcome of this

dissertation is intended to help ship owners in measuring the impact of EEDI and is based on

the critical review of EEDI formula on the basis of available literature and studies carried out

by different organizations.


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Impacts of Energy Efficiency Design Index Page iii

Preface

This dissertation is a part of the requirements for the degree of MSc Marine Transport with

Management at Newcastle University, Newcastle upon Tyne, United Kingdom. It has been

carried out under the supervision of senior faculty Mr Paul Stott at School of Marine Science

and Technology, Newcastle University.

I would like to acknowledge and thank my supervisor Mr Stott and Professor Ian Buxton and

Professor John Mangan for their effort, support, suggestion and guidance during the course of

this thesis.

I would like to give special thanks to Mr James Ashworth of Tri-Zen for providing invaluable

data and Mr Tristan Smith of University college of London for his initial guidance and

suggestions.

Special thanks to my friends and family members.

Newcastle upon Tyne

August, 2012

Kanu Priya Jain


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Impacts of Energy Efficiency Design Index Page iv

List of Figures

Figure 1: Greenhouse effect ....................................................................................................... 4

Figure 2: CO2 emissions from shipping compared with global total emissions ........................ 8

Figure 3: Comparison of CO2 emissions between different modes of transport ....................... 8

Figure 4: Shipping as compared to major CO2 emitting countries ............................................ 9

Figure 5: Projected growth of CO2 emissions from shipping ................................................. 10

Figure 6: Anatomy of EEDI formula ....................................................................................... 17

Figure 7: EEDI regulatory concept .......................................................................................... 21

Figure 8: Framework to study EEDI formula .......................................................................... 24Figure 9: Shipping cash flow model ........................................................................................ 25

Figure 10: EEDI vs Speed curve for a 17,000 dwt General cargo ship ................................... 28

Figure 11: Air Lubrication ....................................................................................................... 40

Figure 12: Specific fuel consumption of various engines ........................................................ 45

Figure 13: IMO Sulphur limits ................................................................................................ 47

Figure 14: Price comparison of LNG, fuel oil and gas oil ....................................................... 48

Figure 15: Towing kite system and wing shaped sails ............................................................ 54

Figure 16: Magnus effect and E-ship 1 .................................................................................... 56

Figure 17: MV Auriga Leader (left) with solar panels (right) installed on deck ..................... 57

Figure 18: CATCH values ($/T) for various emissions reduction measures ........................... 61

Figure 19: Average marginal abatement cost per reduction measure for the fleet in 2030 ..... 63
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Impacts of Energy Efficiency Design Index Page v

List of Tables

Table 1: International Trade in terms of percent of GDP (year 2010)..................................... 11

Table 2: Reduction factors (in %age) for the EEDI relative to the EEDI Reference line ....... 20

Table 3: Parameters for determination of reference values for the different ship types .......... 21

Table 4: Values of conversion factor CF .................................................................................. 34

Table 5: Power and costs for different kite areas ..................................................................... 55

Table 6: Impacts and constraints of applying various measures.............................................. 70


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Impacts of Energy Efficiency Design Index Page vi

Contents

Abstract ...................................................................................................................................... ii

Preface...................................................................................................................................... iii

List of Figures ........................................................................................................................... iv

List of Tables ............................................................................................................................. v

Contents .................................................................................................................................... vi

1. Introduction ........................................................................................................................ 1

2. Background ........................................................................................................................ 4

2.1 Greenhouse Effect ....................................................................................................... 4

2.1.1 Impact of Greenhouse effect ................................................................................ 5

2.1.2 Global Warming................................................................................................... 5

2.1.3 Consequences of Global Warming ...................................................................... 6

2.1.4 Inference .............................................................................................................. 7

2.2 Shipping Industry and Global Warming ..................................................................... 7

2.3 Projected CO2 emissions from ships ........................................................................... 9

2.4 World GDP, Trade and CO2 emissions ..................................................................... 11

2.5 Reduction of GHG emissions .................................................................................... 12

2.6 CO2 emissions regulations ........................................................................................ 12

3. EEDI and SEEMP ............................................................................................................ 15

3.1 EEDI Formula ........................................................................................................... 16

3.2 EEDI regulatory concept ........................................................................................... 19

3.3 EEOI formula ............................................................................................................ 22

3.4 Analysis of EEDI formula ......................................................................................... 22

4. Methodology .................................................................................................................... 24

5. Change in denominator variables..................................................................................... 26


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Impacts of Energy Efficiency Design Index Page vii

5.1 Change in design speed ............................................................................................. 26

5.1.1 Factors affecting design speed ........................................................................... 27

5.1.2 Relation between design speed and EEDI ......................................................... 27

5.1.3 Discussion .......................................................................................................... 28

5.2 Change in deadweight ............................................................................................... 30

5.2.1 Factors affecting change in deadweight ............................................................. 30

5.2.2 Relation between deadweight and EEDI ........................................................... 31

5.2.3 Light weight reduction ....................................................................................... 31

5.2.4 Discussion .......................................................................................................... 32

6. Change in numerator variables ........................................................................................ 34

6.1 Main engine emissions parameters .......................................................................... 35

6.1.1 Engine power ..................................................................................................... 35

6.1.2 Specific fuel consumption.................................................................................. 44

6.1.3 Conversion factor CF.......................................................................................... 46

6.2 Energy efficient technologies .................................................................................... 52

6.2.1 Waste heat recovery ........................................................................................... 52

6.2.2 Wind power ........................................................................................................ 53

6.2.3 Solar Power ........................................................................................................ 57

7. Cost effectiveness of EEDI reduction measures .............................................................. 59

7.1 CATCH ..................................................................................................................... 59

7.2 MACC ....................................................................................................................... 62

7.3 Discussion ................................................................................................................. 64

8. Summary and Conclusions .............................................................................................. 65

8.1 Summary ................................................................................................................... 65

8.2 Conclusions ............................................................................................................... 66

8.3 Future work ............................................................................................................... 72


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Impacts of Energy Efficiency Design Index Page viii

9. References ........................................................................................................................ 73

10. Appendix 1 (Communication to Tri-Zen) ..................................................................... 79


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Impacts of Energy Efficiency Design Index Page 1

Chapter 1

1.IntroductionIn Jul 2011 International Maritime Organisation (IMO) adopted technical measures for new

ships and operational measures for all ships over 400 GRT and above making Energy

Efficiency Design Index (EEDI) and Ship Energy Efficiency Management Plan (SEEMP)

mandatory for new ships and all ships above 400 GRT respectively. The EEDI requires a

minimum energy efficiency level in terms of CO2

emissions per capacity mile for different

ship type and size segments. Due to these regulations ship design is required to get affected

and any changes to basic design features such as speed and deadweight have an impact on

shipping economics. There are various measures which can be used to meet EEDI

requirements.

It is very important to study financial and economic impacts of EEDI regulations on ship

owners and charterers because ship owners and charterers operate in the industry to maximize

their profits out of the shipping business and any negative impact of these regulations on

ships earnings potential may put them out of the business.

This dissertation aims to find out how exactly EEDI regulations would impact costs and

revenue associated with ships due to the implementation of various measures affecting ship

design features to meet EEDI limits by analysing the concept of EEDI by studying all the

components of EEDI formula separately. This work also aims to review the feasible options

available to ship owners to meet the EEDI requirements and assess different approaches

available to find out how a ship owner can decide which measure is cost effective. This work,

in general, aims to find out if EEDI is beneficial to ship owners commercially or it is a

regulation developed by IMO to reduce CO2 emissions which would burden ship owners with

extra costs.

This dissertation is based on the critical review of EEDI formula on the basis of available

literature and studies carried out by different organizations. Key studies relevant to the issue

are discussed below.


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The IMO led an International consortium to study greenhouse gas emissions from ships and

the report was published in 2009 as Second IMO GHG study 2009 (Buhaug et al., April

2009) while first report on this topic was published in the year 2000 as Study of Greenhouse

Gas Emissions from Ships (Skjlsviket al., Mar 2000). On the basis of these reports, IMO

adopted EEDI and SEEMP regulations and guidelines for which were adopted at MEPC 63 in

March 2012 under different resolutions such as resolution MEPC.212(63) 2012 as

Guidelines on the Method of Calculation of the Attained Energy Efficiency Design Index

(EEDI) for New Ships; Resolution MEPC.213(63)2012 as Guidelines for the Development

of a Ship Energy Efficiency Management Plan (SEEMP); Resolution MEPC.214(63) 2012

as Guidelines on Survey and Certification of the Energy Efficiency Design Index (EEDI);and Resolution MEPC.215(63) as Guidelines for Calculation of Reference Lines for use with

the Energy Efficiency Design Index (EEDI).

Other important studies relevant to the topic include report on greenhouse gas emissions

submitted by AEA group to the committee on climate change (Kollamthodi et al., Sep 2008),

report on EEDI tests and trials submitted by Deltamarin to European Maritime Safety Agency

(EMSA) (DeltamarinLtd, Dec 2009), study carried out by Oceana on the impacts of shipping

on climate (Harrould-Kolieb, July 2008), report submitted by DNV and Lloyds register to

IMO assessing the emissions reduction potential of EEDI and SEEMP regulations (Bazari

and Longva, 2011), and study carried out by CE Delft for European Commission as a

technical support for European action for reducing greenhouse gas emissions from

international maritime transport (Faberet al., 2009b).

Engine manufacturers such as Wartsila (Wartsila, Sep 2008) and MAN (MANDiesel&Turbo,

Jul 2010)and classification societies such as DNV and Lloyds register (Lloyd'sRegister, May

2012) have carried out various studies to explore available technology related to ship design

and machinery which can be used to increase the efficiency of ships to reduce CO 2 emissions.

Various authors have studied the relationship between design and economic performance of

the ship. Notable work includes (Veenstra and Ludema, 2006; Chen et al., 2010). Most of the

work regarding the assessment of cost effectiveness of various measures is carried out by

M.S. Eide (Eide et al., 2009; Eide and Endresen, 2010; Eide et al., 2011). Other important

study related to the cost effectiveness of various measures is the one commissioned by IMO

which is published as report MEPC 62/INF 7 (IMO, Apr 2011).


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This dissertation is divided into eight chapters. Chapter 2 gives the background information

about this work which includes explaining greenhouse effect, global warming and its impact

on our planet, contribution of shipping industry in global warming, projected CO 2 emissions

from ships and an overview of CO2 emission regulations. Chapter 3 explains EEDI formula

in detail explaining how it was conceived by IMO and this section of the thesis further

explains the regulatory concept of EEDI in detail analysing the EEDI formula discussing

various measures affecting different components of the formula. Chapter 4 gives the

methodology used and framework developed for this work to study the impacts of EEDI.

Chapter 5 and 6 forms the major part of this work explaining the impact of different CO 2

abatement measures on different numerator and denominator components of the EEDIformula and impact of those measures on cost an revenue associated with ships. Chapter 5

deals with denominator components while chapter 6 deals with the numerator components of

the formula. Chapter 7 details the studies and approaches available to study the cost

effectiveness of various CO2 abatement measures. This dissertation ends with Chapter 8

dealing with summary, conclusion and future work.


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Chapter 2

2.BackgroundMelting glaciers, rising sea levels, depleting forests and reducing wildlife shows that earths

climate is changing. These climate changes, according to IPCC (Pachauri and Reisinger,

2007), are mainly due to the human activities such as deforestation and burning fossil fuels

which increase the concentrations of greenhouse gases in the atmosphere. This increased

concentration of greenhouse gases such as CO2

lead to greenhouse effect and in turn global

warming and related consequences. This phenomenon of global warming can be explained by

studying greenhouse effect.

Source: Redcar and Cleveland Borough Council Source: US Environmental Protection Agency

2.1 Greenhouse EffectThe greenhouse effect is the warming caused by heat trapped into the greenhouse gases.

Greenhouse gases are the gases which allow the light to get-in but do not allow the heat to

escape just like the glass walls of a greenhouse. A greenhouse is a house made of glass walls

and a glass roof. It is used to grow vegetables, flowers and other plants in them. A

greenhouse remains warm inside because as the sunlight shines in, it warms the plants and air

Figure 1: Greenhouse effect


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inside but the heat is trapped by the glass and can't escape. So during the daylight hours, the

greenhouse gets warmer and warmer from inside and stays warm at night too.

Earth's atmosphere acts in the same way as the greenhouse. Gases in the atmosphere such as

carbon dioxide do what the roof of a greenhouse does. During the day, the sun shines through

the atmosphere and suns energy thus warming up the earths atmosphere. At night, earth's

surface cools, releasing the heat back into the air but some of the heat is trapped by the

greenhouse gases in the atmosphere which keeps the planet earth warm and habitable at 59

degrees Fahrenheit (15 degrees Celsius), on average. But the problem is, if the greenhouse

effect is too strong, earth gets warmer and warmer. This is what is happening now.

2.1.1 Impact of Greenhouse effectExcessive carbon dioxide and other greenhouse gases in the air are making the greenhouse

effect stronger leading to rise in average temperature of earth's atmosphere and oceans

(NASA). This rise in temperature is termed as Global Warming. As per the data given in the

IPCC fourth assessment report (Pachauri and Reisinger, 2007), earths average surface

temperature has increased by 0.74 degrees Celsius between 1906 and 2005, and the warming

trend over the 50 years from 1956 to 2005 is nearly twice that for the 100 years from 1906 to

2005. Also, eleven of the twelve warmest years were recorded between 1995 and 2006 since

1850, when the thermometer readings became available. It is thus clear that earths

atmospheric temperature is increasing at an alarming rate.

2.1.2 Global WarmingIt is clearly explained above that global warming is caused by greenhouse effect and there are

two factors leading to global warming, natural and anthropogenic. Natural factors arent

much of a concern as said by lead researcher and director of NASAs Goddard Institute for

Space Studies James Hansen The fact we still see a positive imbalance despite the prolonged

solar minimum isn't a surprise given what we've learned about the climate system...But it's

worth noting, because this provides unequivocal evidence that the sun is not the dominant

driver of global warming. (Parry, 2012). Other natural factors such as volcanic eruptions

and El Nino cycles also do not have long lasting impacts on climate change as they are fairly

short and predictable (NationalGeographic).


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According to IPCC (Pachauri and Reisinger, 2007)Most of the observed increase in global

average temperatures since the mid-20th century is very likelydue to the observed increase in

anthropogenic GHG concentrations. and It is likely that there has been significant

anthropogenic warming over the past 50 years averaged over each continent (except

Antarctica).

The report continues to say that global atmospheric concentrations of greenhouse gases have

increased remarkably since 1750 due to human activities and in the year 2005 atmospheric

concentrations of CO2 and CH4 exceeded by far the natural range over the last 650, 000

years. The report suggests that global increase in CO2 concentrations is primarily due to fossil

fuel use with smaller contributions due to agriculture and land use. The maximum growth in

GHG emissions between 1970 and 2004 has come from energy supply, transport and

industry, while residential and commercial buildings, forestry (including deforestation) and

agriculture sectors have been growing at a lower rate (Pachauri and Reisinger, 2007).

To sum up, earths atmospheric temperature is rising at an alarming rate by greenhouse effect

caused due to excessive concentrations of greenhouse gases such as CO2, which are

increasing rapidly as a result of human activities such as burning fossil fuels and agriculture.

2.1.3 Consequences of Global WarmingAccording to the facts and figures provided by IPCC in 4 th assessment report plants and

animal species are at increased risk of extinction if increase in global average temperature

exceeds 1.5 to 2.5 0C. Crop productivity is expected to decrease above 3 0C increase in global

average temperature. By the 2080s, many millions more people than today are projected to

experience floods every year due to sea level rise.

The health status of millions of people is projected to be affected through, for example,

increases in malnutrition; increased deaths, diseases and injury due to extreme weather

events; increased burden of diarrhoeal diseases; increased frequency of cardio-respiratory

diseases due to higher concentrations of ground-level ozone in urban areas related to climate

change; and the altered spatial distribution of some infectious diseases. (Pachauri and

Reisinger, 2007).


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The report suggested that if planet earth continues to get warmer, its impact is going to be

enormous. It classified the impacts related to global average temperature change in five broad

categories namely water, ecosystems, food, coasts and health. The ferociousness of these

impacts differs with the rate of temperature change.

The report says that change in frequency and intensity of extreme weather, together with sea

level rise (due to global warming) will certainly have adverse effects on natural and human

systems. Anthropogenic warming could lead to abrupt and irreversible impacts which include

major changes in coastlines and inundation of low-lying areas.

2.1.4 InferenceIt is thus pretty clear that impacts of global warming and climate change are tremendous and

something needs to be done quickly to save the planet and to maintain its sustainability for

life. IPCC, in its report on climate change suggests that climate change can be responded by

adapting to its impact and by reducing greenhouse gas emissions and thus reducing the rate

and magnitude of the change.

It is obvious that to remove greenhouse gases from the atmosphere, it is important to identify

their sources. As explained earlier, most of the damage is done by CO 2 emission due to

burning of fossil fuel (56.6% of total GHG emission in terms of CO2 equivalent in the year

2004) (Pachauri and Reisinger, 2007). Normally, greenhouse gases emitted in the atmosphere

are naturally absorbed by carbon sinks such as plants and oceans but since present

greenhouse gas concentrations are so high, these sinks are not enough to mitigate global

warming and thus extra efforts are required (Pachauri and Reisinger, 2007).

2.2 Shipping Industry and Global WarmingShipping industry is also the contributor of CO2 emissions and thus plays a part in global

warming. According to IMOs second greenhouse gas study, shipping is measured to have

emitted 1046 million tonnes of CO2 in the year 2007 which accounted for about 3.3% of the

global emissions during 2007 (Buhaug et al., April 2009).Emissions of CO2 from shipping as

compared with global CO2 emissions from other sectors are shown in the figure 2.


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Figure 2: CO2 emissions from shipping compared with global total emissions

Source: Second IMO GHG Study 2009 (Buhaug et al., April 2009)

Even though CO2 emissions from the shipping industry accounts for about 3.3% of the global

emissions, international shipping is, by far, most carbon efficient mode of commercial

transport as a cargo vessel of over 8000 dwt emits only 15 grams of CO2 per tonne-km while

a heavy truck with trailer would emit about 50 grams of CO2 per tonne-km and an aircraft

would emit a whopping 540 grams of CO2 per tonne-km of cargo, as shown in the figure 3 as

calculated by The Network for Transport and Environment (NTM), Sweden, a non-profit

organisation (ICS, 2009).

Source: Swedish Network for Transport and Environment

International

Aviation

1.9%

Rail

0.5%

Other Transport(Road)

21.3%

Manufacturing

Industries and

Construction

18.2%

Other Energy

Industries

4.6%

Other

15.3%

Electrical and Heat

Production

35%

Domestic Shipping

and Fishing

0.6%

International

Shipping

2.7%

15

21

50

540

0 100 200 300 400 500 600

Cargo vessel over 8000 dwt

Cargo vessel 2000-8000 dwt

Heavy Truck with trailer

Air freight

Grams CO2 per tonne-km

Figure 3: Comparison of CO2 emissions between different modes of transport


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1046 million tons of CO2 emitted by shipping in the year 2007 (Buhaug et al., April 2009)is

comparable to that emitted by some of the major economies of the world. It is argued that if

shipping were a country it would be the sixth largest producer of CO2 emissions (Harrould-

Kolieb, July 2008) as clearly shown in the graph below prepared by plotting CO2 emissions

data of various countries collected for United Nations by the Carbon Dioxide Information

Analysis Centre (CDIAC) of United States Department of Energy. The CO2 emissions data

for shipping is collected from IMO second greenhouse gas study 2009.

Figure 4: Shipping as compared to major CO2 emitting countries

Source: United Nations Statistics Division and IMO

It can certainly be concluded from the above data that although shipping is more efficient

mode of transport as compared to truck or aeroplane, it is no doubt a major emitter of CO 2,

making it comparable to the major CO2 emitting countries of the world including China,

USA, Russia, India etc.

2.3 Projected CO2 emissions from shipsMaritime transport is comparatively favourable to other modes of transport in terms of GHG

emissions (per unit/ton-kilometre) but its global carbon footprint is projected to grow in view

of the heavy reliance of ships on oil for propulsion and the expected growth in world trade,

driven by expanding global population, world economy and demand for shipping services

(UNCTAD, 2011).

0

1

2

3

4

5

6

7

China USA Russia India Japan Shipping Germany

6.79

5.58

1.66 1.611.25 1.05

0.79

CO2emissions(billionmetric

tons)


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Projected CO2 emissions growth from shipping in different scenarios as explained in IMOs

second greenhouse gas study can be depicted by the following graph where A1FI, A1B, A1T,

A2, B1, and B2 are different scenarios based on global differences in population, economy,

land-use and agriculture (Buhaug et al., April 2009).

Figure 5: Projected growth of CO2 emissions from shipping

Source: International Maritime Organization (Buhaug et al., April 2009)

According to IMOs second greenhouse gas study, mid-range emissions scenarios show that

by the year 2050, in the absence of policies, as a result of the growth in shipping, carbon

dioxide emissions from international shipping may grow by a factor of 2 to 3 as compared to

the emissions in 2007, which would constitute between 12% and 18% of the global total CO2

emissions in 2050 (Buhaug et al., April 2009). IMOs second greenhouse gas studypredicts

that without any policy measures international shipping emissions will lie between 6% and

22% (9251058Mt of CO2 emissions) higher in 2020 than emissions in 2007. By 2050

emissions are predicted to even lie between 119% and 204% (1903-2648 Mt of CO2

emissions) higher than in 2007. (Heitmann and Khalilian, 2011).


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2.4 World GDP, Trade and CO2 emissionsAs we all know that shipping is the primary carrier of the world trade and internationalshipping is responsible for the 80% of the world trade by volume and almost 60% by value

(UNCTAD, 2011) thus it plays a vital role in the functioning of the world economy. The

international trade to GDP ratios for different countries, developed and developing are shown

in the following table (table 1) which proves that international trade has become an important

component of the GDPs of most nations (U.S.EPA, 2012). As the world economy grows,

trade grows; demand for shipping grows; number of ships increases and contributes to the

CO2 emissions more than ever before.

CountriesInternational Trade (% of GDP)

(year 2010)

Brazil 18.8

Russia 43.8

India 31.7

China 50.2

Indonesia 41.0

Malaysia 152.9

Germany 71.2

Canada 50.1

USA 22.3

UK 42.9

Table 1: International Trade in terms of percent of GDP (year 2010).

Source: The World Bank(WorldBank, 2012)

According to The Platou Report (Platou, 2012) world GDP growth in the year 2011 was

about 3.8 per cent and the tonnage demand grew at the rate of 6.7 per cent and the total fleet

growth was at about 8.2 per cent. The relationship between world GDP growth and seaborne

trade growth follows the ratio of 1:2, according to (Platou, 2012). Since world GDP is

expected to grow at the rate of about 3.5 per cent in the coming years (Source: World

Economic Outlook, International Monetary Fund), world seaborne trade is also likely to grow

and thus it would certainly contribute to the growing CO2 emissions if effective measures are

not taken.


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2.5 Reduction of GHG emissionsA significant potential for reduction of GHGs through technical and operational measures has

been identified by IMOs second greenhouse gas study 2009. The study says that these

measures implemented together could increase efficiency and reduce the emissions rate by

25% to 75% below the existing levels. The study further finds that market-based instruments

are cost-effective policy instruments with a high environmental effectiveness. These

instruments allow both technical and operational measures in the shipping sector to be used,

and can offset emissions in other sectors (Buhaug et al., April 2009).

The report submitted by AEA Technology plc to the Committee on Climate Change (CCC)

concluded that there is availability of various CO2 abatement options that could be applied to

ships which include design improvements and upgrades, operational improvements,

alternative fuels, and the use of renewable energy. The report identifies that optimising the

design of the underwater hull and propeller, recovering energy from the propeller and engines

and after body flow control systems are the options to improve the design of the ships.

Operational improvements could be strategic measures such as use of larger ships or sailing

at reduced speeds, optimal hull maintenance and the upgrading of propellers and engines, and

improved operations on board the ship such as energy management and voyage optimisation.

The report identifies liquefied natural gas and wind power (e.g. sails) as the most promising

alternative fuels available, although other sources of energy, such as biofuels and solar

energy have been identified as having limited potential of use on board ships (Kollamthodi et

al., Sep 2008).

2.6 CO2 emissions regulationsAs discussed above, there are various CO2 abatement options available which can be used to

reduce CO2 emissions from ships. But, here a question arises, who is going to implement

rules and regulations relating to it. Shipping industry is a global industry involving multiple

nationalities.

Laws pertaining to a particular country cannot be applicable to entire industry because a

significant part of the emissions caused by ships takes place on high seas outside the

jurisdiction of any country. Often ships are registered in one countrytheir flag statebut


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their owners may be citizens of another country while the operating company is based in a

third country. Regulating this global business therefore needs a global inclusive approach that

limits free-riding. (Heitmann and Khalilian, 2011).

Moreover, The Kyoto Protocol, a protocol to United Nations Framework Convention on

Climate Change (UNFCCC), which aims at fighting global warming, does not apply to

international shipping mainly because of the global nature of shipping industry. The Kyoto

Protocol acknowledges that emissions from international shipping cannot be attributed to any

particular country, thus a collaborative action is required to address the issue of CO2

emissions from shipping industry (ICS, 2009).

This collaborative action will be best achieved by a recognised body which can direct entire

shipping industry to follow a common set of rules and regulations to curb CO2 emissions.

Only such agency which can regulate the entire shipping industry is IMO. Recognizing its

responsibility IMO has been seeking the control of GHG emissions from international

shipping.

IMOs Marine Environment Protection Committee considered a range of measures aimed at

reducing emissions of GHG from international shipping, including technical, operational and

market-based measures.

In July 2011, IMOs Marine Environment Protection Committee (MEPC) adopted a package

of specific technical measures for new ships and operational reduction measures for all ships

over 400 GRT. The adopted measures are added to MARPOL Annex VI with a new Chapter

4 named Regulations on energy efficiency forships, making the Energy Efficiency Design

Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) mandatory for

new ships and all ships respectively.

Such measures are considered to be the first ever mandatory GHG reduction regime for an

entire economic sector. The aim of such measures is to improve the energy efficiency for new

ships through improved design and propulsion technologies and for all ships, both new and

existing, primarily through improved operational practices. The measures are expected to

come into force on 1 January 2013 (IMO, 2011a).


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IMOs MEPC recognized that technical and operational measures would not be sufficient to

limit CO2 emissions from shipping in view of the growth in the international trade driven by

population and economic growth (IMO, Nov 2010). Thus, MEPC is considering the

implementation of some market based measures (MBMs) that would serve two main

purposes providing a fiscal incentive for the maritime industry to reduce emissions even

further, and off-setting of growing ship emissions. The revenue generated by an MBM would

be used for climate change purposes in developing countries (IMO, 2011a). The MBMs are

still under developing stage at IMO. Thus, this topic has been kept away from the scope this

dissertation.

The first phase CO2 reduction level in grams of CO2 per tonne mile is set to 10 per cent

which will be strengthened every five years to keep up with technological developments of

new efficiency and reduction measures. This means that the EEDI will require ships built

between 2015 and 2019 to improve their efficiency by 10 per cent, rising to 20 per cent for

those built between 2020 and 2024 and 30 per cent for ships delivered after 2024. These

reductions are calculated from a baseline which represents the average efficiency for ships

built between 2000 and 2010 (IMO, Oct 2011).


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Chapter 3

3.EEDI and SEEMPThe EEDI is a non-prescriptive, performance-based tool that allows ship designers and

builders to choose from various available cost effective technologies that can be used for a

specific ship design. Ship designers are only expected to attain the required energy efficiency

level as prescribed by the regulation. The EEDI provides a specific figure for an individual

ship design, expressed in grams of CO2per ships capacity-mile (the smaller the EEDI the

more energy efficient ship design) and is calculated by a complex formula defined by IMO,

based on the technical design parameters for a given ship (IMO, Oct 2011).

The SEEMP is an operational measure that assists a shipping company to improve the energy

efficiency of its ship operations in a cost-effective manner. It provides an approach for

monitoring ship and fleet efficiency performance over time using the Energy Efficiency

Operational Indicator (EEOI) as a monitoring tool which acts as a benchmark tool. The

guidance on the development of the SEEMP for new and existing ships incorporates best

practices for fuel-efficient ship operation (IMO, Oct 2011).

According to IMO, the adoption of mandatory reduction measures for all ships from 2013

and onwards will lead to significant emission reductions and also a cost saving for the

shipping industry. IMO predicted that by the year 2020, annual CO2 reductions would lie

between 100 and 200 million tonnes due to the introduction of the EEDI for new ships and

the SEEMP for all ships in operation and by 2030 reductions will increase to between 230

and 420 million tonnes of CO2 annually which in terms of percentage is approximately

between 10 and 17 per cent below business as usual by 2020 and between 19 and 26 per cent

below business as usual by 2030. The reduction measures will also result in a significant

saving in fuel costs to the shipping industry. The annual fuel cost saving estimate gives an

average figure of US$50 billion by 2020 and of US$200 billion by 2030 which is a huge

amount of savings at a little extra cost required to implement these measures (IMO, Oct

2011).


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3.1 EEDI FormulaThe basic idea of creating the index is to represent CO 2 efficiency of ship at design point. The

simplest way of representing the EEDI formula is thus

CO2 emission on ship comprises of emission from main engine, emission from auxiliary

engines at certain power, defined by ships operation speed. Transport work is the product of

ship capacity (deadweight) and speed (Vref). So, the above formula can more precisely be

mentioned as below.

The main- and auxiliary engine emissions can be calculated by multiplying fuel consumption

(FC) of the main and auxiliary engines with the carbon conversion factor (CF), which

connects the fuel consumption to the amount of CO2

emissions. Thus, the formula becomes as

mentioned below.

Fuel consumption of an engine can be calculated as a product of produced power (P) and

specific fuel consumption (SFC). Considering these factors, EEDI formula can be mentioned

as follows.

Some ships are fitted with energy saving technologies, such as waste heat recovery system,

sails, solar panels etc. which reduce the power required either from main or auxiliary engines

(Peffand PAEeff). Power take in electrical motors (PPTI) on propeller shaft are installed in some

ships and the impact of these devices on the environment should also be included in the

formula. These factors are taken care of in the formula by subtracting the emission reduction


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due to innovative technologies. The EEDI formula with such additional elements can be

written as.

Some ships with special design elements may require additional installed main engine power

(e.g. ice-class ships). This is taken care of by introducing a power correction factor (fj)which

normalizes the installed main engine power. A capacity correction factor (fi) is included in

the formula because capacity of the ship may be limited due to technical or regulatory

reasons. A weather correction coefficient (fw) is also included to normalize the speed of the

ship as ships are designed for various operation conditions of wave height, wave frequency

and wind speed. A cubic capacity correction factor (fc) is included to normalize the capacity

for chemical tankers and gas carriers. When these non-dimensional correction factors are

added to the formula, the expression is

( )

Finally, as mathematical symbols for taking into consideration multiple engines and factors

are included, the formula can be written as it has been presented in IMO MEPC. resolution

212(63), Annex 8.

( ) ( )

( )

Figure 6: Anatomy of EEDI formula

Source:International Maritime Organization (IMO, 2012)


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whereMain engine emissions

Auxiliary engine emissions

Shaft generators/motors emissions and energy saving technologies (auxiliary power)Energy saving technologies (main power)

Transport work

And meaning of the various denotations is as follows:

Engine Power (P)

(Individual engine power at 75% of Max. Continuous Rating)

Peff(i) Main engine power reduction due to individual technologies formechanical energy efficiency

PAEeff(i) Auxiliary engine power reduction due to individual technologies for

electrical energy efficiencyPPTI(i) Power of individual shaft motors divided by the efficiency of shaft

generators

PAE Combined installed power of auxiliary engines

PME(i) Individual power of main engines

CO2 Emissions (C)

(CO2 emission factor based on type of fuel used by given engine)

CFME Main engine composite fuel factor

CFAE Auxiliary engine fuel factorCFME(i) Main engine individual fuel factors

Specific fuel consumption (SFC)

(Fuel use per unit of engine power, as certified by manufacturer)

SFCME Main engine (composite)

SFCAE Auxiliary engine

SFCAE* Auxiliary engine (adjusted for shaft generators)

SFCME(i) Main engine (individual)

Correction and Adjustment factors (f)

(Non-dimensional factors that were added to the EEDI equation to account for specific

existing or anticipated conditions that would otherwise skew individual ships' rating)

feff(i) Availability factor of individual energy efficiency technologies (=1.0 ifreadily available)

fj Correction factor for ship specific design elements. E.g. ice-classed shipswhich require extra weight for thicker hulls

fw Coefficient indicating the decrease in ship speed due to weather andenvironmental conditions

fi Capacity adjustment factor for any technical/regulatory limitation oncapacity (=1.0 if none)


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Ship design parameters

Vref Ship speed at maximum design load condition

Capacity Deadweight tonnage (DWT) rating for bulk ships and tankers; a percentageof DWT for containerships

Section 3.1 is developed on the basis of the information collected from (ICCT, Oct 2011),

(DeltamarinLtd, Dec 2009) and (IMO, 2012). The current EEDI formula is suitable for oil

and gas tankers, bulk carriers, general cargo and container ships, refrigerated cargo and

combination carrier(IMO, Jul 2011).

3.2 EEDI regulatory conceptHaving understood that CO2 emission control regulations are implemented by IMO on ships

with the help of EEDI formula explained in the previous section in detail, this section would

explain how exactly these regulations came into existence and how would they be

implemented.

EEDI formula calculates the CO2 emission efficiency of a vessel at the design stage in terms

of grams of CO2 emitted per tonne-nautical miles (gCO2/tonne-nm) (DeltamarinLtd, Dec

2009). In order to implement CO2 emission regulations in a step by step manner, making

emission criteria rigorous over time; IMO first developed the EEDI baseline from the data

collected for existing ships using Lloyds Register Fairplay (LRFP) database (IMO, Dec

2009). These baselines are developed for each category of the ship, differentiated by IMO as

bulk carrier, gas carrier, tanker, container ship, general cargo ship, refrigerated cargo carrier,

and combination carrier (IMO, Jul 2011). The EEDI reference lines refer to statistically

average EEDI curves derived from data for existing ships (Lloyd'sRegister, May 2012).

CO2 emission regulations aim to reduce the emission of new buildings with respect to

existing ships, thus the EEDI value of new ships is required to be less than these baselines

representing existing ships by a certain factor which keeps on increasing over time from 0%

to 30%, as explained in chapter 2.

Regulation 21 of chapter 4 of MARPOL annex VI defines how EEDI regulations are

implemented. For each new ship, attained EEDI should be less than or equal to required

EEDI and required EEDI is calculated as , where X is the


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reduction factor (specified in the table below) for the required EEDI compared to the EEDI

reference line (IMO, Jul 2011).

Ship Type Size

Phase 0:

1 Jan 2013-

31 Dec 2014

Phase 1:

1 Jan 2015-

31 Dec 2019

Phase 2:

1 Jan 2020-

31 Dec 2024

Phase 3:

1 Jan 2025

and onwards

Bulk Carrier

20,000 DWTand above

0 10 20 30

10,000 - 20,000DWT

n/a 0-10* 0-20* 0-30*

Gas Carrier

10,000 DWTand above

0 10 20 30

2,000 - 10,000DWT

n/a 0-10* 0-20* 0-30*

Tanker

20,000 DWTand above

0 10 20 30

4,000 - 20,000DWT

n/a 0-10* 0-20* 0-30*

Container

ship

15,000 DWTand above

0 10 20 30

10,000 - 15,000

DWT

n/a 0-10* 0-20* 0-30*

General

Cargo ships

15,000 DWTand above

0 10 15 30

10,000 - 15,000DWT

n/a 0-10* 0-15* 0-30*

Refrigerated

Cargo ships

5,000 DWT andabove

0 10 15 30

3,000 - 5,000DWT

n/a 0-10* 0-15* 0-30*

Combination

Carrier

20,000 DWT

and above 0 10 20 30

4,000 - 20,000DWT

n/a 0-10* 0-20* 0-30*

* Reduction factor to be linearly interpolated between the two values dependent upon vessel size.The lower value of the reduction factor is to be applied to the smaller ship size.

n/a means that no required EEDI applies

Table 2: Reduction factors (in %age) for the EEDI relative to the EEDI Reference line

Source: International Maritime Organization (IMO, Jul 2011)


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The reference line values are calculated using the following formula.

Values of a, b and c defined by IMO are given in the following table.

Ship type a b c

Bulk carrier 961.79 DWT of the ship 0.477

Gas carrier 1120.00 DWT of the ship 0.456

Tanker 1218.80 DWT of the ship 0.488

Container ship 174.22 DWT of the ship 0.201

General cargo ship 107.48 DWT of the ship 0.216

Refrigerated cargo ship 227.01 DWT of the ship 0.244Combination carrier 1219.00 DWT of the ship 0.488

Table 3: Parameters for determination of reference values for the different ship types

Source: International Maritime Organization (IMO, Jul 2011)

At the beginning of phase 1 and at the midpoint of phase 2, IMO will review the status of

technological developments and, if required amendments can be made to the time periods, the

EEDI reference line parameters for relevant ship types and reduction rates set out in this

regulation (IMO, Jul 2011).

The regulatory concept of EEDI can be depicted by the following graph extracted from the

guidance notes for implementing EEDI developed by Lloyds Register.

Figure 7: EEDI regulatory conceptSource: Lloyds Register (Lloyd'sRegister, May 2012)


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3.3 EEOI formulaThe formula for Energy efficiency operational indicator (EEOI) is similar to that of EEDIformula, only difference is that EEOI is the measure of actual CO2 emissions of a ship and it

acts like a monitoring tool.

The EEOI formula developed by IMO is as follows (IMO, Oct 2011).

EEOI is the measure of CO2 emission from a ship in terms of grams per tonne mile.

3.4 Analysis of EEDI formulaAs understood from the above mentioned EEDI formula, there are five main components of

the formula namely main engine emissions, auxiliary engine emissions, shaft

generator/motors emissions, efficiency technologies and transport work.

In order to meet the EEDI regulations, main aim of a ship builder is to reduce the EEDI

value. This can be done in different ways which include firstly the reduction of individual

emissions of main engine, auxiliary engine and shaft generator/motor, secondly by using

efficient technologies as it reduces (subtracts) CO2 emissions from the overall emissions, and

finally by increasing the transport work.

Considering the first option of reducing the individual emissions of main engine, auxiliary

engine and shaft generator/motor means instalment of highly efficient engines i.e. engines

with lesser specific fuel consumption or use of engines that uses low carbon fuel such asLNG. Another option is to reduce the designed power of the main engine because at less

power, fuel consumption is less and thus CO2 emissions are reduced. But, as per IMO

guidelines a ship owner cannot reduce the power of the ship to such an extent which would

limit its manoeuvrability under adverse conditions.

Considering the second option of making use of efficient technologies means use of energy

saving technologies such as waste heat recovery systems and solar power. Design measures

that can be used to improve ships EEDI include optimized hull design, hydrodynamic


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modification to hull, advanced hull coatings, light weight construction, improved propeller

design such as contra rotating propeller etc. (Hughes, Nov 2011).

Considering the third option i.e. increasing transport work, a ship owner who wants to

improve EEDI of his vessel has two main options, first to increase the deadweight (capacity)

of the ship and second to reduce the design speed of the ship because at a reduced speed,

power required by the main engine will be reduced considerably as power is the cubic

function of the speed.

In short, a ship owner has a number of options available at his disposal that can be used to

improve EEDI of the ship. But the question is which of these options is cost effective becausefrom ship owners point of view, cost effectiveness of implementing such measures is of

paramount importance, because if a ship owner does not make profit out of shipping, there is

no point for him to remain in the business.

Various studies have been carried out to compare and prioritise different options available to

be applied to improve the EEDI of the ship. One such method is marginal abatement cost

comparison developed by DNV on the basis of second IMO greenhouse gas study 2009. Such

methods are a helpful tool for ship owners to select the potential measures for their own ship

(Eide and Endresen, 2010).

Having understood the various components of the EEDI formula, now let us study the impact

on the ship owners of considering different options to reduce the EEDI value by studying all

the available options individually. For an easy approach, study has been carried out

separately for numerator and denominator component of the formula. Main components of

numerator that can be varied are power, carbon factor, specific fuel consumption and efficient

technologies while the main components of denominator that can be changed are deadweight

(capacity) and design speed of the ship.


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Chapter 4

4.MethodologyIn order to study the impacts of EEDI formula on ship owners, each component of EEDI

formula must be studied separately. Every component of the formula has different variables

those can be changed in order to meet the EEDI regulations. There can be various ways and

technologies that can be used to meet the emissions regulations. Following framework has

been developed as part of this dissertation to study the impacts of EEDI regulations on ship

owners.

Figure 8: Framework to study EEDI formula

EEDI regulations call for the changes in technical specifications of the ship. There is a

relation between the technical specification of the ship and its economic performance which

has been extensively studied by Chen et al (Chen et al., 2010) for bulk carriers. Thus,implementation of EEDI regulations would have some impact on the economic performance


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of the ships. Ship owners are concerned with economic performance of the ship and any

negative impact on that may force them out of business.

Martin Stopford, in his book Maritime Economics (Stopford, 2009)has explained shipping

cash flow components as shown in the following figure 8. These components are used as the

basis of this study. In this dissertation, economic impact of complying EEDI regulations on

ship owners has been studied using the framework developed as shown in figure 8 by relating

the impact of change in those components on the cash flow components explained by Martin

Stopford.

Source:Maritime Economics (Stopford, 2009)

Figure 9: Shipping cash flow model

Ship Revenue

Cargo CapacityShip sizeBunkers and Stores

ProductivityOperating SpeedOperational PlanningBackhaulsOff hire time

Deadweight utilisationPort time

Freight rates

Operating CostsCrew wagesStores & LubricantsRepair & MaintenanceInsuranceAdministration

Voyage CostsFuel ConsumptionFuel priceSpeedPort & Canal dues

Main & Aux Engine Cargo Handling Costs

Free cash flow

Annual costs of maintaining and financing fleet.

Annual costs of operating fleet.


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Chapter 5

5.Change in denominator variablesThe key to survival in the shipping market is financial performance of the ship (Stopford,

2009). This is the reason why ship owners prefer ships which can either minimize costs or

maximize earnings potential (Chen et al., 2010). Veenstra and Ludema show that the earnings

potential of a ship depends on the technical variables such as cargo carrying volume

(capacity/deadweight) and speed (Veenstra and Ludema, 2006). Thus, changes in the

technical specifications of a ship have a substantial impact on ship owners.

IMOs EEDI formula calls for the changes in the technical specification of the ship in order

to meet the prescribed regulations. Traditionally, desired earnings potential has been an

important factor in determining the technical specifications of the ship. The relation between

technical specifications and earnings potential is fairly direct: desired earnings potential

influences the design specifications, and the specification of the finished ship determine the

earnings potential. (Veenstra and Ludema, 2006).

In this section we will discuss what technical design changes can be made to meet the EEDI

regulation and in what way those changes will have an impact on ship owners. Firstly,

studying the denominator of the formula, speed reduction and deadweight enlargement can be

used as the options to reduce the EEDI value (IMO, Jan 2010).

5.1 Change in design speedThe design speed of a vessel is of great concern to ship owners because it determines the

ships transport capacity. Determining the design speed of a vessel seems to be a technical

issue but it is also an economical issue as it is related to fuel consumption, building costs, and

revenues (Chen et al., 2010). Therefore, it is of great importance for ship owners to determine

the optimal design speed of a vessel. Optimal speed, from an economical point of view, may

be defined as the speed that maximises the difference between income and expenses (per time

unit) of the ship.(Skjlsviket al., Mar 2000).


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5.1.1 Factors affecting design speedThe analysis of the optimum speed in operation carried out by (Chen et al., 2010) established

that two significant factors affecting the optimum speed are the bunker costs and the market

price level, which will be considered by ship owners in making a decision about the design

speed. Chen et al. justified this by explaining that the average design speed of bulk carriers

built during the early 1980s to the end of the 1980s was relatively lower than that in other

periods due to the high oil prices from mid-1979 to 1986, together with lower time charter

rates during the period from 1981 to 1986. Many ship owners preferred vessels with low

speed, so as to reduce costs during hard times (Chen et al., 2010).

Other important factor which determines the design speed as explained by Stopford is the

type of cargo carried by the ship (Stopford, 2009). Typically, ships have been built to operate

at a specific design speed, for example, large dry bulk vessels have speed in the range of 13

16 knots, while service speeds of large container vessels are in the range of 2426 knots

(Lindstad et al., 2011). Container ships have high speed because they carry high-value cargo

and the shipper is normally willing to pay for faster transport because faster speed reduces the

transport time which in turn reduces the inventory cost of cargo in transit which can be

enormous for high value cargoes such as television sets are worth around $44,000 per tonne

(Stopford, 2009). On the other hand, bulk commodities such as iron ore and coal have low

inventory costs, for example, iron ore has inventory cost of about $35 per tonne while coal

has inventory cost of about $47 per tonne (Stopford, 2009).

5.1.2 Relation between design speed and EEDIThe design speed of the vessel determines the required engine power. The engine power is

approximately the cubic function of the speed thus lowering the speed would reduce the

necessary engine power considerably which makes speed reduction an effective option to

improve the EEDI value (IMO, Jan 2010) and (DeltamarinLtd, Dec 2009).

Effect of speed on EEDI value for a 17,000 dwt general cargo ship is explained in the report

prepared by Deltamarin Ltd. for EMSA. Effect can be explained by the following graph as

obtained from the report. The graph illustrates that the EEDI value at 11 knots is 5 and if the

speed is increased to 14 knots and 18 knots, the index is nearly doubled and tripledrespectively. It can be clearly seen that the curve gets steeper for higher speeds and the


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difference in index value between 19.5 knots and 20.5 knots is about 20% (DeltamarinLtd,

Dec 2009).

Figure 10: EEDI vs Speed curve for a 17,000 dwt General cargo ship

Source:(DeltamarinLtd, Dec 2009)

5.1.3 DiscussionDesign speed of the vessels affects the required engine power as there is a cubic relation

between the design speed and the power required. Engine power being on the numerator of

the EEDI formula directly affects the EEDI value. This means that lower the design speed

lower would be the engine power required and consequently, lower would be the EEDI value.

In other words, theoretically, reduction of design speed can be used to meet the EEDI

regulation.

On the other hand, as we have seen above, a ship owner decides upon the design speed of the

vessel considering various factors such as market level, fuel price and type of cargo to be

carried. Container ships have design speed greater than that of bulk carriers and tankers. High

fuel prices and low charter rates have forced ship owners in the past to reduce the design

speed of ships as shown by Chen et al. with the data related to bulk carriers as discussedabove.


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During the period of low charter rates and high fuel prices, another measure used by ship

owners is slow steaming i.e. ships are operated at a speed lower than the maximum speed or

design speed. This measure reduces the operating costs for ship owners and various studies

have shown that slow steaming would certainly reduce the CO2 emissions as well

(Kollamthodi et al., Sep 2008) but it does not affect the EEDI value. In this discussion we are

concerned with the effect of change in design speed on EEDI and its implications on ship

owners. So, the topic of slow steaming has been kept out of the discussion.

Reducing the design speed does help in reducing the EEDI value but it is an irreversible

approach i.e. if a ship owner needs to operate the ship at higher speed, suppose in a market

with high charter rate and low fuel prices in order to increase the earnings potential, a ship

owner is left with no option to run the ship at higher speed. This way, a ship owner is likely

to lose the profit which he would have otherwise earned at higher speed. Moreover, reduced

design speed comes at a cost as it directly affects the amount of cargo transported over a

particular time period and a greater number of ships are required to maintain the annual

transport capacity. Other important disadvantage of lower design speed is the effect on ships

manoeuvrability in extreme weather conditions. But, this issue has been addressed by IMO

by regulation 21.5 stating For each ship to which this regulation applies, the installed

propulsion power shall not be less than the propulsion power needed to maintain the

manoeuvrability of the ship under adverse conditions, as defined in the guidelines to be

developed by the Organization.(IMO, Oct 2011)

Altogether, reduced design speed reduces the EEDI value but it affects the earnings potential

which are of great concern to a ship owner. Reduced design speed reduces the engine power

and thus lesser fuel consumption. Savings in fuel consumption must offset the revenue lost

due to less volume of cargo carried and cost of adding extra ships to maintain the supply

chain, in order to convince the ship owners to opt for the reduced design speed.

Considering the implications a ship owner is likely to have due to a reduced design speed in

the form of reduced earnings potential, it can be concluded that it is highly unlikely that ship

owners will order the ships with lower design speed. There are other available options that

can be used to meet the EEDI regulations which are discussed below.


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5.2 Change in deadweightThe concept of economies of scale plays an important part in keeping sea transport costs low.The unit costs generally fall with increased size of the ship due to the fact that capital,

operating and cargo-handling costs do not increase in proportion with the cargo capacity

(Stopford, 2009). Over the past decades, the size of dry bulk carriers has been increased due

to reasons of economy of scale. (Chen et al., 2010). Lindstad et al. studied the importance

of economies of scale in reducing the greenhouse gas emissions from shipping and found that

that emissions can be reduced by up to 30% at a negative abatement cost per ton of CO2 by

replacing the existing fleet with larger vessels (Lindstad et al., 2011). But there are various

factors which limits the increase in ship size.

5.2.1 Factors affecting change in deadweightEven though economies of scale keep low unit cost of transportation, there are various factors

that determine the maximum size of the ship which can be used. A bulk ship owner is faced

with the challenge of building a ship that fits into the bulk transport system used by the cargo

shippers. This challenge primarily affects the size of bulk carrier(Stopford, 2009).

Other factors that determine the maximum size of the ship which can be used include the

depth of water and berth length at the loading and receiving end of the operation. Storage

capacity at ports also determines the size of the ship, as there is no point in shipping the

quantity of cargo that cannot be handled either at loading or discharge port (Stopford, 2009).

Plant size is another important factor that puts the constraint on the size of the ship. The

amount of raw material a manufacturing plant can process in a year determines the size of the

cargo required by the plant, placing a constraint on the ship size. This is well explained by

Martin Stopford by the following two examples. A steel mill which produces 5 million tons

of steel a year needs about 700,000 tons of iron ore and 200,000 tons of coal each month. For

such volume of cargo use of 180,000 dwt ships would make sense because using large

number of handy bulk carriers each month would be troublesome. On the contrary, a sugar

factory which needs 42,000 tons of raw sugar monthly is unlikely to use 180,000 dwt ships;

instead two 25,000 dwt ships each month can be used (Stopford, 2009).


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For an oil tanker, parcel size of the cargo to be shipped, typically determines the size of the

vessels. For example, crude oil is shipped in very large parcel sizes of over 100,000 tonnes

while oil products are shipped in parcels of 30,000 to 50,000 tonnes. Large vessels require

dedicated port infrastructure and their deep draught restricts their use of key shipping lanes

such as the Suez Canal, the Dover Straits and the Straits of Malacca (Stopford, 2009).

The economies of scale is also generated for the container ships by the three main elements of

the ship cost calculation i.e. capital cost, operating expenses and bunker costs. Stopford

explained that an 11,000 TEU vessel halves the cost of container transport as compared to a

1200 TEU vessel. Beyond 2600 TEU economies of savings are roughly 5 % for each

additional 1000 TEU capacity (Stopford, 2009). But economies of scale diminishes after a

certain increase in size and finally there may be diseconomies and using very big ships

requires deep dredging of hub ports and introduction of feeder services to the ports which

cannot accommodate large ships. These feeder costs may reduce the savings made by using

bigger ships on the deep-sea leg (Stopford, 2009).

5.2.2 Relation between deadweight and EEDISince deadweight is part of the denominator in the EEDI formula, theoretically, index value

is inversely proportional to the deadweight i.e. increase in deadweight would reduce the

EEDI value. It can be argued that larger deadweight may need larger engine power thereby

increasing the EEDI value but as explained by IMO MEPC 60/40/35 deadweight enlargement

can improve the efficiency thereby reducing the EEDI value because increase in the

necessary engine power in proportion to the deadweight increase is powered by two-third,

and therefore the increase of the denominator (deadweight) outweighs that of the numerator

(engine power) (IMO, Jan 2010).

5.2.3 Light weight reductionAnother option that can be looked at, in order to increase the deadweight of the ship, is

reduction in lightweight (Lloyd'sRegister, May 2012). This means that displacement of the

vessel remains constant, so does the engine power i.e. same engine power can be used to

carry a greater amount of cargo increasing the vessel efficiency and thus reducing EEDI

value.


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Impact of change in lightweight was examined by Chen et al and it was concluded that it has

a great impact on the economic performance of a ship because by keeping total displacement

of a ship constant, reduced lightweight can always result in more deadweight. Increased

deadweight means increased cargo carrying capacity and in turn greater earnings. Increasing

deadweight has a long-term effect on the earnings owning to the life of a ship being in the

range of 25-30 years (Chen et al., 2010).

Ships lightweight can be reduced in two ways first by using aluminium or other lightweight

construction material for structures that does not contribute to ships global strength and

second by reducing the weight of the steel structure using high tensile steel which can lower

the weight by 5% to 20% (Wartsila, Sep 2008). Since high tensile steel is already used to

some extent on some ships, reduction in steel weight is thus estimated to give fuel saving of

about 5% annually (Wartsila, Sep 2008). Lightweight materials are expensive as compared to

steel and since most shipyards are not used to build ships with lightweight materials, there are

certain costs associated with building ships using lightweight materials (IMO, Apr 2011).

According to the report submitted by Deltamarin Ltd. to EMSA (DeltamarinLtd, Dec 2009)

research conducted on 11,350dwt Ro-Ro case ship showed that use of aluminium and

composite structures resulted in 10% lightweight reduction which translated into 9% increase

in the deadweight of the ship and 8.3% of EEDI reduction. On this particular ship lightweight

construction costs about 5 million euro (US$ 6 million) (DeltamarinLtd, Dec 2009).

5.2.4 DiscussionDeadweight enlargement is one of the options that can be used to meet the EEDI

requirements as explained by IMO MEPC 60/4/35. Increase in deadweight helps ship owners

to squeeze more profit out of a ship due to the economies of scale but there are certain factors

that limit the increase in size of the ships. Due to those factors as explained above, ship

owners cannot opt for a bigger ship where there is a requirement of a smaller ship. Size of the

ship is related to the type of the trade and the requirements of the particular trade. Since ship

is always designed for certain transportation task, capacity of the ship could be considered as

a fixed parameter which cannot be affected unless the whole concept is redesigned.

(DeltamarinLtd, Dec 2009). Thus it is unlikely that a ship owner will order bigger ships to

meet the EEDI value.


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Reduction in lightweight keeping the constant displacement provides with two-fold benefits

to the ship owners. One, it reduces the EEDI value due to increased deadweight and other, it

increase the earnings potential of the vessel. Thus, ship owners will always support a ship

with less lightweight at constant displacement in order to increase the earnings potential of a

vessel. However, ship owners may be required to pay more for building such a vessel due to

advanced technology involved in ship design and construction. It is thus important for them

to evaluate how much increase in building prices is acceptable for a new vessel with less

lightweight at the same displacement. As evaluated by Chen et al., if a standard new panamax

vessel costs US $60 million, it is not profitable to build an alternative ship with 5% reduced

lightweight, if the building price is increased by 2.11% (Chen et al., 2010).

Altogether, increase in deadweight by reducing lightweight seems to be a good option from

ship owners point of view to meet the EEDI regulation subjected to the economic and

technical feasibility. On the other hand, increasing deadweight of the vessel to get benefits of

economies of scale and at the same time to reduce the EEDI value doesnt seem to be a viable

option due to the constraints which the option of economies of scale is subjected to.


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Chapter 6

6.Change in numerator variablesIn this section we will study what parameters of numerator of EEDI formula can be changed

to meet the EEDI regulations and in what way those changes will affect ship owners. As

explained before, numerator of EEDI formula consists of Main engine emissions, Auxiliary

engine emissions, Shaft generator/motor emissions and energy saving technologies related to

auxiliary and main power. Calculation of the CO2

emissions from main engine, auxiliary

engine and shaft generator/motor is carried out by using the following basic formula as

explained in section 3.1.

(Hughes, Nov 2011)

where SFC means specific fuel consumption and CF is a non-dimensional conversion factor

between fuel consumption measured in g and CO2 emission also measured in g based on

carbon content (IMO, 2012). According to IMO MEPC 63/23 annex 8 resolution

MEPC.212(63) the value of CF is as follows.

Type of fuel ReferenceCarbon

content

CF (t-CO2/t-

Fuel)

1 Diesel/Gas OilISO 8217 Grades DMXthrough DMB

0.8744 3.206

2 Light Fuel Oil (LFO)ISO 8217 Grades RMAthrough RMD

0.8594 3.151

3 Heavy Fuel Oil (HFO)ISO 8217 Grades RME

through RMK0.8493 3.114

4 Liquefied Petroleum Gas (LPG)Propane 0.8182 3.000

Butane 0.8264 3.030

5 Liquefied Natural Gas (LNG) 0.7500 2.750

Table 4: Values of conversion factor CF

Source: International Maritime Organization (IMO, 2012)

The carbon di-oxide emissions by main engine will be studied and analysed using the above

mentioned formula as defined by IMO while the emissions from shaft generator/motor are


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not studied separately because those are taken care of by studying the emissions from main

engine because shaft generator generates electricity using the power from main engine.

Similarly, emissions from auxiliary engine are not studied separately because the basic

approach in EEDI calculation for cargo ships is to derive PAEdirectly as certain percentage of

PME so there are practically no chances to have an impact on this value independently (IMO,

2012; DeltamarinLtd, Dec 2009).

Another aspect of numerator components is the effect of energy efficient technologies

(auxiliary and main power), which will be studied separately for various technologies those

can be used to meet EEDI requirements and impact of using such innovative technologies on

ship owners will also be examined in this section.

6.1 Main engine emissions parametersAs explained above, for the purpose of EEDI formula, carbon di-oxide emissions from main

engine are calculated as the product of engine power, specific fuel consumption and

conversion factor based on carbon content of the fuel used. Thus, there are basically three

things that can be done to reduce the EEDI value i.e. reduce engine power, reduce specific

fuel consumption of the engine by using efficient engines and lastly reduce the conversion

factor by using the fuel with less carbon content.

6.1.1 Engine powerThe installed engine power to some extent determines the capital cost of the ship and it

greatly affects the fuel consumption thus influences the bunker costs which are of great

concern to ship owners with such high fuel prices. The power installed determines the height

of the

impacts of energy efficiency design index

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