The maritime industry is facing an unprecedented challenge of complying with the IMO’s targets for decarbonization, but the milestones of 2030 and 2050 are only part of the story.
The regulations that support the process of decarbonizing the shipping industry will do far more than reducing carbon dioxide emissions. They will create a framework that will rate which are the most efficient and which are the least efficient vessels.
With the focus so far on the Energy Efficiency Existing Vessel Index (EEXI), the industry has yet to grasp the implications of the Carbon Intensity Indicator (CII), which will radically impact vessel operations for decades to come.
Impact of energy efficiency technologies
Like the EEDI for newbuildings, the EEXI is a filter, a process of assigning a value to a vessel’s design characteristics and providing a goal-based means of compliance. Once attained through technical means, the EEXI is a fixed value and its implications on performance are easily understood. It can be difficult for vessel designers/owners/operators in terms of administration and technical compliance, potentially requiring verified adjustments to a vessel’s power rating and investment in energy efficiency technologies.
Because it assigns an ‘energy efficiency’ rating to all ships, the CII effectively creates a market mechanism which enables charterers, financiers, and regulators to grade various ships. A vessel’s present and forecasted CII rating may be seen as an indicator of a vessel’s suitability for purchase or refinancing in the near future. Shippers too will increasingly be scrutinized for their environmental, sustainable, and governance goals. Their goals will likely be reflected in their supply chains, causing them to prioritise the most efficient vessels.
How performance indicators will reduce CO2 emissions
The CII creates a downward trajectory on a ship’s carbon intensity, which is the amount of carbon emissions generated by a unit of transport work, equivalent to one tonne of cargo carried over a distance of one nautical mile. The CII will assign all ships a performance category between A-E, but attaining a category does not automatically represent compliance.
Vessels in the better performing categories, A or B, may well be the beneficiaries of positive market sentiment. While category C represents the acceptable baseline of the regulation, vessels in the D or E categories will have to demonstrate improvement. More specifically, if the rating is E for one year or D for three consecutive years, the vessel will have to show improvement. Moreover, demonstrating capability of continuous improvement will require enhancing the existing SEEMP to include a minimum three-year implementation plan to achieve the Required Annual Operational CII.
If owners and charterers are to remain competitive, it is likely that they will need to demonstrate that the vessels they buy and operate are high performers, and that the less efficient ships will be exploring performance improvement options. Shipyards too will likely need to prioritise higher efficiency vessels, and may have to improve their standard designs to achieve the minimum acceptable CII levels.