The Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMCZCS) has been investigating how to improve future energy efficiency regulations in the maritime industry, looking in particular at the IMO’s carbon intensity indicator (CII), which looks at the CO2 that a vessel emits in the context of the cargo transport that it does.
MMCZCS belives that the CII has experienced teething problems since its entry into force at the start of 2023. A ships’ fuel consumption and distance travelled are reported each year to the IMO, then converted to a carbon intensity rating from A (lowest intensity) to E (highest intensity). Each year, the CII value required to achieve a certain rating decreases, meaning that the regulation becomes more stringent over time.
Octavi Sadó Garriga, MMCZCS Head of Fleet Performance said: “The IMO will review the CII by 2026 to decide what the regulation will look like after 2030, and the data gathering for that has already started this year. We started this project to make sure that by the time that review begins in 2024, we have an opinion on what could be done.”
Accoding to Daniel Barcarolo, Head of Regulatory Affairs: “The CII provides a framework that drives stakeholders to work together and invest in initiatives like monitoring and training. It’s also helped some companies think through energy efficiency in a more structured way.”
The MMCZCS research team is concerned that the current method for calculating the CII may be creating some perverse incentives that push shipowners or operators towards unintended methods of maintaining compliance with the regulation. CII calculations are fundamentally based on a relationship between GHG emissions and distance travelled. These calculations currently do not differentiate between emissions generated on laden and ballast journeys, or during time spent in port or dry dock compared to sea voyages.
For example, port congestion can significantly worsen CII ratings because a vessel’s auxiliary engines continue to emit CO2 as it waits to enter the port – without any corresponding increase in distance travelled. Based on the current regulations, operators or shipowners could maintain a better CII rating by choosing to sail further rather than staying in one place while waiting for the congestion to clear up.
Another concern is the lack of clarity surrounding how the CII will be enforced. Vessels that receive a poor CII rating need to develop a performance improvement plan – however, it is not clear what the consequences will be if a vessel fails to meet the requirements laid out in this plan. Neither are there incentives currently offered for good CII ratings. This creates problems when trying to make a business case for investment in projects that would improve a ship’s energy efficiency, such as retrofitting new technology.
Barcarolo said: “This lack of clarity is also a problem because it means the market takes the lead on enforcement, and the market means everybody – the operators, the charterers, the ship owners, cargo owners, insurance companies, banks, brokers … so enforcement depends on how each of these actors considers the CII rating to be good or bad for their business. Then we can get an uneven ‘enforcement’ of the CII.”
MMCZCS aims to develop potential solutions to these issues, as well as an overall picture of what the industry needs from effective future energy efficiency regulations. Solutions currently being investigated include ideas for better CII enforcement mechanisms and changes to the CII calculation to reduce perverse incentives. These solutions could eventually be recommended to the IMO ahead of the CII review process.
Garriga said: “What we ultimately want is for people to continuously improve their energy efficiency. The more efficient a vessel is, the less dependent we are on new fuels for the transition. So, in the long run, better energy efficiency will save new fuels, it will also save costs, and in the short run, it will emit less CO2. So no matter which way you look at it, it’s a very positive thing for the industry and for the planet.”
