Maersk Broker Advisory Services has been helping shipowners navigate their way through the upcoming Carbon Intensity Indicator with commercially viable solutions.
The Copenhagen consultancy is aware of the criticisms of CII but believes those companies that embrace the move towards decarbonisation will emerge as winners.
“Even though it [CII] is not perfect, it is better than having nothing. If we can increase transparency and have conversations about CO2 reduction, then the regulation has been good,” says Daniel Caceres Larsen, head of energy transition at Maersk Broker.
“Every time we talk to shipowners we say: ‘Going for energy efficiency, going for voyage optimisation, going for energy-saving devices, that is a no-regret move’.
“You should go for that regardless, because it will improve your CII. It will also affect the European Union Emission Trading System that you have to pay.”
While there has been criticism of whether the CII regulation is fair, or even workable, Maersk Broker recommends that owners closely monitor ship performance data to see how vessels are performing.
Jakob Hjortlund, director of research at Maersk Broker, says those players that are monitoring vessel performance will have an edge and understand better what is influencing their CII ratings.
“There might be good reasons why a vessel can score as a D and E without, objectively speaking, being a poor-performing vessel,” he tells TW+. “That is a conversation you can have if you are on top of your data and you know exactly what causes one reaction or another on the CII rating.
“What we see from a number of interactions we have had is that there are quite a number of top owners that are right now monitoring ... the CII scores on a daily basis so they will have a good understanding of what will cause a spike and what can be done to reduce the CII rating.”
One factor Hjortlund’s number-crunching on the operation of the world fleet has shown is that market conditions play a huge role in determining ratings.
Healthy market conditions, such as the recent rate spike in dry bulk and boxship markets, naturally encourage faster speeds and result in more carbon emissions.
“It is difficult to take the CII rating outside the market dynamics,” Hjortlund comments. “Moving from 2020 to 2021, container vessels and bulk carriers scored worse. But also, we were able to say those vessel types had been increasing their speeds by a couple of per cent.
“Whereas tankers, where the markets had not been good, to put it mildly, were scoring better, likely as a function of the lower speed.”
The Energy Efficiency Existing Ship Index applies technical standards to cut carbon dioxide emissions by ships from 1 January 2023 based on the Energy Efficiency Design Index adopted by the IMO for newbuildings in 2020.
The Carbon Intensity Indicator (CII) will regulate existing ships above 5,000 gt from an operational perspective. It is worked out by taking a ship’s annual emissions from fuel used and dividing that by its capacity (deadweight or gross tonnage), multiplied by annual distance travelled in nautical miles.
The CII will be implemented via a new Part III of the Ship Energy Efficiency Management Plan (SEEMP) containing targets and an implementation plan that details measures to be applied.
From 2024, CII ratings will be assigned for the previous year ranging from the highest A to lowest C pass grades, while D and E results may be considered non-compliant.
Operators of ships rated D for three consecutive years or E for a single year will have to develop an approved plan of corrective actions to bring a vessel into compliance by the end of the next year.
The CII is based on 5% reduction in carbon intensity in 2023 relative to a 2019 base level. Its requirements will get stricter by 2% per year until 2026. The IMO has yet to decide on further levels.