How IMO’s Carbon Intensity Indicator (CII) ratings impact shipping

The international shipping industry has turned its focus to reducing the carbon emissions of cargo ships. In fact, the International Maritime Organization (IMO) has plans to reduce them by as much as 70% by the year 2050 (with the 2008 levels as a baseline).

That type of ambitious goal should make it clear what kind of dangers we are facing. However, to create a sustainable future, significant changes need to be made. For example, from 2007 to 2012, ships were responsible for roughly 3% of global CO2 and greenhouse gas emissions, emitting approximately 1 billion tonnes of CO2 and GHGs per year.

This article will outline the IMO’s CII regulation and how ship owners and charterers can monitor, predict and manage the CII rating of their ships and comply with regulatory requirements using the Vessel Insights API.

 

What is IMO’s Carbon Intensity Indicator regulation?

In 2021, the International Maritime Organization (IMO) agreed to put two new measures into effect in January 2023. One measure, the Energy Efficiency Index for Existing ships (EEXI), measures the physical design and equipment of the ship. The other, the Carbon Intensity Indicator (CII) rating, measures how efficiently the ship operates.

The annual CII rating will be calculated using the Annual Efficiency Ratio (AER) formula adjusted for corrections and exclusions as shown below.

AER = Annual Fuel Consumption.CO2 emission factor/Annual Distance Sailed.Capacity

CII = AER adjusted for corrections and exclusions

Depending on the data submitted by the ship in its IMO DCS report, it will be awarded a CII rating from A to E, with A being the best.

CII rating criteria will become stringent every year and ships will have to optimize their operations continuously to be able to maintain a desired CII rating. Incentives will be awarded to companies using ships with high ratings.

 

How will the CII regulation impact ship’s SEEMP

CII regulation will come into effect in beginning of 2023. At that time, all ships will be required to have an enhanced Ship Energy Efficiency Management Plan (SEEMP) with an implementation plan for achieving the required CII that will need to be approved and kept on board.

The SEEMP of every vessel should include:

• the methodology used to monitor and calculate the relevant vessel’s Attained Annual Operational CII;
• the Required Annual Operational CII for the next three years;
• an implementation plan describing how the Required Annual Operational CII target will be achieved over the next three years (to achieve a continuous improvement); and
• a procedure for self-evaluation and improvement.

 

Which ships need to follow this regulation?

From January 2023, the CII requirements will take effect for all cargo, RoPax and cruise vessels above 5,000 GT.

 

With the EEXI in place, why is this necessary?

The EEXI relates to the design of the ship, whereas the CII relates to its operation. 

Let’s illustrate it this way: suppose you purchased LED bulbs for your home. That would be an energy-conscious choice! However, if you left them on all the time, those “energy-efficient” lightbulbs really would not have the same effect.

It’s the same with vessels. Design is only part of the solution. Reducing emissions must also be a large part of determining how the ship is operated.

 

How will IMO’s CII affect shipping companies?

The CII ratings can have a significant business impact on the ships. Recently, cargo owners, charterers and banks and insurance companies have all committed to reducing the emissions from their shipping supply chain and portfolio respectively.

So in future, bad CII ratings will significantly reduce the commercial attractiveness of the ships. Charters will not want to charter them, insurance premiums for these ships will increase, and they will not get preferred slots in ports around the world and the port fee will increase for these ships.

According to some experts, more than 1/3 of the world’s fleet would fall short of IMO CII ratings. If ship owners do not proactively manage the CII rating of their ships, they run a risk of having dead assets in their fleet.

CII ratings can also have an interesting impact on shipping routes and trading patterns. Routes with regular harsh weather can become less attractive due to the negative impact bad weather has on emissions and hence on CII ratings. Hence more attention will need to be given to how companies plan their vessel’s route.

Also, as CII rating is based on emissions per transport work, shipping companies will need to optimize the time ships stay at anchorage or in ports. When ship is not moving, transport work is zero. But they are still emitting CO2 as their auxiliary engines and boilers might still be running. So time spent at anchorage or at berth will have significant negative impact on CII ratings. This will further incentivize Just-In-Time arrivals.

 

How You Can Comply With CII Regulations and Manage the CII Rating of your Ships

You can subscribe your ship to Vessel Insights API. Using the noon reports, AIS data and weather data, we will provide you quality checked CII relevant parameters in return so that you can monitor your vessels CII performance daily and see the evolving trend throughout the year. This way you can proactively manage the CII ratings by taking data driven decisions in timely manner instead of trying to improve the ratings at the end of the year when very few (or none) commercially viable options will be available.

You will also be able to compare the CII performance of various vessels in your fleet and see the yearend CII rating predictions for every ship in your fleet. You can easily spot outliers and take targeted decisions to improve its performance.

Using the Vessel Insights API, you can also get the required annual CII ratings for next 3 years for each ship that you have subscribed. Therefore, subscribing your vessels to Vessel Insights API will assist you in fulfilling the SEEMP update requirement which must be done by end of 2022 to account for the CII regulations.