Tag "CII"

Carbon Intensity Indicator (CII) and Its Impact on the Global Shipping Industry

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The latest report of the IPCC (Intergovernmental Panel on Climate Change) woke the world from blindly following the economic frenzy at the expense of the environment. IPCC forecasts read that the global temperature could rise as much as 10F over the next decade[1].

In this environmental disaster, the maritime industry happens to be a significant contributor. The 4th IMO GHG study states that ships worldwide emitted 1076 million tons of greenhouse gases in 2018, which accounts for nearly 3% of the global greenhouse emissions [2][3]. The IMO has been pulling its weight to put a damper on this unchecked emission growth and limit the damage.
IMO has come up with its ambitious goal of achieving a 40% reduction in CO2 emission from the 2008 level by 2030 and a massive 70% reduction by 2050 [4]. Pursuing its goal, IMO introduced mechanisms such as EEDI (Energy Efficiency Design Index ), EEXI (Efficiency Existing Ship Index) and now the latest is the Carbon Intensity Indicator (CII).

©Photo by Don Mingo on Unsplash

What exactly is the CII ?

In essence, CII measures how efficiently a ship transports its goods or passengers in terms of CO2 emitted. More precisely the CII is the grams of CO2 emitted per ton of cargo transported across every nautical mile. It was one of the regulations adopted by IMO in June 2021 and will come into force from 1st January 2023, covering all cargo, RO Pax, and cruise ships above 5000 GT [5].

The CII value of a vessel will be evaluated annually and compared to the reference CII values determined by IMO. The emission data of 2019 sets the reference line. Based upon this comparison, the performance of every ship will be rated on a scale of A to E, with A being the best. Achieving the CII rating equivalent to the reference line will land a ship squarely in the middle of the C rating, with better and poorer performances progressively leading to higher or lower ranks. For the start in 2023, the reference line will be set at 5% emission reduction concerning the 2019 level and then gradually move up to 11% reduction by 2027 [6][7].

How will CII impact the shipping industry?

With the adoption of guidelines and tools such as the CII, EEXI, SEEMP, etc., IMO is working on reducing the carbon footprint of the maritime industry. However, some industry experts believe that IMO might have been overzealous in reducing emissions. An analysis conducted by ABS using EU-MRV 2019 data suggests, that to 92% of the current container ship fleet, 86% of bulk carriers, 74% of tankers, 80% of gas carriers, and 59% of LNG carriers would require modification and operational changes of some kind to achieve A, B or C energy efficiency rating [8].

FleetMon in Research & Development: EmissionSEA – Extrapolation of emissions from ships

The ship owner’s struggle

From the above ABS data, it is obvious that a vast number of ships would require retrofitting to achieve favorable CII ratings. Securing finance for such retrofitting will be a challenge for small shipowners who often have older ships as ship finance is rapidly moving towards Environment, Sustainability, and Governance (ESG) goals. The Poseidon principles and the Sea Cargo Charters are essentially frameworks for integrating climate considerations in shipping’s financial decisions. Financing a poorly CII rated ship would increase the risk of the financer as a D-rated vessel today might slip to an E rating tomorrow when CII becomes stringent in coming years [9].

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