Regulatory Update Part I: CII Analysis
Feb. 10, 2023
Since 2019, ships of 5,000 GT and above have been reporting their fuel consumption data mandated by the IMO DCS. From 2023, cargo, cruise, and RoPax ships must calculate CII (Carbon Intensity Indicator) with a required rating of C or better. A verified Ship Operational Carbon Intensity Plan, or SEEMP Part III, is to be kept on board from 1 January 2023 to document how shipowners plan to achieve their CII targets.
CII is the CO2 emitted per capacity transport work during a calendar year, adjusted by correction factors (to be finalized at MEPC 78 in June 2023) that will apply for certain ship types especially those doing short haul voyages.
Officially IMO mandated CII regulations are coming into play on 1st January 2023, bringing all the confusion one might expect. What are the compliance criteria, who issues certificates, who enforces compliance, and ultimately what is the consequence due to non-compliance?
In short, IMO issues the mandates, Class Societies issue the certificates, and flag states are there for further oversight with the hope that charterers will be paying attention to the ship’s CII ratings and will be reluctant to hire ships with lower CII scores.
Key to everything is something referred to as SEEMP, or the ship energy efficiency management plan, of how operationally ship will reduce its carbon emissions in the following year if the ship reaches D-E rating for 3 years in a row. Figure 1 shows the current fleet rating, with almost 32% of VLCCs falling outside compliance in 2022.
However, currently the legislation does not have any teeth in terms of compliance enforcement. This is a fact-finding mission – ship owners are only tasked with collecting and reporting fuel consumption data. We should not expect any enforcement until 2026 when IMO is due to release a more impactful mandate for shipping carbon emissions regulations.
Figure 1 VLCC Fleet CII rating
Source: Marine Benchmark
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