The Challenges of CII Compliance – Cooperation is Key

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A Gard article talks about the challenges which are to be addressed in terms of CII compliance.

IMO’s Carbon Intensity Indicator (CII) rating system for vessels is coming into force next year. It will be used to assess the efficiency with which a ship operates in terms of its CO2 emissions. The CII regulation is likely to alter the traditional division of responsibilities between owners and time charterers, and may significantly change the way vessels are operated.

An initial step in the journey is to understand the challenges ahead in order for owners and charterers to work cooperatively to meet them. In this article we look at some of the key features of the CII regulation. Our accompanying article “Under the lens – BIMCO’s CII clause for time charterparties” parses the newly released clause that intends to help owners and charterers contractually navigate and collaborate on compliance with CII as an operational measure.

The CII regulation

The Carbon Intensity Indicator or CII is a rating system developed by IMO for all cargo, Ro-pax and cruise vessels above 5,000 GT whereby vessels will be rated for their operational Carbon Intensity for each calendar year, starting in 2023. Operational carbon intensity performance of different types of ships from 2019 will be used as a reference. Below are some key points of the CII regulations.

CII Rating: Based on a vessels carbon intensity, vessels will be given a rating between A and E, with ‘E’ being for vessels that are worst emitters under the CII regime. Calculations will be based on data reported by the vessel under the IMO Data Collection System (DCS), which has been in force since 2018.

Actions after receiving rating ‘D’ or ‘E’: A vessel that is rated ‘D’ for three consecutive years or ‘E’ for a single year, will have to update their Ship energy Efficiency Management Plan (SEEMP) Part III with a corrective action plan showing how the vessel will achieve a rating of ‘C’, and this will then have to be verified by the Flag State or the Classification Societies in their role as Recognised Organizations (RO). This plan will then have to be implemented onboard.

Correction factors and voyage adjustments: IMO has agreed to various correction factors and voyage adjustments which may be applied to the calculation of the attained CII, for example any emission necessary for the purpose of securing the safety of a ship or saving life at sea, fuel consumed in relation to STS voyages, fuel consumed for production of electrical power used for refrigerated containers or cargo cooling/re-liquefaction systems on gas carriers, fuel used in cargo heating etc. The need for further adjustments is still under discussion.

Progressive reduction of carbon intensity: IMO’s objective is to continuously improve a vessel’s operational carbon intensity. Therefore, a phased approach has been adopted whereby the carbon intensity limits will progressively reduce by 2% each year. This requires owners and managers to continuously work on improving a vessel’s carbon intensity, or else her rating could degrade over time.

As an example, if a 62,000 t DWT bulk carrier has a carbon intensity of 5.50 g CO2/t-nm for 2023, then she will be rated as ‘D’ for that year. Assuming no improvements or changes are made to how the ship is managed or operated in the subsequent year, then for the same carbon intensity of 5.50 g CO2/t-nm she will be rated as ‘E’ at the end of calendar year 2024. This is because the ‘required CII’ for this vessel has reduced in this two-year period.

Ship Energy Efficiency Management Plan (SEEMP) Part III: Vessels subject to CII regulations must develop a ship specific SEEMP Part III to include things such as, ‘CII calculation methodology’, ‘Required CII values until 2026’, ‘implementation plan for achieving the required CII’, and ‘procedures for self-evaluation & improvement’. Vessels will already have onboard SEEMP Part I, that relates to improving energy efficiency, and Part II which focusses on procedures for monitoring and collecting fuel oil consumption data. The requirements for SEEMP Part I and Part II came into force in 2018.

Incentives for better performing vessels: IMO encourages Administrations and port authorities to provide incentives to ships rated as A or B. However, there is no guidance provided by the IMO on what form these incentives should take. We are not yet aware of any authorities introducing such incentive schemes based on CII ratings, but we do expect to see some in the future.

Read more here.

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Source: Gard

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