Shipping Industry Emissions Regulation; Why you need to start preparing ASAP
By Gurjeet Warya and Ben Merrell
With growing urgency the shipping industry is finally taking concrete action to curb their GHG emissions and instituting shipping industry emissions regulation. Starting in November 2022, the first of the IMO’s ‘short-term measures’ aimed at reducing the shipping’s GHG emissions will come into force. With less than a year before this regulatory shift, affected shippers should begin preparations now in order to meet the looming survey and reporting requirements.
Since 2018, when the Marine Environmental Protection Committee (MEPC) first adopted their official decarbonization strategy, progress towards regulation has been incremental. Industry initiatives like the Sea Cargo Charter and Poseidon Principles have also been gathering steam with prominent dry bulk shippers and financial institutions signing on. Between commercial initiatives and regulation from the IMO and EU, monitoring and reducing your emissions can appear daunting. However, not moving fast enough to reduce your fleet’s emissions or non-compliance with regulations is risky— you could undermine your vessel’s competitiveness in the chartering market.
With this in mind, True North Marine’s Capt. Gurjeet Warya prepared a simple guide for charterers and shipowners to help clarify the distinctions between different regimes and help you take steps to prepare for the impending wave of regulation.
Download the technical guide in full below:
Shipping emissions reduction regimes and stakeholders:
The Sea Cargo Charter: This non-governmental organization provides a framework for signatories, which include major dry bulk charterers, to report and reduce their emissions in accordance with the IMO’s goals. Signatories agree to evaluate their emissions against the IMO’s ‘Decarbonization trajectory’ and publish the results annually.
The Poseidon Principles: This organization provides a framework for financial institutions to assess the alignment of their maritime lending portfolios against the IMO’s decarbonization goals. Signatories agree to evaluate the emissions from vessels in their portfolios and publish the results of these assessments annually.
Signatories to both the Sea Cargo Charter and the Poseidon Principles strive for annual emissions reductions consistent with the IMO’s decarbonization goal (50% reduction in emissions from 2008 levels by 2050)
’Short-Term’ shipping industry regulatory measures from the IMO: What you need to know
Beginning in November 2022, the first of the IMO’s ‘short-term’ shipping industry emissions regulation, the EEXI survey, will come into force.
Understanding the EEXI and why it matters:
The Energy Efficiency Existing Ship Index (EEXI) is a system to determine the energy-efficiency of vessels based on their ship type (size and function; ex. Panamax bulkers). The EEXI measure was created by the IMO based on the earlier EEDI (Energy efficiency design index). When in force, it will be required for shipowners to survey and determine the EEXI for vessels over 400 GT (with some exceptions).
The EEXI describes the CO2 emissions of a particular vessel, per cargo tonne, per nautical mile. Like the EEDI, the EEXI is purely design-based and provides a theoretical description of a certain vessel’s CO2 emissions depending on its installed engine power, transport capacity, speed, and other design factors.
The ultimate goal of the EEXI is to improve the energy efficiency of the global shipping fleet. A vessel must meet the reference EEXI (as specified by the IMO) for their vessel type or otherwise make adjustments/retrofits to ensure it is compliant. These retrofits could include limiting installed engine or shaft power, the installation of energy saving devices (ex. hull coatings to reduce friction, improved propellors, etc…)
Understanding the CII and why it matters:
While the EEXI is a measure of a vessel’s technical efficiency, from January 2023 onwards shipowners will also need to collect operational data to calculate the Carbon Intensity Indicator (CII).
The CII is a measure of the actual CO2 emissions from a vessel per tonne mile of transport work done. In contrast to the EEXI, the CII is a measurement focused on the operational efficiency of a given vessel over the course of a year.
Based on the data reported through the IMO’s DCS system, vessels will be assigned a rating on a scale from A – E (A being best). Each year, all vessels will need to reduce their CII in order to meet the decarbonization trajectory laid out by the IMO. Reducing the CII can be accomplished through a number of operational adjustments including:
- Speed reduction,
- Use of alternative fuels,
- Just-in-time arrival,
- Prevention of hull-fouling,
- Voyage routing optimized for reduced fuel consumption
The rating achieved could have major implications for a vessel’s competitiveness in the chartering market as the rating system will allow charterers to discriminate based on energy efficiency.
Commercial partners in emissions reduction;
True North Marine has closely followed developments in shipping industry emissions regulation and will continue to update our technical advice and services to adapt to the changing landscape. To-date we’ve developed solutions to some of the common problems charterers may encounter in relation to emissions monitoring and reduction:
1. Data collection; TNM collects data on our routed vessel’s fuel consumption, cargo transported, and distance sailed. This data is essential for signatories to the Sea Cargo Charter and can prove difficult to obtain for past voyages. Proactively collecting this information is one way to help shield your organization from risk and save time and hassle later.
2. Reporting Requirements; It can be challenging for shippers to comply with the different reporting requirements for non-governmental organizations and regulatory agencies. TNM has worked with several Sea Cargo Charter signatories to assist with their annual reporting. We are happy to consult with organizations who require expertise in this area.
3. Compliance Strategies; To ensure compliance with annual reductions in their vessel’s CII, shipowners will need to adapt their operations. TNM’s route optimization, speed optimization, and weather routing services are all effective strategies for reducing fuel consumption — and your vessel’s CII.