About
The CII became effective 1 January 2023. It provides mandatory annual reduction targets for operational emissions from ships, and will require parties to charterparties to carefully consider their contractual arrangements.
The CII is a measure of vessel efficiency of CO2 emitted when transporting cargo and/or passengers and is expressed in grams of CO2 emitted per cargo-carrying capacity and nautical mile. The annual operational CII or attained CII must be documented and verified against the required annual operational CII. The vessel will then be given an annual rating ranging from A to E, where A is the best. The rating thresholds will be tightened towards 2027, and the required CII rating will be reviewed at regular intervals.
Factors that may have a positive impact on the CII rating include:
- Lowering fuel consumption by sailing at slower speeds
- Using fuels with less carbon emission
- Efficient energy consumption by e.g. improving frictional resistance, installing wind power technologies, optimising machinery performance etc.
- Increasing distance sailed and limiting idling time in anchorage
Charterers will mainly have control over the CII of the ships they charter to the extent that they decide the speed, route, cargo and fuel type. An owner can control the CII by optimising operations and ensuring vessels are in a good condition. However, as it is the owner who will ultimately need to comply with the regulation, careful consideration and drafting of charterparties is required.
The CII requirements have been subject to increasing criticism from the shipping community for several reasons. For instance, the regulation disrupts the traditional relationship between owners and time charterers, and we have seen difficulty in allocating the responsibility contractually. Additionally, there are several unintended consequences of the regulation which will affect operation and emission from vessels negatively. For instance, the CII requirements incentivise using more polluting vessels on long-distance routes and unfairly penalise idle vessels.
In response to the controversy, the IMO has acknowledged the issues. During the 82nd
Marine Environment Protection Committee (MEPC 82) meeting it was agreed that gaps and challenges related to CII would be addressed in a two-staged approach, where the first phase would be concluded before 1 January 2026, and the second phase would be concluded after 1 January 2026. Thommessen is closely monitoring these developments.
In November 2022, BIMCO released the CII Operations Clause for Time Charter Parties. The clause may provide a starting point for negotiating the allocation of responsibility between owners and charterers, however, bespoke solutions are often needed to address the needs of a particular charterparty.
Who does it impact?
The CII requirements apply for all cargo vessels, RoPax vessels and cruise vessels above 5,000 gross tonnes, trading internationally.
Status: In force
The CII requirements entered into force on 1 November 2022 and have been in effect since 1 January 2023.
Relation to other initiatives and regulations
The CII was introduced together with the Energy Efficiency Existing Ship Index (EEXI), which both addresses CO2 emissions from existing ships. Where the EEXI is a one-time certification taking into account various design parameters, the CII addresses the actual emissions of operating vessels.
The CII requirements will apply to ships that are already subject to the requirement of the IMO Data Collection System.
The CII requirements are also linked to the Ship Energy Efficiency Management Plan (SEEMP), where IMO has adopted an "Enhanced SEEMP", requiring certain aspects of the CII requirements to be included in the vessel's SEEMP.
Participants
Signatories to MARPOL Annex VI.
Thommessen's comments
The CII is one of several measures adopted by International Maritime Organization (IMO) as part of its intensified efforts to cut greenhouse gas emissions from the shipping industry.
From 1 January 2023, shipping companies became required to calculate and report on their vessels' carbon intensity annually. The carbon intensity is calculated based on reported IMO DCS data and the ship is given a rating from A to E, where A is the best. Each vessel needs to achieve rating C or better. If the vessel rates D for three consecutive years or is rated E once, the ship-owner will be required to develop and implement an approved corrective action plan as part of the ship's Ship Energy Efficiency Managing Plan, to show how the required index – C or above – would be achieved. The thresholds between the CII Rating categories will become increasingly stringent towards 2027.
The vessel's Ship Energy Efficiency Management Plan (SEEMP) must also include mandatory content, such as a description of the methodology that will be used to calculate the ship's carbon intensity as well as an implementation plan on how to achieve the CII targets, and making it subject to approval. This is often referred to as the "Enhanced SEEMP".