Blog News » Rules & Regulation

Navigating the Future: A Look at Carbon Intensity Standards in Global Maritime Regulations

Bookmark

Introduction

With the increasing focus on environmental responsibility across industries, maritime regulations have evolved to address the sector's significant carbon emissions. As a heavy contributor to global CO₂ emissions—around 940 million tons annually—the shipping industry now faces stricter carbon intensity standards aimed at cutting its environmental impact. These standards, introduced by the International Maritime Organization (IMO), bring a new layer of compliance for ship operators globally, setting specific thresholds and grading systems that significantly influence the future of sustainable shipping.

Key Carbon Intensity Regulations and Their Impacts

1. The Energy Efficiency Existing Ship Index (EEXI)

Implemented by the IMO, the EEXI sets technical requirements for existing vessels, similar to those already in place for new ships through the Energy Efficiency Design Index (EEDI). By establishing a baseline for energy efficiency, the EEXI encourages ships to upgrade or retrofit to meet these new performance standards.

  • Deadline: Ships need to comply with EEXI requirements by 2023.
  • Scope: Applies to about 75,000 vessels in international waters, spanning categories from container ships to tankers.
  • Expected Emission Reduction: If the EEXI is properly enforced, it’s projected that COâ‚‚ emissions could drop by 1-2% annually from the shipping industry, translating to roughly 10 million tons less COâ‚‚ each year.

2. Carbon Intensity Indicator (CII)

The CII introduces a yearly rating system, from "A" to "E," assessing each vessel's carbon intensity based on the grams of COâ‚‚ it emits per ton-mile. Ships with ratings "D" or "E" must submit corrective action plans to improve their performance or face penalties.

  • Implementation Timeline: The CII applies starting January 2024.
  • Compliance Deadline: Ships must maintain at least a "C" rating or higher; non-compliance will trigger mandatory action plans.
  • Impacted Fleet: Covers approximately 60% of the global merchant fleet, particularly focusing on large vessels, including bulk carriers and container ships.

3. Data Collection System (DCS)

The IMO's Data Collection System is crucial to tracking a vessel's annual fuel consumption, enabling accurate CII calculations and verification of compliance. Each vessel over 5,000 gross tons is required to report its fuel use across all types.

  • Requirements: Reporting all fuel types, including alternative fuels, to maintain transparency in emissions.
  • Scope: Covers around 27,000 ships, including various fuel types, to comprehensively assess the maritime fleet's carbon footprint.

Economic Impacts of Carbon Intensity Regulations

  1. Cost of Compliance The investment in compliance measures—retrofits, new technologies, and operational changes—will vary based on a vessel’s size and type. Costs for upgrading existing fleets to meet EEXI standards are estimated between $1 million to $3 million per ship.

  2. Penalty for Non-Compliance Failing to maintain the required CII rating (falling below a "C" rating) can lead to penalties, including restrictions on vessel operations, heightened inspection protocols, and even bans from specific ports. Analysts suggest that the cost of non-compliance could reach 10-15% of a shipping company's annual operating budget.

  3. Incentives for High Performance There are also advantages for ships achieving high CII ratings. Many ports, especially in Europe, offer discounted port fees for ships with low carbon emissions. For example, the Port of Rotterdam offers a 10-15% discount on port fees for vessels meeting advanced efficiency benchmarks.

Adoption of Alternative Fuels

To comply with these new regulations, there’s a significant shift towards alternative fuels. LNG (liquefied natural gas), green hydrogen, and biofuels have become popular, though adoption remains slow due to high infrastructure costs and fuel availability. For instance:

  • Green Hydrogen: Although offering zero carbon emissions, production costs remain high, with green hydrogen costing around $5 to $7 per kilogram compared to traditional fuels at $0.5 per kilogram.
  • Biofuels: These offer a 60-70% reduction in COâ‚‚ emissions but are approximately 30% more expensive than conventional maritime fuels.

Future Outlook on Maritime Carbon Regulations

By 2050, the IMO aims to cut overall COâ‚‚ emissions from international shipping by 50% compared to 2008 levels. This ambitious target will likely lead to future regulatory updates, potentially affecting everything from ship design to fuel production standards. As the industry adopts more sustainable practices, carbon offsetting programs and collaborations with renewable energy providers are expected to become mainstream strategies.

References