Background
In June, the International Maritime Organization (IMO) held its 76th Marine Environment Protection Committee (MEPC) session. Arguably, the most important and time-consuming issue on the committee’s agenda is the regulation of greenhouse Gases (GHG) from ships. Because the IMO is an agency of the United Nations (UN), IMO’s efforts on this subject have been underway since the UN 1997 Kyoto Protocol. The IMO’s GHG emission goals and ambitions align with the UN’s 2015 Paris Accord. They are officially stated as a 40% improvement in ship GHG intensity by 2030 and a 50% reduction in overall GHG emissions by 2050, compared to base 2008 levels. IMO defines GHG intensity as the CO2 emissions per ton of cargo transported per nautical mile.
Previous approved regulations for New Ships
In their ongoing work since 1997, the IMO’s MEPC committee has approved the short-term regulation of GHG intensity improvements for new ships as regulated by the Energy Efficiency Design Index (EEDI), which has been in effect since 2013, the Ship Energy Efficiency Management Plan (SEEMP) for all ships, and the mandatory Data Collection System (DCS) for the recording of fuel oil consumption of all ships beginning in 2019. EEDI began in 2013 with Phase 0, mandatory compliance for new ships beginning with Phase 1 in 2015, and is now in Phase 2, with discussion currently on the required Phase 3 and Phase 4 reduction levels.
Development of regulations for Existing Ships
The IMO regulations for short-term measures for existing ships have been under development for several years and were required to be finalized at this session’s MEPC meeting to be implemented on schedule, beginning in 2023. What has now been approved, in addition to the EEDI standard for new ships, is a one-time-only standard for existing ships called the Energy Efficiency Existing Ship Index (EEXI), and an ongoing regulation for all ships, new and existing, called Carbon Intensity Indicator (CII). All the current and proposed IMO GHG regulations use the ship’s deadweight to approximate cargo carried since cargo is not recorded as part of the DCS system.
The new EEXI is essentially the one-time 2023 application of EEDI to all existing ships, generally at the EEDI Phase 2 levels. Ships that do not meet the EEXI requirements will typically be required to implement engine power limits to improve their GHG intensity efficiencies or switch to lower carbon density fuels like LNG. We anticipate that EEXI will have minimal impact on newer ships in the world fleet that are currently slow-steaming or are operating at efficient speeds compared to 2008 levels. However, many existing ships are older and less efficient or are designed and operated at higher operational speeds near their MCR ratings. These ships will face substantial power limits and speed reductions beginning in 2023.
The new CII, unlike EEDI and EEXI, is not a design rating but rather an operational rating based on actual fuel consumed. (Think of this as EEDI being analogous to the window sticker mileage rating on a new automobile and CII as the average mileage the automobile achieves yearly.) CII is also an ongoing rating standard, with progressively higher efficiency standards each year through 2030.
Setting the initial value and annual reduction rates for CII
The major discussion at this recent MEPC 76 meeting was about the starting value of CII for 2023 and the annual reduction rates for 2023 through 2030.
The plot above shows that the GHG efficiencies of the world shipping fleet have continually improved since 2008 and have been measured by the 4th GHG Study to be 78% of the 2008 values in 2018. These improvements are primarily the result of three contributing factors:
– general ship and engine efficiency improvements,
– larger, more efficient ships replacing smaller, less efficient ships, and
– existing ships operated at lower speeds (slow steaming)
What was agreed and approved at MEPC 76
It can be seen from the figure above that the GHG intensity values for the world fleet have been generally on track toward the IMO’s target of 60% of 2008 GHG levels (a 40% improvement). The recently approved CII starting level in 2023 assumes these trends should generally continue between 2018 and 2022 to establish the 2023 starting value of CII. The approved reduction factors for 2024, 2025, and 2026, at 2% per year, have been set based on maintaining this general trajectory for existing ships toward the IMO 2030 intensity goal. Since GHG emissions and attained emissions levels will be continually monitored, it was decided that the reduction levels for 2027 through 2030 could be deferred and decided later so that they could be adjusted as necessary to ensure a trajectory meeting the IMO goal.
Some countries (including the USA) and non-governmental organizations (NGOs) have recommended substantially higher reduction rates for CII. However, most of the IMO-represented countries felt that the proposed values were meeting the agreed target GHG reductions and could be adjusted after 2026 if required based on monitoring of the world fleet.
While not perfect, CII is a landmark regulation that will significantly impact many of the world’s existing ships over the next decade. Its requirements are significantly more than business-as-usual and will push the global maritime industry on an overall trajectory towards meeting the IMO’s 2030 goal of a 40% improvement in GHG intensity by 2030.
What’s Next
Concurrent with implementing these “short-term” measures, IMO has also started developing mid- and long-term technical and market-based measures. These efforts will be essential to meet IMO’s ambitious further goal of 50% total GHG reductions for the ever-growing world maritime fleet compared to 2008 levels by 2050. It is generally believed that to attain these ambitious goals by 2030; most new ships will need to be based on alternative low-carbon fuels and shipboard technologies that are still under development and not currently readily available. In addition to technical GHG emission regulations, many countries and NGOs believe that market-based measures such as fossil fuel taxes or carbon levies will be necessary to incentivize the necessary investments in ship decarbonization research, prototype installations, as well as fuel production and fuel delivery infrastructure for the future near-zero carbon fuels. Those could be renewably produced hydrogen, ammonia, methanol, and other bio- and synthetic fuels. IMO’s work on these mid- and long-term measures begins in earnest at the next IMO MEPC session in late November 2021.
These will be challenging times for ship owners and operators, and they should start by evaluating their existing fleet for compliance. The impacts of EEXI and CII could be felt sooner and more severe (in terms of cost and service viability) than rule changes promulgated in the past. Allowable service speeds (and fuel consumption) may be reduced as early as 2023 with EEXI or potentially more significantly in the following years under CII. This will impact fleet deployments, decisions on when to change fuel, and whether another carbon-based fuel, such as LNG, is the right move. Ship scrapping or sale and new building plans could be impacted. Building slots may be more difficult to find to the extent the entire world fleet is affected.
Herbert Engineering uses decades of fleet evaluation, ship design, and acquisition support experience to help owners understand these changes in their operations and new building plans. This includes calculating power limits or design speed reductions and evaluating what these limits might mean for actual in-service capabilities, impact on sea margins, make-up speeds, etc. Some may find little impact until 2030 because of earlier steps to slow steam or reduce emissions. Others may need an overhaul of their fleet deployments, major modifications, fuel conversions, or operational practices (speeds, available sea margin, schedule reliability).
Herbert Engineering is perfectly positioned with the tools and experience to help our clients with their fleet evaluations and transition planning to meet these new short-term regulations in the most economical way possible and to contribute to designing future deep-sea ocean cargo transport ships with near-zero carbon emissions.
