CE Delft: CII could cut EU shipping’s emissions by 30% if enforced correctly

A recent study, titled “CII and EU Maritime Decarbonization,” conducted by the research center CE Delft on behalf of the Environmental Defense Fund Europe, found that if European policymakers required ships to achieve top performance (A, B) in climate label Carbon Intensity Indicator (CII), ships could reduce emissions by up to 23% and as much as 30% by 2030.

Under the regulation, the International Maritime Organization (IMO) mandates that ships with a gross tonnage (GT) of 5,000 or more, falling under specific categories, must annually calculate their operational carbon emissions.

These ships are then assigned CII labels, ranging from A to E, based on their carbon intensity performance. To promote carbon emission reduction, the system is structured such that ships failing to improve their operational carbon intensity risk receiving lower CII labels over time.

Furthermore, the IMO requires ships to create a corrective action plan if they consistently receive a D rating for three consecutive years or an E rating in a single year. This plan aims to help them achieve the necessary annual operational CII for a C rating.

The study looked into whether the CII is a meaningful tool that additional measures could use to ensure the timely decarbonization of the EU maritime shipping sector.

“Shipping’s global labeling scheme is a very useful decarbonization tool, which the industry has spent more than two years preparing its vessels and operations for,” said Panos Spiliotis, Senior Manager, EU Transport at Environmental Defense Fund Europe.

“By properly enforcing it, the European Union and its Member States would be first movers in the race to reduce emissions from the world’s biggest ships and would boost newcoming industries for green fuels and energy saving technologies.”

As a major trading bloc, the European Union could make use of Port State Control (PSC) powers to tighten enforcement and require ships calling at European ports to achieve the CII grades necessary to achieve global climate goals, CE Delft said.

Ships need these emission reductions to meet the IMO 2030 indicative target of a 20% reduction in emissions compared to 2008 levels. 

The study also found that cargo ships –including containers, bulk carriers, and tankers – can reach and maintain A and B grades by implementing climate-friendly vessel speeds, as well as using energy-saving technologies, sustainable biofuels, and green e-fuels such as e-methanol and e-ammonia. 

Further improvements to the CII will also help maximize its decarbonization potential. The CE Delft/EDF study refers to fully reflecting the potential of alternative fuels through a full lifecycle (Well-to-Wake) approach to greenhouse gas emissions.

In addition, CII can help enhance transparency by publishing the grades of individual ships so that cargo owners and investors can also take action and contribute to decarbonizing the thriving shipping industry, the study said.

The CII’s enforcement is the role of Flag States, the jurisdictions under which individual vessels are registered.

So far it is unclear what – if any – enforcement actions the industry’s largest Flag States, including Panama, Liberia, and Marshall Islands will take against the most polluting ‘E’-grade ships.

Overall, the study found that the CII is, in principle, a very useful tool to improve the operational carbon intensity of the sector. For the effectiveness of the CII, however, it is important to ensure that the metric of the CII is amended to reward the use of renewable fuels.

Also, the CII reduction factors, which have not been determined for the period after 2026 yet, should be ambitious enough to stimulate further and timely development of technical measures to improve the energy and carbon intensity of ships as well as of alternative fuels.

If the enforcement of the CII at the IMO level cannot be strengthened, additional measures that reward ships with a relatively good label and/or penalize ships with a relatively poor label are all the more important, CE Delft said.

The IMO has initiated a review of several short-term measures, including CII, Energy Efficiency Existing Ship Index (EEXI), and Ship Energy Efficiency Management Plan (SEEMP).

The scope of the review encompasses the experiences related to the enforcement of these short-term measures by Flag States and Port State Control (PSC), as well as the evaluation of CII metrics, currently measured as Annual Efficiency Ratio (AER), along with correction factors and voyage adjustments for CII.

This review will be carried out in three phases:

1. Data gathering will take place from the current period until MEPC 82, scheduled for the autumn of 2024.
2. MEPC 82 will initiate a data analysis phase, which will be further examined by a correspondence group until MEPC 83 in the spring of 2025.
3. A working group, set to convene in late 2024 or early 2025, will begin the review of regulations within MARPOL Annex VI and associated guidelines.

This review is prompted by concerns and criticisms regarding the methodology used in these regulations, with apprehensions that it may lead to unintended consequences and penalizations.

Under the present metric, the ship with the best AER would be one constantly operating in a ballast condition, devoid of cargo. This creates an unfavorable situation where the metric penalizes efficiently operated cargo-carrying ships while favoring inefficiently utilized empty vessels.

This imbalance arises from the fact that the AER metric leans toward ships in ballast condition, while another voluntary metric, the Energy Efficiency Operational Indicator (EEOI), penalizes them significantly. Neither of these metrics is deemed appropriate, as ballast conditions are an integral part of normal ship operations and should neither be unduly favored nor penalized.

Furthermore, the inclusion of fuel consumption when the ship is not underway in the calculation of the attained CII presents challenges to the effectiveness of the CII framework. This inclusion has several drawbacks:

1. Ships are penalized for time spent at ports, despite the fact that the duration of port calls is often beyond the ship’s control.
2. Ships engaged in short sea shipping, which inherently involves more frequent port calls compared to long-haul trades, face disproportionate penalties.
3. During periods of reduced demand and oversupply of ships, some vessels may spend extended periods at anchorage awaiting new orders. This idle waiting time at anchorage negatively impacts the ship’s attained CII.
4. Some ports and terminals experience chronic congestion, forcing ships to wait at anchorage for extended periods before they can load or unload cargo. This situation disproportionately affects certain trades, potentially characterizing them as inferior trades under the CII framework.

These challenges highlight the need for a comprehensive review of the CII metrics to ensure that they accurately reflect and incentivize environmentally friendly and efficient shipping practices while considering the inherent variability in ship operations and port-related factors.