MMMCZCS: Navigating the regulatory traps to drive real change

Regulatory measures implemented by the International Maritime Organization (IMO) often set out with the noble goal of curbing carbon dioxide (CO2) emissions and promoting sustainability within the global shipping industry.

Yet, the journey from regulation to actual emission reduction can be marred by intricate technicalities and market-driven adaptations that lead to unintended outcomes.

As the maritime world grapples with these challenges, a recent report by the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS) working group has cast a spotlight on recommendations to fortify existing measures and drive real change.

The Energy Efficiency Design Index (EEDI), the Energy Efficiency Existing Ships Index (EEXI), and the Carbon Intensity Index (CII) have been heralded as the IMO’s key instruments to steer the industry toward lower CO2 emissions. However, good intentions alone do not always translate into desired outcomes. The allure of regulatory mechanisms can often be eclipsed by the complexities of implementation and the allure of market desires.

In a proactive bid to address these concerns and refocus efforts on emission reduction, the MMMCZCS working group has formulated a series of recommendations that could invigorate the maritime industry’s march toward sustainability. These strategic proposals, derived from analysis and collaboration among industry experts, represent a concerted effort to surmount the pitfalls that regulations can sometimes encounter.

For example, the proactive implementation of EEDI resulted in the first phase being impacted by poor market conditions and high bunker costs, which led to the introduction of slow steaming across the industry and thus significantly reduced the installed power needs on board new vessels. This reduction in installed power made it easy for new designs to comply with EEDI targets.

In later phases, the EEDI has proven to be an effective mechanism for promoting the adoption of energy efficiency technical measures.

Nevertheless, the introduction of dual-fuel vessels during EEDI Phase 2 has blurred the picture on energy efficiency improvements, as a better EEDI rating can be gained using the conversion factor for the fuels the vessel is capable of consuming, thus missing the opportunity for greater energy efficiency improvements.

What is more, EEXI has leveled the reduction of available power onboard across vessel ages in the fleet and aligned older vessels with EEDI-compliant vessels. For most vessels, shaft or engine power limitation were the main options to achieve EEXI compliance because of their low cost and high impact on EEXI.

Only limited older vessels and special tonnage have generally been retrofitted with additional energy efficiency measures for EEXI compliance purposes. This reduction of available onboard power is unlikely to lead to a short-term reduction of global CO2 emissions, since most vessels routinely operate at speeds requiring even less power than the new reduced power limits.

However, in the future, the EEXI is expected to limit the ability of vessels to speed up under favorable commercial conditions or to catch up on schedules due to port delays.

Finally, the implementation of the CII has driven an increased awareness of operational efficiency and provided a standardized framework for operational energy efficiency. Optimizing the CII rating of a vessel is challenging, requiring transparent collaboration among multiple stakeholders (shipowner, operator, charterers, technical managers, and ports and terminals).

Because of this complexity, improvements in CII ratings are expected to initially come from operational measures such as speed reduction and vessel deployment changes, with the adoption of technical efficiency measures being limited. This effect is amplified by the operational nature of the CII rating, which means that two sister vessels deployed in different trades can very easily have different CII ratings.

1. Reimagining the Metrics: A New Focus on Energy Units

One of the key stumbling blocks identified is the reliance on carbon conversion factors in current EEDI measures. The working group suggests a shift toward assessing power or energy units, offering a more tangible reflection of energy efficiency improvements. By removing the veil of technicalities, this recommendation could create a clearer path towards effective emission reductions.

2. Harmonizing Efforts: Addressing Overlaps and Synergies

The report underscores the importance of synergies between energy efficiency measures and emerging fuel-centric regulations. With greenhouse gas (GHG) fuel standards and carbon pricing mechanisms on the horizon, integrating these complementary efforts could streamline the industry’s collective journey toward a lower-carbon future.

3. Charting the Path Forward: Future Reduction Rates and Holistic Metrics

As the maritime landscape evolves, the working group recommends a thorough exploration of future reduction rates for both new Energy Efficiency Design Index (EEDI) and Carbon Intensity Index (CII) phases. Moreover, the group envisions a comprehensive, holistic metric that captures the multifaceted nature of the shipping industry’s operational intricacies.

4. Role of ports

The working group also proposed to explore opportunities to highlight the role of ports and terminals and ways to regulate all stakeholders influencing the CII rating across the value chain.

The group also believes there is a need for clear and enforceable mechanisms for CII compliance, possibly including other mechanisms such as the Ship Energy Efficiency Management Plan (SEEMP).

Finally, the market need to evaluate the risk of EEXI and CII compliance via speed reduction, which could lead to increased overall CO2 emissions due to the need for additional vessels to keep transport work constant.

5. Beyond Compliance: The Market-Driven Role of the CII

While regulatory compliance remains an essential goal, the report highlights the potential for the Carbon Intensity Index (CII) to become a market tool, fostering commercial discussions and decisions that ripple across the industry. This evolution from regulatory measure to market influencer could wield a substantial impact on short-term emission reductions.