IMO MEPC 76 Update: EEXI and CII

The 76th session of the IMO’s Marine Environment Protection Committee (MEPC 76) was held remotely from 10 to 17 June 2021.

by Gillian Lovering

The limited agenda was focused on the C02 reduction measures including the Energy Efficiency Existing Ship Index (EEXI), the enhanced Ship Energy Efficiency Management Plan (SEEMP) and the Carbon Intensity Indicator (CII) rating scheme.

Ever since the Energy Efficiency Design Index (EEDI) rules were adopted at MEPC 62 in July 2011 there have been rumblings of discontent that whilst they came into effect for newbuildings in 2013, existing ships were not subject to the same limitations.

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Environmental Non-governmental organizations (NGOs) were upset that the industry as a whole would not be subject to strict CO2 emission rules for decades, and ship operators were concerned that older vessels could operate at faster speeds than newer ships. That in itself would not be a problem in depressed markets when ships were operated slower in any case, but if charterers demanded rapid transits then newer ships may not be able to satisfy that demand.

Since their introduction, the EEDI rules have even been tightened for some ship types and the deadlines for different phases (there were originally four stretching from 2013 through to 2025) brought forward for some ship types and sizes.

At MEPC 74 in September 2019, the IMO finally embraced the idea of extending the EEDI principles to existing ships by way of the EEXI. The same meeting also accepted the proposal for a Carbon Intensity Index or CII as a means for further reducing greenhouse gas (GHG) emissions. Essentially the EEXI imposes technical restrictions on maximum emissions while the CII is an operational means of measuring and limiting GHG.

Unfinished business

Although the guidelines for the EEXI worked on by an intersessional working group for the last 18 months were adopted, there are still many points that are unresolved and will require further work before the EEXI comes into effect on 1 January 2023.

The EEXI will apply to all ships over 400gt falling under MARPOL Annex VI. The calculation guidelines adopted, refer to the corresponding EEDI guidelines for newbuildings with some adaptations regarding limited access to design data.

However, just as with the EEDI rules, no account has been taken of the impact of some GHG abatement measures that are already in use across a wide range of ships. These include wind assist systems such as Flettner rotors and their variants or sails. Battery systems are not accounted for and neither are engines that can run on multiple fuels. Also excluded from the calculations are methods used to ensure biofouling is minimised and the loss of performance resulting from it eliminated. These issues will be further discussed at MEPC 77 due to be held in November this year.

The lack of clarity is very likely having a negative effect on shipowners taking action to improve the efficiency of their vessels especially if it involves a capital outlay. Most of the classification societies are attempting to provide some guidance for member shipowners on the impact of the EEXI and CII introductions.

One thing that has emerged is that in many cases ships will need to reduce engine power output and this will, in turn, mean slower speeds and lower-earning capability as well as increasing demand for newbuildings to make up the shortfall.

Korean Register (KR) has conducted a preliminary analysis to estimate the impact of the new regulations and its results show that most ships do not meet the EEXI regulations and the ships that do are small in size. In its analysis, KR suggests operators should expect a reduction of ship speed from 0.9 knots to 6.5 knots (tanker average 1.7 knots, bulk average 2.4 knots, container average 4.1 knots) which it says is a rapid deceleration.

Another factor that has been ignored is the use of bio and synthetic fuels. These fuels are being extensively tested and are counted by some authorities as carbon neutral. That is because, although the chemical composition of such fuels is very similar to fossil fuels and the amount of CO2 released per tonne essentially identical, the CO2 released is reabsorbed by organic sources of the biofuel.

Even the EU, which is normally seen as a strong advocate of green measures, has apparently accepted that both fossil and biofuels will be the main source of marine power for decades to come. Its latest energy policy for shipping has come under attack from environmental NGOs who argue that under the latest EU proposals more than half (55%) of the energy used by ships calling at EU ports could be LNG and “unsustainable” biodiesel, derived from biomass such as plant or algae material or animal waste, by 2035.

Faig Abbasov, Transport and Environment’s shipping programme director said, “Counting fossil gas and biofuels as green will lock shipping into decades of further pollution while we should be promoting carbon-free, renewable hydrogen and ammonia. There’s still time to kick out fossil fuels and stop the European Green Deal turning shipping’s transition into an ecological disaster.”

Meanwhile, some shipping companies are promoting the use of biofuels and carbon offsets as a means for their customers to meet green policy targets.

A divergence of opinion

Although MEPC 76 has adopted the EEXI and CCI and has put in motion the process to their eventual implementation, it is becoming clear that the cost of the IMO’s decarbonisation goal is increasingly coming under scrutiny.

The industry itself has proposed a modest levy on bunker sales to finance research into decarbonisation methods but the idea has still not been adopted by the IMO and will be discussed further at MEPC 77 later this year. A joint proposal from the Marshall Islands and Solomon Islands for a tax on emissions of $100 per tonne of CO2 was firmly rejected at MEPC76 with only a dozen or so delegates supporting it.

Such a tax would increase the price of oil fuels by around $325 per tonne effectively at least doubling the average ship’s bunker bill. Earlier this year, Maersk CEO Søren Skou had suggested that an even higher figure of $150 per tonne of CO2 emissions was needed. Not surprisingly that idea did not attract much support from the wider shipping industry.

The fact that CO2 reduction measures for shipping are not particularly well supported by many IMO member nations is often overlooked and it will be interesting to see how far the divergence of opinion will progress over the next few months and years. While a path may have been mapped, it is by no means certain that all will be following it.

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