IMO’s CII comes under criticism

The criticism on the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) is growing.

The CII, which debuts on January 1 alongside the IMO’s Energy Efficiency Existing ship Index (EEXI), are the most significant pieces of green legislation from the United Nations body since the 2020 introduction of the global sulphur cap.

For the first time, the decisions made by charterers will fall within the scrutiny of an IMO instrument. CII’s real impact on the freight market is expected in 2024, as throughout next year, shipowners will aggregate a track for each of their ships that will set the basis for the first A to E CII rating, similar to the energy rankings seen on household appliances, the difference being in the complexity with how these rankings are derived.

CII is commercially complex as it concerns how the vessel is traded. Under a spot voyage, it is the owner’s obligation to manage the vessel’s performance to attain the CII rating the owner desires.

However, under a time charter, the situation could be much more complex. Given that CII ratings are retrospective, a vessel on time charter could be traded inefficiently and returned to the owner with an inferior rating, putting the owner at a commercial disadvantage following the charter. From a charterer’s perspective, whilst CII is an operational measure and can be managed through trading patterns, the CII performance of a ship is linked to other factors, such as design, maintenance and warranted fuel consumption. If any of these factors is not as described in the charter party, then a dispute is likely to arise.

The biggest issue with CII, however, according to a new report from tanker brokers Gibson, is that vessels will have to adjust their trading patterns to attain the required rating.

A non eco ship, which would typically trade shorter voyages, will now be more likely to engage in longer haul voyages to attain the required CII, which is largely a function of CO2 emitted, cargo capacity and importantly, distance sailed, Gibson pointed out. Likewise, eco ships with much better CO2 emissions could be deployed on shorter voyages where, despite smaller distances, could still attain an acceptable CII rating due to their fuel efficiency.

The merits and pitfalls of the CII have been discussed in great depth in recent months.