What is the preparedness of shipping sector for IMO 2023 challenge?

As International Maritime Organization (IMO), a UN regulatory body for shipping, has been spearheading the energy transition drive in maritime sector. IMO has recently announced some measures with regard to adopting Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII) rating schemes, which led a confusion among shipping and logistics industry.

In order to address and make industry understand the IMO  2023 regulations the two-day Cold Chain Unbroken conference held at Novotel in Hyderabad on September 15 & 16, 2022 dedicated a session on the topic ‘IMO 2023: How to prepare for the coming changes and the need to know more’.

The speakers who have participated in the panel discussion include Nikhil Shireesh Nadkar Vice President – Ocean Product and Procurement, WIZ Freight acted as moderator for the panel discussion, BVR Vijaya Bhaskar, Associate Vice President SCM, Pfizer Healthcare India Pvt Ltd, Capt. Amar Mascarenhas, Director of Operations, WIZ Bulk, Jebakumar S, Area General Manager – Western & Central India – CMA CGM, and Jayaram Radhakrishnan, CEO & Executive Director, M+R Logistics India Pvt Ltd.

Nikhil Shireesh Nadkar kick-started the discussion with question to differentiate the IMO regulations between 2020 and 2023.

IMO has implemented framed several regulations in 2020 to control air pollution under International Convention for the Prevention of Pollution from Ships (MARPOL). Under the regulations the shippers were asked to reduce sulphur in maritime fuel, but that deadline could not meet as most of the shippers have installed scrubbers. IMO 2023 focus is mainly on the reduction of carbon emissions by ocean shipping. From January 1, 2023, by adopting the Energy Efficiency Existing Ship Index (EEXI) and the Carbon Intensity Indicator (CII) rating scheme, IMO’s Greenhouse Gas (GHG) strategy plans are aimed at reducing the carbon emissions of the global shipping industry by 40 percent by 2030, and by 70 percent by 2050 compared with a 2008 base level.

The speakers in the panel agreed that IMO 2023 regulations on shipping likely to have cascading effects on supply chain logistics across the world. They felt that one option the shipping companies have, to comply with the regulations, is slowing down the ships and it is a very likely scenario as the alternate and biofuels are expensive and less in supply. However, this would also mean a reduction of available capacity or an increase in the need for more ships or the freight rate going up for an already disturbed supply chain.

BVR Vijaya Bhaskar thanked the supply chain fraternity for its handling of IMO 2020 as the impact didn’t affect their customers.

Jayaram Radhakrishnan also noted that the awareness about the repercussions among freight forwarders is nil and he understood it while preparing for the discussion.

S Jebakumar said that his group is moving towards carbon neutrality which it plans to achieve by 2050, much ahead of the IMO plan. He also said that CMA CGM has set a funding of $1.5 bn for next five years period to go green in shipping, and have chosen LNG as fuel the future for emission reduction. Jebakumar also confirmed the potential need for more vessels, the investment it needs, and the running cost it will have with the alternate fuels.

While joining the discussion Amar Mascarenhas has expressed his opinion that there is a cost involved for reduction of carbon emission from shipping. But he said, it is necessary for the sake of our planet. He said that these costs can also be passed on to the customer in the form of carbon tax and it is still a matter of concern that how these charges get transferred customer. But he encouraged the stakeholders to instead look into the long-term evolution of the supply chain.

At the of the panel discussion, Vandana Aggarwal, Chairperson – IFSCA Committee on Ship Acquisition, Financing and Leasing, said the best way to mitigate the carbon emissions in shipping is to go for green finance.