Capt. Simon Hodgkinson, Head of Loss Prevention at West P&I, was at sea for 25 years rising up by means of the ranks, with the ultimate 10 years as grasp on offshore vessels within the oil and fuel sector. He then moved ashore and efficiently ran the operations division for an offshore firm within the Middle East for the 9 years earlier than transferring to West.
by Simon Hodgkinson, Head of Loss Prevention at West P&I
Regulators are hopeful that impending Carbon Intensity Indicator (CII) and Energy Efficiency eXisting ship Index (EEXI) rules will signify a sea change for the trade once they enter into power on January 1, 2023. Together they kind the primary severe set of worldwide rules geared toward decarbonizing the present service provider fleet, and will signify the beginning of transport’s inexperienced transition.
These guidelines are set to create new alternatives for forward-thinking and reluctant shipowners alike. Exemplary credentials, new applied sciences, and modern working practices could have an enormous business impression and must be achievable for many – but even guidelines that originally seem comparatively simple can create clear dangers.
A NEW REGIME
Both EEXI and CII create guidelines and requirements based mostly on the carbon effectivity of a vessel. All vessels over 400 GT and that fall underneath MARPOL Annex VI are caught by the EEXI rules, whereas CII applies to all cargo, RoPax, and cruise vessels over 5,000 GT. While each rules enter into power on January 1, the important thing dates related to every are barely completely different and can differ for every vessel.
Any ship caught by the EEXI rules should have its carbon effectivity calculated, and applied and authorized any modifications required to satisfy requirements earlier than its first survey date in 2023. For vessels caught by CII rules, the proprietor or operator should start measuring their vessel’s carbon depth in operation from the beginning of 2023 and all ships should have an enhanced CII compliant SEEMP onboard. Additionally, requirements should be reported in opposition to at yearly intervals, and plans created when a vessel doesn’t meet these benchmarks customary.
A ship’s CII rating relies on reported IMO Data Collection System (DCS) knowledge and can be benchmarked in opposition to a letter grade vary from A to E, with boundaries turning into more and more stringent over time till 2030. A ship that scores three consecutive D grades or a single E grade can be required to develop an authorised corrective motion plan to enhance their grade.
ACHIEVING COMPLIANCE
EEXI requirements will be met by putting in new inexperienced know-how onboard a vessel. Yet, with deadlines steadily approaching, timelines could also be tight for these discovering out their scores right this moment to make use of inexperienced applied sciences as a compliance software: planning and securing an area at dry dock can ordinarily take round six months.
Most shipowners are set to decide on a less complicated possibility for EEXI compliance. Installing engine energy limiters is a far cheaper and simpler strategy to improve power effectivity whereas additionally delivering a shorter set up timetable. Owners should be conscious that shorter doesn’t imply rapid; installations should be scheduled, and engineer time will have to be secured. We anticipate to see a peak in demand for these programs, which might stretch this capability and trigger delays, even for software-based options.
CII might be barely extra difficult. Beyond creating acceptable plans, benchmarking, and monitoring options, grades are offered based mostly on operational efficiency moderately than theoretical efficiency.
This signifies that shipowners are capable of make the most of new inexperienced know-how or scale back speeds to realize an A–C “pass” rating. But they can achieve this on a extra versatile deadline as long as the effectivity advantages of the system would enhance the vessel’s operational common for the entire of the reporting interval. With an eye fixed to repeatedly tightening grade boundaries, some shipowners could discover it’s prudent to satisfy greater requirements early to minimise future remedial work.
However, most vessels’ remaining scores will finally rely upon how they’re utilized in operation. This could require charterers to undertake sure operational procedures and insurance policies and might not be within the direct management of a shipowner.
THE CONTRACTUAL RISK
Shipowners are answerable for assembly EEXI and CII requirements, independently of any agreements they’ve with charterers. This is especially vital for ships on long-term fixtures, the place printed statistics on a vessel utilized by the events throughout negotiations are rendered inaccurate by a compliance methodology.
If a vessel’s printed statistics are mistaken throughout negotiations, and that ship can’t obtain marketed speeds, a shipowner could also be in breach of contract. Similarly, if a shipowner could also be in breach if a ship’s statistics change throughout a contract. This signifies that shipowners should be significantly cautious when implementing EEXI compliance measures.
CII grading poses a special contractual problem. As a lot of the ultimate CII grade will depend on a ship’s operation, any operational measures – together with mandating gasoline varieties, common speeds, and environment friendly route administration – should be laid out in a contract to be binding on a charterer.
KNOW YOUR SCORE
Information is the perfect compliance software a shipowner can have. Thankfully, EEXI scores are comparatively straightforward to calculate, and most classification societies now supply on-line instruments that may work for many ships – homeowners ought to use these instruments now, in the event that they haven’t already.
Knowing your EEXI rating now offers more room to plan. This in flip can assist an proprietor to optimise money stream all through any funding necessities, and to keep away from any potential bottlenecks as deadlines draw close to.
CII rules create comparable issues, however might be extra advanced. Where it’s doable to roughly estimate a vessel’s operational effectivity with pre-existing knowledge, this is not going to present an correct sufficient determine to dictate which letter grade a vessel will obtain and it might be obscure what mitigation strategies are wanted. It is thus advisable that homeowners work with operational knowledge suppliers to scope out their vessel’s precise carbon effectivity scores now.
This scoping work should additionally inform a contract evaluate. Where velocity could also be a difficulty, you will need to work carefully and collaboratively with charterers to seek out options that permit vessels to satisfy requirements whereas minimizing their disruption – both by securing concessions to put in energy limiters to adjust to EEXI, or to make sure sure practices are adhered to for CII.
BIMCO has lately formulated a helpful template clause that may assist safe EEXI compliance for brand new contracts, and as soon as a vessel is compliant, future contractual points will be averted by making certain {that a} vessel’s printed statistics are updated. For CII, you will need to be certain that clauses that require charterers to comply with sure effectivity directions are inserted into all contracts – and reviewed as acceptable, based mostly on modifications to required mitigation actions.
If this course of creates any extra complication, by means of bottlenecks, contracts, or uncertainty, a shipowner ought to contact their P&I Club’s Loss Prevention division for assist. At West, our Loss Prevention department is led by former seafarers, engineers and material specialists, and provides actionable steering on easy methods to reduce dangers for his or her vessel.
This recommendation consists of rapid sensible steering to crews and operational employees on easy methods to adjust to new guidelines, recommendation on new applied sciences and any dangers that come alongside them, and bespoke recommendation on any advanced contractual points related to CII or EEXI.
The finest manner to make sure clean and cost-effective compliance to any new regulation is nice planning. This is particularly true for EEXI and CII, which would require shipowners to make use of knowledge that they might not but have entry to – and will trigger unexpected contractual disputes. Starting work now could be one of the simplest ways to construct these plans, and to navigate these dangers.
