On 10 October 2022, the NNPC hosted a workshop on the upcoming legislation and regulations about reducing greenhouse gases in the shipping sector. The keynote speakers at this workshop were Mark Smith from North of England, of one of our reinsurers, and Ton Jumelet, a lawyer with Dock Legal Experts. This article gives a summary of the workshop.
First of all, Mark explained the three main measures imposed by the International Maritime Organization (IMO) and the EU, namely:
- the European Union Emissions Trading Scheme (EU-ETS)
- the Energy Efficiency Existing Ship Index (EEXI) and Energy Efficiency Design Index (EEDI)
- the Carbon Intensity Indicator (CII)
From 2024 onwards, the maritime sector will be included in the EU-ETS. This means that vessels of above 400GT must now buy emission credits allowances to offset their emissions.
The EEXI applies to all vessels built before 2013 that are larger than 400GT. It is determined by the amount of CO2 emitted by existing ships per ton of cargo per nautical mile. To determine the score for the index, the technical design of the ship is considered and a certificate will then be issued (one time only). Such a certificate must be on board by 1 January 2023. For newly built ships, an equivalent scheme called EEDI has already been in operation since 2013.
The CII measures the operational efficiency of ships and is mandatory for all ships larger than 5000GT. Based on the continuous monitoring and efficiency measurements, a label from A to E is assigned indicating how efficiently a ship carries cargo (where A is the most efficient and E the least). The threshold is at label C: a ship that scores lower (D or E) does not meet the requirements. If the vessel in question gets a D three years in a row or an E once, a correction plan must also be submitted to its classification agency. It is also important to note that the CII label may differ from one ship to another, even if they are sister ships. As the efficiency of a ship is affected by not only how but also where the ship is operated, two ships that are technically exactly identical may nevertheless receive very different CII labels.
Having to meet efficiency requirements can also have legal implications, particularly as the CII is an annually recurring requirement, unlike the EEXI certificate which is one time only. Ton Jumelet therefore gave some concrete examples in his presentation of issues that shipowners may come across, such as disputes over vessel performance. It may in fact be more favourable for the CII score to sail more slowly, meaning that you take longer, or to take a slightly different (but longer) route. It is therefore important to make clear agreements about this beforehand and get them recorded in the chartering.
BIMCO’s CII clause is expected in October or November 2022. It will include the responsibilities for non-compliant or non-optimised vessels and the consequences of not achieving the CII target.
BIMCO has published a transitional clause for the EEXI requirements that can be found at:
https://www.bimco.org/contracts-and-clauses/bimco-clauses/current/2021_eexi_transition_clause
If you have any questions resulting from this article or the workshop, please contact us at info@nnpc.nl.
