VIEWPOINT: CII is Here – But Misperceptions Persist

by Dylan Keil, CEO of Bearing
Wednesday April 26, 2023

It's official. As of Jan. 1, 2023, the Carbon Intensity Indicator (CII) is underway. These new carbon emissions standards — put forth by the International Maritime Organization (IMO) — require every commercial maritime shipping vessel to report emissions data and receive a CII grade on an annual basis.

And that's prompting a lot of questions. What exactly is CII? What do owners need to do to comply? What happens if they don't? What are the financial consequences?

We've been talking to partners and customers. We've taken part in conference talks and listened to the chatter in the hallways. And it's clear there's still a lot of confusion about what CII entails and how best to respond.

To clear things up, here are answers to four of the most common questions we've been hearing. Hopefully these will help you hone your CII-related strategies in the coming year.

What's the difference between CII (Carbon Intensity Indicator) and EEOI (Energy Efficiency Operational Indicator), and can I use EEOI data to report on CII?

The short answer is no, you cannot use EEOI reports for CII purposes. They are two different
indicators, measuring different things.

CII is calculated as grams of CO2 emitted per cargo-carrying capacity and nautical mile. The word "capacity" is key — CII is a supply-based measurement (how much could a ship carry) vs the demand-based measurement of EEOI (what weight is a ship carrying).

CII is based on the data collected by the IMO DCS data system, which includes AER (emission per dwt-mile, for cargo that's weight critical) and cgDist (emissions per gross ton-miles, cargo that's volume critical). EEOI is not compatible with this measurement system.

How will CII affect us financially? Are bad grades really going to cost us anything?

No one knows exactly how the market dynamics will play out, but we can make a few broad assumptions.

Yes, there will be some cost to ship owners, especially if their ships fail. In that case they will be required to formulate — and execute — a plan for continuous improvement. More important, now that each vessel is to be rated A-E (with A-C a passing rating), experts predict that many customers, in an effort to reduce their carbon footprint, will lean toward ships with A-C ratings over those with failing D-E ratings. The better the rating, the higher the likely market price.

Different categories of vessel may be more or less affected, but in general this is the outcome most observers expect.

Are we going to have to install sensors on our ships?

Many CII prediction tools do require sensor data, especially those relying on older calculation models. But breakthroughs in AI and machine learning prediction models makes it possible to provide highly accurate results without the use of any onboard sensors — all we need is a vessel's noon report data.

Any other data we might need to dial in a prediction — weather, currents, wave action — can be obtained from third-party sources. Using this data, AI models are far more accurate than traditional physics-based models — no sensors required.

Isn't AI overhyped?

Yes and no. Plenty of so-called AI tools are overhyped. Some are based on bad technology. Others wave AI around as a buzzword. That's the fault of the software, not AI itself.

Many people are under the impression that maritime AI is mainly concerned with guiding ships in transit. That's actually not the case. AI for shipping isn't like autonomous driving. It's not about flipping a switch and letting the AI take the helm.

Maritime AI is a tool for predicting performance over time. It's ideal for simulating different routes and conditions and finding the most efficient way on average for a given ship to get from point A to point B.

And crucially, when it comes to CII, it's not simply about predicting your results at the end of the year, but improving those results in advance. With the intelligence gained from AI predictions, ship owners and operators can proactively take steps to reduce carbon emissions and boost their CII grade.

The new CII regulations are far-reaching and financially significant. It's no wonder people are still trying to sort through the implications. But that process is exciting. We're living during a time when the shipping industry is modernizing faster than any time since the invention of the steam engine. CII compliance is just the first of many developments that will benefit from the use of AI in a new age where data-driven operational decisions will become the norm.