Shipping Firm Oldendorff Sets Out Flaws in CII Regulation

by Ship & Bunker News Team
Tuesday December 13, 2022

Dry bulk shipping firm Oldendorff Carriers has complied research setting out potential flaws and perverse incentives in the upcoming carbon intensity indicator regulation.

From January 1 all vessels larger than 5,000 GT will have calculated for them a CII rating based on historical data submitted to the IMO. The rating is a calculation of the CO2 the vessel emitted per unit of cargo capacity per nautical mile.

The rating will come as a letter between A and E, with A at the top of the scale, and ratings will be determined on an annual basis. Ships receiving a D rating for three years or an E rating for a single year will need to implement a ship energy efficiency management plan setting out their plans to improve their performance.

Oldendorff has prepared a report detailing the potential impact the regulation may have on shipping, pointing out scenarios where it may have unintended effects.

"The CII formulas in the regulation are not holistic, can be gamed and there are many real-world instances where strict adherence and focus on the CII rating letter grades will do more damage than good," the company said in a note on its website accompanying the report.

"For example, ship owners and operators are already trying to increase fleet productivity by reducing empty legs, so they can carry more cargoes per year.

"Even though a ship consumes more fuel during laden voyages, the improved utilization decreases the emissions per ton carried, which is beneficial for the environment and should be the objective.

"However, such improved efficiency is being penalized with a bad CII rating, whereas if an identical sister ship engages in inefficient trading and lower productivity, this leads to higher emissions per ton carried, but this vessel is being rewarded and encouraged by a good rating."

The report takes six scenarios for dry bulk shipments with varying environmental factors, showing that some with lower total CO2 emissions per unit of cargo can result in worse CII ratings.

"At the end of each calendar year, a ship that is rated D or E can simply stop trading and just ballast around to repair its CII rating," the company said in the report.

"Obviously, this results in burning a lot more fuel, generating a lot more emissions, but that's how the regulation can be gamed."