INSIGHT: The ABCDE of CII

The regulation was first drawn up in 2018 and came into effect at the start of 2023, as part of the so-called short-term measures following IMO’s initial greenhouse gas strategy. File Image / Pixabay

The Carbon Intensity Indicator (CII) from the International Maritime Organization is a vital yet under-discussed regulation for decarbonizing the shipping industry that warrants more attention.

The regulation was first drawn up in 2018 and came into effect at the start of 2023, as part of the so-called short-term measures following IMO's initial greenhouse gas strategy.

All vessels larger than 5,000 GT are assigned a CII rating based on historical data submitted to the IMO. The rating reflects the vessel's CO2 emissions per unit of cargo capacity (DWT) per nautical mile.

Ratings range from A to E, with A at the top of the scale, and will be determined on an annual basis. Ships receiving a D rating for three consecutive years or an E rating for a single year will need to update the Ship Energy Efficiency Management Plan (SEEMP) to include corrective actions aimed at improving performance.

Achieving a higher rating makes the vessel more attractive to companies and cargo owners focused on minimizing GHG emissions. Below are five reasons to prioritize CII, even as other regulations capture more attention.

Action not Reaction

CII is a regulation where proactive planning pays the biggest dividends.

If a ship is performing at an E-grade level for most of a year, trying to get that up to an A before the year ends will yield little in the way of results, but earlier action can have a large impact.

Every shipowner should be paying careful attention to their vessel's trade patterns, the type of fuel it uses, and which energy-saving technologies could be installed on it. Conducting this analysis early and formulating a plan to improve CII scores will yield multiple long-term benefits.

Business Competitiveness

The main reason for shipping companies to pay attention to CII is to improve their bottom line. Charterers and cargo owners with targets to lower GHG emissions may favor ships with a good CII grade, as the use of these vessels will reflect well on their own environmental performance. Equally, ships trending towards a failing grade are likely to be seen as less efficient.

A good CII score could also result in better financing options as vessels that trade more efficiently experience less idle time. Further, financial institutions focused on GHG reductions may offer favorable terms for vessels deemed more efficient with better CII scores.

Beyond this, CII is largely an indication of fuel efficiency, which should be a prime concern in any case; bunker costs are the largest expense for most shipping companies, and lowering these bills in any way possible will mean higher profitability in the long run.

CO2 Compliance

The main purpose for the CII regulation is to encourage the reduction of CO2 emissions. Decarbonization has emerged as a priority for the shipping industry, and companies that fail to keep pace with this agenda will increasingly be perceived as lacking a strategic vision for the future.

Installing energy-saving technologies, using voyage optimization tools and burning biofuel blends will all contribute to reduced CO2 emissions and better CII scores.

Decreased Costs

Prioritizing CII scores is expected to result in overall cost savings for shipping companies. This is potentially due to vessels having less idle time and trading more efficiently, which cuts bunker bills.

Steps towards compliance with CII will also assist in addressing other regulations such as the EU ETS, FuelEU Maritime and any carbon taxation the IMO may choose to impose in future. Each of these regulations comes with a cost, and early work on CII will reduce these costs in time.

ESG Focus

Finally, formulating a strong strategy on CII can play an important role in advancing your company's environmental, social and governance (ESG) agenda.

Having a fleet with consistently high CII scores sends a message that your company is planning well for the future, recognizing its role within the energy transition and taking ESG seriously. Banking and insurance counterparties are likely to take a keen interest in ESG plans, and your work on these issues may also feed into your customers' own ESG strategy.

Need more information?

Glander International Bunkering has developed an in-house new fuels calculator to assist clients in reaching their desired CII rating, and a global team of New Fuels Advisors who provide guidance on understanding CII ratings and their impact on vessel tradability. Contact our team here to assist on your decarbonization strategy.