By 2050, shipping will change more than it has in decades due to stricter environmental regulations. But what are those regulations? Do we know what the cryptic abbreviations EEDI, EEXI, MRV, CII mean? And above all, which ships they concern, which of them is important and what pitfalls are there. Here is a very short dictionary on the subject for those outside the maritime industry.
Background for tightening regulations
In 2018, the International Maritime Organization (IMO) set a goal of reducing shipping’s greenhouse gas emissions by 50 percent by 2050, and in July 2023, the IMO made significant tightening of its goals. The revised IMO GHG Strategy includes an enhanced common ambition to reach net-zero GHG emissions from international shipping close to 2050, a commitment to ensure an uptake of alternative zero and near-zero GHG fuels by 2030, as well as indicative check-points for 2030 and 2040.
In July 2023, the European Parliament also finally decided on the maritime Fit for 55 package, which stipulated the carbon content of shipping fuels, fuel distribution and taxation, and included shipping as part of the emissions trading system.
However, these are only the latest changes in greenhouse gas emissions regulations. The first international regulations to reduce shipping’s greenhouse gases came into force more than a decade ago.
The ship’s technical and operational regulations
In 2011, the IMO set goals by which the structure of new ships must be designed in such a way that ships’ fuel consumption and thus greenhouse gas emissions are reduced. EEDI stands for Energy Efficiency Design Index, i.e. it is used to calculate the ship’s energy efficiency index (carbon dioxide emissions per tonne-mile). In order for the ship to operate, the index value must be lower than the reference value set by the IMO. Reference values are different for different ship types. They are gradually becoming stricter, so new ships gradually become less emitting. The regulation has already had a significant impact on the energy consumption of ships, for example by designing the hull shapes, as well as the fact that the newest ships usually have less engine power than the older ones.
In 2021, the IMO set a requirement that existing ships must also meet the energy efficiency requirements set by the IMO. And like EEDI, this EEXI gradually tightens. For this, ships must increase their energy consumption, for example by reducing their speed or by introducing emission-free forms of energy, such as electricity.
In 2013, the IMO demanded that the ship’s energy efficiency system SEEMP – Ship Energy Efficiency Management Plan – i.e. a management system that aims to reduce the ship’s energy consumption in all operations, be introduced. So this is not a strict regulation, but mostly support for achieving other goals.
In 2021, the IMO also approved the much more controversial regulation CII – i.e. carbon intensity indicator. It moved from the ship’s structures to the ship’s operation, i.e. the ship must reduce certain amounts of greenhouse gas emissions in relation to the transport performance. There has been a lot of discussion about this regulation in the industry, because the transport performance is calculated as transport capacity and not how much goods have actually been transported (in units or tons). Therefore, there is “transportation”, even if the ship is empty. And on the other hand, ships that travel short distances have relatively more port time than ships that travel long distances, and thus get worse results than others. It is possible that this regulation will be further refined.
Data collection systems
In 2016, IMO introduced the emissions data collection system (DCS – data collection system), into which shipping companies enter their ships’ emission data. This system is used for statistics and defining metrics. The European Union has a similar system in use, called EU-MRV.
Emissions trading
This year, the EU will also introduce a market-based control tool – ETS – emission trading system. A similar system is also being considered at the IMO, but there are no decisions yet. ETS means that After each year, an operator must surrender enough allowances to cover fully its emissions, otherwise heavy fines are imposed. If an installation reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another operator that is short of allowances. In the European Union emissions trading, the European Commission defines the amount of emission allowances.
In practice, the more greenhouse gases are released into the atmosphere, the more emission rights must be purchased, and the higher their price rises. The goal is therefore a situation where it is most economical for the shipping company to reduce its emissions, instead of buying emission allowances. Since the carbon emission market is shared with other industrial sectors as well, the system also directs activities in which emissions are reduced where it’s the easiest or cheapest to do, and those companies then sell the rights to companies in other industries.
Emissions trading will be introduced for shipping the first time this year, taking into account some of this year’s emissions, and will be tightened in the following years. It is difficult to estimate what the price of emission rights will be in the future, and how it will affect the development of the industry. Ice-strengthened ships will receive a five percent relief in emissions trading until 2030. Currently under discussion in Finland is whether to take the so-called island excemption to use. The island excemption would make it possible for passenger ship traffic between mainland Finland and the Åland Islands to be outside of emissions trading until 2030.
Regulations for fuels
The EU has also set a goal that the annual calculated carbon content of the fuel used at sea should decrease. This FuelEU Maritime means that part of the fuel used must be carbon-free, in which case either biofuels or other new non-fossil fuels such as methanol are used. This regulation is also gradually tightening, and it is likely to have a significant impact on shipping. However, it should be noted that even one ship running on fossil-free fuel reduces the emissions of the entire fleet of a shipping company, and thus the shipping company can switch to emission-free ships one at a time over several years.
The EU has also set a goal that the most significant ports must be able to offer distribution infrastructure for alternative low-emission fuels and shore power. In addition, the EU has removed the tax exemption from marine diesel used in its territory.
Summary
It should be clear that the above description of the environmental regulations in use now and in the future is only a rough generalization, and “the devil is in the details”. Each shipping company and ship owner must check the issues regarding their own fleet, in order to be able to assess the impact of the regulations on their own fleet and, on the other hand, direct their strategy for reducing greenhouse gas emissions as efficiently as possible. However, the most important thing is to remember the importance of savings. Every ton of fossil fuel that remains unburned is always a saving from an economic and environmental point of view.
The article was previously published in Finnish in the online magazine for maritime professionals Navigator Magazine on July 26th, 2023.
Tales of Talsinki 