The International Maritime Organization's (IMO) Initial GHG Strategy is a critical effort to tackle the pressing issue of reducing greenhouse gas emissions from ships. The strategy aims to achieve a 40% reduction in emissions by 2030, compared to 2008 levels, and a more ambitious target of 70% by 2050. This plan recognizes the enormous potential to address emissions in the transportation sector, which accounted for 27% of global carbon emissions of as 2020, surpassing both electric power and industrial sources.
Working toward sustainability in the US, the Inflation Reduction Act (IRA) was passed in 2022 to create more clean energy jobs. In Europe, the EU is set to include maritime shipping in the rules for buying carbon credits for emissions in EU waters, starting in 2024.
However, among the new regulations, IMO 2023 may be the subject of the most debate. Today, we are examining the effects of IMO 2023 on ocean shipping and how ocean freight visibility is a vital asset in meeting the demands of the IMO’s regulations.
What is IMO 2023?
IMO 2023 is the set of regulations passed in the 2023 edition of the IMO Assembly, which meets every two years to develop international maritime policies and regulations. EEXI (Energy Efficiency Existing Ship Index) and CII (Carbon Intensity Indicator) are included in IMO 2023, which went into effect January 1, 2023.
With the goal of reducing carbon emissions, EEXI is a measure of an existing ship's energy efficiency. CII was similarly created to measure and reduce greenhouse gas emissions from ships, specifically assessing a ship's operational performance against carbon reduction targets.
What is EEXI?
Calculation of EEXI uses a complex formula that takes into account various factors that affect the ship's energy efficiency, such as its size, weight, speed, power, and the conversion factor between fuel consumption and carbon emissions. The formula considers the ship's design characteristics, such as its hull, engine, and propeller, as well as any energy-saving technologies or equipment installed on the ship. The calculated EEXI is then compared to the baseline for the minimum acceptable energy efficiency.
What is CII?
CII is expressed in grams of carbon emissions per tonne-kilometer. To calculate CII, the total fuel consumed by a ship for the previous year is multiplied by a carbon emission factor and divided by the distance traveled times the ship’s capacity. The CII result is compared to the IMO target and assigned a letter rating from A through E. Ships are rated based on data from the previous calendar year. A rating of D for three years in a row or E for one year requires the shipowner to submit a plan for corrective action.
The Debate Surrounding IMO 2023 and CII
Since IMO 2023 was announced, there has been debate surrounding the approach and effectiveness of CII. Some of the largest vessel charterers, the companies leasing ships from the owners, have refused to comply with a charter agreement clause, which relies on cooperation between shipowners and the charterers, stating it places more obligation on the charterers than shipowners.
One of the biggest complaints about CII is the fact that its formula uses ship capacity rather than actual cargo transported, when cargo transported is the relevant measure. This inadvertently encourages ships to use other strategies to increase their total distance traveled, strategies that are not the best choice for energy efficiency with respect to the cargo carried.
For example, less efficient ships will inevitably be routed to longer trade lanes to increase their total distance traveled. More ships will elect to slow steam in circles when waiting outside the port to increase distance while they are still consuming fuel. These practices will improve a ship’s CII but are not the answer for the bigger picture of reducing emissions.
How Ocean Container Tracking Helps Shippers with IMO 2023
As carriers employ strategies that improve their CII rating and compliance with IMO 2023—including the strategies that are environmentally responsible and otherwise—this will ultimately affect the shipper. Shippers may need to monitor their transportation-related carbon emissions more closely. Shipping costs are also likely to increase as shipowners pass along the costs of upgrading their existing ships to comply with EEXI.
Container tracking offers shippers visibility and insight into the operations that affect their freight. Shippers gain key metrics on performance plus industry-wide insights. From this, they can identify improvements and better inform future decisions to save time and money and ensure they receive quality shipping services, avoiding waste.
Get Prepared for the Impacts of IMO 2023 Through Increased Visibility
With IMO 2023 now in effect, there are more reasons for shippers to consider increasing their visibility, as they contend with possible changes to performance. VIZION API provides real-time container tracking and visibility data through an easy-to-implement API-first approach, which shippers can use to drive decision-making and stay ahead of the impacts of industry regulations. To learn more about VIZION API, contact us today to schedule a demo.