2. Why are alternative fuels being considered by the industry?
The International Maritime Organization (IMO) reports that maritime transport is responsible for about 3% of global greenhouse gas (GHG) emissions (IMO Fourth GHG study). To reduce emissions and align international shipping with the temperature goals under the 2015 Paris Agreement,[1] the IMO adopted an Initial Strategy in 2018 on the reduction of GHG emissions from shipping (i.e. emissions including carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O), expressed in CO2e (carbon dioxide equivalent)). The Initial Strategy is a policy framework which sets key objectives to:
▬ reduce average carbon intensity (carbon dioxide (CO2) emissions per transport work) of international shipping by at least 40% by 2030, while pursuing efforts towards 70% by 2050, as compared to 2008 levels; and
▬ reduce total annual GHG emissions from shipping by at least 50% by 2050 compared to 2008, while pursuing efforts towards phasing them out entirely within this century.
The short, mid, and long-term measures to achieve these objectives remain a topic under intense discussion. The Initial Strategy is expected to be revised in 2023.
The use of alternative fuels is considered key to achieving the Initial Strategy goals because, whilst other energy efficient measures might achieve some reduction in GHG emissions, alternative fuels will be transformative and ultimately are capable of significantly reducing, if not eliminating, such emissions.
[1] The Paris Agreement excluded shipping due to its international scope. Climate-related shipping regulation was delegated to the IMO.
3. What are GHGs?
GHGs trap heat in the earth’s atmosphere. Whilst carbon dioxide is the dominant GHG for shipping, GHGs include a basket of six harmful gases:
▬ Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur hexafluoride (SF6) and Nitrogen trifluoride (NF3).
4. Is the IMO Initial Strategy regime mandatory? If so, how will it be enforced?
The Initial Strategy itself is not mandatory. However, the IMO can adopt measures to implement the Initial Strategy by amending existing conventions which are mandatory in many jurisdictions (such as the International Convention for the Prevention of Pollution from Ships (MARPOL).
The requirements imposed by the revisions to MARPOL (see paragraph 5) are mandatory for all cargo and cruise vessels trading internationally and which are above the gross tonnage specified in the amendments and registered in a MARPOL-signatory country. Enforcement of such amendments will be through flag states which are parties to MARPOL.
5. Has the IMO adopted measures in furtherance of the Initial Strategy objectives?
Yes. In June 2021, the IMO’s Marine Environment Protection Committee (MEPC) held its 76th
session (referred
to as ‘MEPC 76’) and adopted measures aimed at the Initial Strategy objectives. These measures include amendments to Annex VI of MARPOL.
The revised Annex VI requires ships over 400 GT and operating internationally to calculate their Energy Efficiency Existing Ship Index (EEXI). The EEXI is a design rating which will reflect the ship’s energy efficiency as compared to a baseline target for ships of that type and size. The EEXI requirements are in addition to the existing Energy Efficiency Design Index (EEDI) requirements which are applicable to the design and construction of new ships (see paragraph number 7). The EEXI baseline target for a vessel will be based on a reduction factor expressed as a percentage relative to the EEDI baseline set for new ships
60 | The Report • September 2022 • Issue 101
of the same type and size. Existing vessels will be required, among other things, to have an actual calculated EEXI (‘attained EEXI’) below the targeted EEXI (‘required EEXI’) for the vessel. The EEXI requirements do not mandate modifications to existing ships, but realistically, modifications may be necessary to achieve the required EEXI for a particular ship.
MARPOL Annex VI also requires ships over 5,000 GT to establish an annual operational carbon intensity indicator (CII) and rating. Shipowners must calculate annually a CII for each ship accounting for cargo carried. The CII rating scale will be A, B, C, D, or E (with A being the best). The CII scale will require progressively higher efficiency standards each year, through 2030. Shipowners therefore should also develop plans to cut the CII to reach the progressive ship- specific targets whereby the CII of a ship is reduced annually. The flag state will compare a ship’s reported CII to its target and produce the CII rating. A ship rated D for three consecutive years or E (on one occasion) will be required to submit a corrective action plan to show how a rating of C or above will be achieved.
6. What is the timeline for implementation of the EEXI and CII measures adopted by the IMO?
As explained in paragraph 5, the EEXI and CII regulations were adopted in 2021 through revisions to MARPOL Annex VI. The amendments are expected to enter into force on 1 November 2022, with the EEXI survey requirements taking effect in November 2022 and the EEXI and CII certification requirements coming into effect from 1 January 2023. The first annual EEXI and CII reports will accordingly be due in 2023. The EEXI and CII measures will then be reviewed by the IMO for effectiveness in 2026.
7. What is the EEDI?
The Energy Efficiency Design Index (EEDI) reflects the theoretical design efficiency of a new build ship.[2] EEDI was made mandatory with the adoption in July 2011 of amendments to MARPOL Annex VI. The EEDI regulations mandate a minimum required energy efficiency level per capacity mile (e.g., tonne
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