The regulatory challenges of EEXI and CII

Next year will shake up the industry with the introduction of the EEXI and CII calculator which will affect all vessels in the market. To help the shipping industry to cut emissions and start 'greening' vessels the EEXI was brought in as a tool to enable both shipowners and operators to achieve this. Now the requirement for compliance with these regulatory tools will be coming into effect at the start of 2023 - next month.

The EEXI gives owners and operators a tool to enhance a vessel's operation to meet future carbon emissions reduction regulations.

Turgay Colak, Head of R&D, Newport Shipping explains EEXI: "In short, EEXI is a measure of a vessel's CO₂ emissions and considers only a ship's technical/design parameters. In general, everyone is familiar in recalling EEDI which was introduced in the early 2010's for new vessels. In principle both indexes are similar and the only difference is EEDI is used for new ships whereas EEXI applies for existing ones. For a new building, an owner can react to specific limits early but this is not so easy for existing ships and sometimes it is impossible to comply with the requirements, especially for vessels built before 2010."

The CII, which will also come into effect at the same date, will act like a grading system for vessels to show how efficiently they operate. The scale will be A through to E, with A being the 'best' efficiency for a vessel, it is expected that vessels will have a rating no lower than C, and therefore in practice we should see it proving easier and more cost effective to achieve compliance than if a vessel needed to be upgraded from the lower D or E end of the scale.

The CII will measure CO₂ emissions of a ship while transporting goods or passengers. It is unlikely that EEDI or EEXI will be a one-time certification, given CII will be measured and reported annually with the ship then scoring a rating from A to E.

For ships that achieve a D rating for three consecutive years or an E rating in a single year, a corrective action plan needs to be developed as part of the SEEMP and approved by Class on behalf of Flag State. For owners, the major concern with CII is that given this is a new initiative there has not been visible evidence of other project investments leading to a successful conclusion of meeting the new compliance, which has led to them hesitating to invest. One option available is that they can manage the ship's efficiency by reducing the speed for a period of time, but as mentioned a CII rating is not a one-time certification, and the rating thresholds will become increasingly stringent towards 2030. So, at some point a reduced speed will not be effective in complying with the new regulations.

Earlier this month the IMO held its MEPC 79 meeting that looked at updating regulations for decarbonization. At the meeting it was noted that the shipping industry is moving to a 'Year of delivery' (i.e. building and completing projects) from a 'Year of building contracts' (i.e. feasibility, planning, ordering and completing contractual formalities). Along with adding the Mediterranean Sea as an Emission Control Area (ECA), the CII calculator also saw confirmation of how it will work, in that if a ship's results for data collected in a calendar year YYYY is rated as E, or D for the third consecutive year, the corrective action plan should be verified in year YYYY+1 and developed to achieve the required annual operational CII for data collected in the calendar year YYYY+2. This means that vessels missing their targets by their third year will have only a maximum of two years to show significant improvements to their operations.

The Future

Overcoming the future challenges to meet with both green regulations and also the EEXI and CII standards will mean that the shipping industry will need solutions that can enable this. At the moment it does not seem to be one option, but many options on the table to choose from.

"There are couple of energy saving solutions which aim to increase the propulsion efficiency such as flow regulators before and/or after propeller, bulbous bow modification, sails. However, there is not a standard solution for every ship and each one needs be evaluated on a case-by-case basis. Engine retrofit for alternative fuels is another option, but initial investment requirement seems to be significant. There are some vessels that can opt for energy saving options but these are not in themselves sufficient and require power limitation on the engine or shaft, meaning reduced operational speed and loss of profit for owners" Colak explains.

It is important for the existing fleet to start making and adopting technology solutions today. Newport Shipping can assist the market and its upcoming regulatory needs through solutions such as its LNG retrofit designs. Last year it launched three designs for the market: for bulk carriers, tankers and containerships. Switching to a greener fuel will be the main option chosen for existing vessels in the market. Newport is working with green technology manufacturers around the world to give owners the access to the technology they need to meet these incoming future regulation requirements.