March 22, 2023
In an effort to demystify the CII for our customers, Siglar developed the voyage CII. When comparing the estimated CII of a specific voyage to the estimated absolute emissions of the same voyage, some unintended consequences of the CII rating become apparent. Here we present common voyage examples highlighting how a CII approach to chartering can increase carbon emissions and cost.
The IMO’s Carbon Intensity Indicator (CII) rating introduces a global, easy to understand reference that brings much needed attention to operational carbon efficiency in shipping. This is a large and necessary step in the right direction.
However, the CII ratings have been met with criticism from many quarters. Our experience is that the CII does not provide professionals at the cargo side nor the ship side with sufficient incentives to support carbon efficient chartering decisions. Hence, the full potential of an operational measure to improve efficiency and reduce emissions is not realised.
The weakness of the current CII relates to the fact that the operational efficiency is based on Annual Energy Ratio (AER) calculations which disregard whether the ship is transporting cargo or not. Two consequences of leaving cargo out of the operational efficiency equation are:
In such cases the CII rating can lead to sub-optimal chartering decisions and increased overall emissions. The CII can therefore work against the IMO’s intended purpose which is to reduce shipping emissions.
The best way to understand the consequences of day to day chartering decisions is to zoom in on single voyages. So, to help our customers understand how their chartering decisions impacted the CII, we developed the Voyage CII. When comparing the CII rating of a voyage to its absolute emissions it is easy to find examples where CII rating and absolute emissions do not coincide.
The first example compares three potential ships for an MR voyage and highlights that the ship with CII rating A can emit almost 4 times more CO2 than the ship with rating B and almost 3 times more than the ship with rating D. Have a closer look at this example.
In the second example we use the same MR voyage to exemplify how a CII approach in chartering can increase carbon cost. This is an intra EU voyage, hence the carbon cost correlates with absolute emissions and the ship with CII rating A would get the higher carbon cost. Have a closer look at this example.
More examples will follow during the coming weeks.
From the charterers’ point of view, understanding CII variations and how the cargo in question would contribute to each ship’s annual CII is useful in charter party negotiations. However, if the aim is to reduce emissions and the related carbon cost, absolute numbers,measured in tonnes of CO2, are the appropriate indicators. Measuring and estimating absolute emissions allows charterers to understand the carbon consequence of their shipping decisions and to make carbon efficient chartering decisions.
From a charterer’s perspective, the best moment to avoid unnecessary shipping emissions is when planning the voyage. Measuring in absolute emissions allows the charterer to estimate the carbon consequence of pre-fixture shipping decisions, like how the ballast leg and cargo destination impacts emissions. Understanding the emissions impact and the related carbon cost of the ballast leg and the cargo destination might trigger the use of flexibility in the chartering program. Using this flexibility leaves opportunities to slash emissions at low cost and at large scale.