REGULATIONS

CLEAR

THINKING

With further waves of legislation relating to the environment rolling in, there have been calls for clarification on some of the plans already put forward by different government bodies and country groups

The World Shipping Council, along with Danish Shipping and renewable energy producers, shipowners and other organisations, have written an open letter to EU decision makers stating that the total climate footprint from production to combustion should be considered in the

EU emssions trading system for maritime.

The European Commission has proposed to include shipping in the EU’s emissions trading system (ETS) as from 2023. The crucial details in the regulation are currently being negotiated and therefore the World Shipping Council, Danish Shipping, Methanol Institute, Renewable Hydrogen Coalition, Royal Association of Netherlands Shipowners, Swedish Shipowners’ Association and several other organisations representing the full value chain behind green fuels are asking policymakers to push the regulation in the greenest possible direction.

In an open letter sent to central representatives in the tripartite meetings on the legislative proposal, the signatories emphasise the importance of looking at the climate impact of the new green fuels from extraction at the source to combustion.

“To support shipping’s transition to renewably produced marine fuels, the EU ETS must provide the right signal, taking into consideration the greehouse gas (GHG) emissions of fuels across their full lifecycle,” says Jim Corbett, the World Shipping Council’s environmental director for Europe. “We are concerned that the current ETS language for maritime unintentionally favours so-called brown fuels from fossil production that increase GHGs.

“Liner carriers are already investing in alternative fuels and technologies, and urge the EU to ensure policies are geared to accelerate investments in the necessary renewably derived fuels by adopting a full life-cycle perspective. Aligning EU ETS pricing with other EU Green Deal measures also supports Europe’s potential to become a major producer of renewable marine fuels.”

Rules on ship carbon intensity and rating system amendments to the International

Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI entered into force on 1 November 2022. Developed under the framework of the Initial International Maritime Organization () Strategy on Reduction of GHG Emissions from Ships agreed in 2018, these technical and operational amendments require ships to improve their energy efficiency in the short term and thereby reduce their greenhouse gas emissions.

From 1 January 2023, it will be mandatory for all ships to calculate their attained Energy Efficiency Existing Ship Index (EEXI) to measure their energy efficiency and to initiate the collection of data for the reporting of their annual operational carbon intensity indicator (CII) and CII rating.

The short-term GHG reduction measures, adopted in 2021, form a comprehensive set of amendments to MARPOL Annex VI, which provide important building blocks for IMO’s future mid-term greenhouse gas reduction measures.”

The latest amendments build on IMO energy-efficiency measures that were first adopted in 2011 and strengthened since. The CII and EEXI measures represent the next stage in IMO’s work to meet the targets set in the Initial IMO GHG Strategy.

The amendments to MARPOL Annex VI came into force on 1 November 2022. The requirements for EEXI and CII certification come into effect on 1 January 2023. This means that the first annual reporting will be completed in 2023, with initial CII ratings given in 2024.

As a stimulus to reduce carbon intensity of all ships by 40% by 2030 compared with the 2008 baseline, ships will be required to calculate two ratings: their attained EEXI to determine their energy efficiency, and their annual operational CII and associated CII rating. Carbon intensity links the GHG emissions to the amount of cargo carried over distance travelled.

Based on a ship’s CII, its carbon intensity will be rated A, B, C, D or E (where A is the best). The rating indicates a major superior, minor superior, moderate, minor inferior, or inferior performance level. The performance level will be recorded in a “Statement of Compliance” to be further elaborated in the ship’s Ship Energy Efficiency Management Plan.

A ship rated D or E for three consecutive years will have to submit a corrective action plan to show how the required index of C or above will be achieved. Administrations, port authorities and other stakeholders as appropriate, are encouraged to provide incentives to ships rated as A or B.

A ship can run on a low-carbon fuel clearly to get a higher rating than one running on fossil fuel, but there are many things a ship can do to improve its rating, for instance through measures, such as: » hull cleaning to reduce drag » speed and routeing optimisation » installation of low-energy light bulbs » installation of solar/wind auxiliary power for accommodation services. Member States are working on the revision of the initial GHG strategy and the revised version is set to be adopted in mid-2023 at the Marine Environment Protection Committee (MEPC 80) session in July 2023.

IMO member states have already initiated discussions on various proposals for IMO’s next set of GHG reduction measures, such as a maximum carbon-content for marine fuels as well as on economic measures, such as a GHG levy, emissions trading scheme, feebate or an incentive scheme for zero emission vessels. To download the revised MARPOL Annex VI (2021 Revised MARPOL Annex VI) and related guidelines visit: tinyurl.com/IMO-MarpolAnnexVI

CII OPERATIONS CLAUSE

The BIMCO Documentary Committee has adopted a Carbon Intensity Indicator (CII) Operations Clause for Time Charter Parties, which will help the industry commercially navigate the complexities of the new CII regulations from the International Maritime Organization (IMO).

The new regulations on the carbon intensity of international shipping will come into force on 1 January 2023. Owners and charterers need to collaborate and co-operate to manage the IMO objective to reduce carbon emissions. The clause sets out a way forward in a time charter context, where charterers are responsible for the operation of the vessel.

Although owners and charterers have different roles, the task to reduce carbon emissions must be shared and requires both parties to be committed to collaborate to manage this task. When entering into a charterparty, or incorporating the clause into an existing charter party, the parties are to agree on a specific CII value to be achieved each year.

“The subcommittee comprised shipowners, charterers and legal and insurance experts,” says Nicholas Fell, chairperson of BIMCO’s Documentary Committee. “After more than eight months of deliberation and consultation, we have arrived at a clause which serves as an excellent starting point for negotiations for owners and charterers and which is workable in practice. The new clause will be reviewed as the underpinning regulatory regime develops.”

As the industry is likely to face more regulations from the IMO and the EU aimed at reducing shipping’s CO2 emissions, the need for new contracts and clauses increases. The CII clause is the latest addition to BIMCO’s suite of carbon clauses for time charter parties.

“The subcommittee will now continue its work to develop further clauses – such as a CII clause for voyage charterparties – to assist charterers and owners responding to new regulatory requirements, regardless of whether they come from the IMO, EU, or elsewhere,” says Stinne Taiger Ivø, director, Contracts & Support at BIMCO.

ZERO EMISSIONS PUSH

Europe’s lawmakers voted in October in favour of a 2% mandate for green shipping fuels by 2030 and while lobby group Transport and Environment (T&E) welcomes the world’s first measure to decarbonise shipping fuels, it says much more will be needed to get shipping to zero emissions.

Delphine Gozillon, sustainable shipping officer at T&E, says: “This is the beginning of the end for fossil fuels in Europe’s shipping industry.

The green shipping fuel mandate will kickstart the production of hydrogenbased fuels by providing investment security for fuel producers. But 2% will not be enough if we are to stick to 1.5°. The EU must build on this and go bolder. There is a clear will to clean up the shipping industry. This is just the start.”

T&E has called on the EU to raise this mandate – otherwise known as a sub-quota – to at least 6% in 2035. Around 50 industry organisations and NGOs from all over Europe, including Unilever, Siemens and Alstom, have backed this.

The group has also called for a removal of the exemption for companies with three ships or less, which would exempt 60% of shipping companies. This was rejected by the EU parliament.

The parliament also failed to announce a greenhouse gas (GHG) reduction target of 100% in 2050, which would effectively phase out all ghg-emitting fuels. This puts the EU’s domestic shipping ambition at odds with its claims to be a global green shipping leader internationally, says T&E.

The parliament did reduce incentives for fossil gas by introducing stricter GHG targets. This will shorten the lifetime of liquefied natural gas (LNG) as a compliance option, but it will not be enough to stop shipping’s worrying shift to LNG, warns T&E. However, as Gozillon concludes “it does signal that there is no long-term future for fossil LNG in shipping”.

CHINA’S GREEN BOOST

In November, China Classification Society (CCS) launched the Sustainable Shipping Innovation and Development Initiative (SSIDI) with China Petrochemical Corporation, China COSCO Shipping Corporation Limited, China Merchants Energy Transportation Co, and ICBC Financial Leasing Co.

Given accelerated policy making and development to reduce shipping emissions by the International Maritime Organization (IMO), EU and other global and regional bodies, it has become an industry consensus to promote the application of alternative fuels in shipping, CCS says.

However, the application of alternative fuels in shipping involves many uncertain factors such as fuel supply, ship financing, technology development, and standard formulation, which are far beyond the scope of traditional shipping and require joint exploration by all parties in the entire industry chain, the class society has explained.

For this reason, CCS launched the SSIDI with all interested parties in energy, shipping, finance and other industrial chains. Co-operative research will focus on the economy, safety, technology maturity, policies and regulations, fuel availability, market mechanisms and other aspects of the application of alternative fuels in the shipping field, while conducting extensive and in-depth research on sustainable shipping innovation and development.

FOCUS ON FIRE FIGHTING

Regulation and improved fire-fighting techniques have proved inadequate to stem the tide of serious incidents costing lives, significant cargo losses and ship damage, according to insurer, the TT Club.

TT Club is continuing its battle to convince cargo interests, supply chain professionals and enforcement agencies that the responsibility for mitigating container ship fires is shared by numerous entities involved from end to end of the entire global supply chain. With its estimated 60day average occurrence of serious fires being maintained by the Zim Charleston fire in August and the TSS Pearl in the Red Sea in early October, TT is once more urging a more comprehensive approach to arresting the trend.

“There were significant lessons coming from the sad incident on the MSC Flaminia, which cost the lives of three seafarers, particularly from the subsequent legal proceedings that adjudged the shipper and NVOC responsible for root cause errors,” says

TT’s Peregrine Storrs-Fox. “Despite the biennial updates to the IMDG Code, including multiple arising from this particular incident, the judge’s assessment that the regulations merely set the ‘baseline’ for good practice remains utterly true today.”

Ensuring compliance with the latest mandatorily applicable version of the International Maritime Dangerous Goods (IMDG) Code is essential as a minimum standard for all those shipping dangerous goods by sea. But the liability judgment in the MSC Flaminia case made it clear that regulations merely set the baseline.

“This is an important statement to which any entity inclined to rely solely on the letter of the law when consigning dangerous goods, would do very well to pay heed,” comments Storrs-Fox.

TT advocates a comprehensive approach, striving to bring an understanding of all the factors contributing to these fires to everyone involved in the movement of cargo in containers and therefore underlining their responsibilities for safety. Errors, misunderstandings, mis-declarations and inadequate packing and securing lie at the heart of many incidents, both at sea and in storage facilities.

Movement of cargo is initiated in the trading of goods – sellers and buyers – who instruct packers and whoever becomes the shipper. They have a duty of care as much as the packers, warehouse operators, forwarders, logistics companies, carriers of all modal types, cargo handlers and terminal operators.

Attention to accurate classification and declaration are critical to improve certainty of outcome from end to end. This requires truth as much as awareness of regulations and sound safety practices.

In addition, TT Club together with the UK Club recently updated the publication, Book it Right, Pack it Tight. This provides key insights for all involved in dangerous goods’ shipments, including a clear exposé of the more technical aspects of the International Maritime Dangerous Goods (IMDG) Code. The aim is to influence higher standards of compliance by assisting all involved to understand their own duties and the duties of their contractual partners.

Closely related to the issues specific to dangerous goods are the broader aspects of packing cargo in general. While the International Maritime Organization/International Labour Organization/UNECE Code of Practice for Packing of Cargo Transport Units (CTU Code) remains non-mandatory international law, it is clearly referenced from the IMDG Code.

Through its participation in the Cargo Integrity Group, TT has contributed to work on the CTU Code - a quick guide. Once more, this has been recently updated and assists those responsible for packing containers, accurately declaring details of their contents in order to access the guidance contained in the voluminous CTU Code itself more easily. There is also a useful checklist of actions required, which along with the quick guide is available in multiple languages.

TT’s campaign to influence all parties continues with a series of webinars early in 2023 on the subject of container ship fires and the on-going efforts to prevent them. The intent is to attract awareness and debate particularly around innovations that could materially improve the risk, including a number of those whose efforts have been recognised through the TT Club Innovation in Safety Awards over recent years.

Thus, these online forums will contribute further to the valuable weight of knowledge and expertise in the arena.

“The complexities of the global container trades increase rather than diminish,” concludes StorrsFox. “No one entity can surmount the dangers of these horrific fires, as a consequence it is essential that the entirety of the risk faced should be embraced by all involved through the supply chain if they are to be successfully reduced.”