Eric Eyo Partner
IMO’s Short Term Measure for reducing greenhouse gas emissions: implications for maritime industry
The committee responsible for addressing environmental issues under the remit of the IMO is the Marine Environment Protection Committee (MEPC). Amongst several of its environmental safeguarding initiatives, the MEPC’s work includes the control of emissions from ships, including greenhouse gas emissions.
During the IMO’s 12th Intersessional Working Group on Reduction of GHG Emissions from Ships (ISWG-GHG 12) between 16 – 20 May 2022, it finalised the Short Term Measure, which is the focus of this article.
The ISWG-GHG 12 also agreed to further develop a “basket of candidate mid-term measures”, including technical and carbon-pricing elements (Mid Term Measure), which will be the focus of a separate article.
Short Term Measure
The Short Term Measure enters into force on 01 November 2022 and introduces: the Energy Efficiency Ship Index (EEXI); the Annual Operational Carbon Intensity Indicator rating (CII); and an enhanced Ship Energy Efficiency Management Plan (SEEMP).
EEXI
EEXI is an acronym for the Energy Efficiency eXisting ship Index. It is a measure that is related to the technical design of a ship and hence is a design index only (as opposed to an operational index).
A vessel needs to attain EEXI approval only once in its lifetime, and in any event by the first International Air Pollution Prevention Certificate (IAPP) survey after January 2023 at the latest.
Broadly speaking, EEXI applies to all new build and existing vessels above 400 GT with conventional propulsion.
It is expected that compliance and certification requirements will be effective from 01 January 2023. This may necessitate vessel modification to be undertaken to ensure compliance, such as: engine or shaft power limitation; installation of energy saving devices; and or propulsion optimisation.
CII
By contrast, the Carbon Intensity Indicator (CII) is an operational indicator and will be assessed annually from 2023. Essentially, the CII is a measure of how efficiently a ship transports goods or passengers in grams of CO₂ emitted per cargo carrying capacity and nautical mile.
The annual CII is calculated using the vessel’s reported IMO data collection system (DCS) data.
Vessels are given an annual rating from A to E (where A is the highest rating and E is the lowest). It is thought that the rating thresholds will become increasingly stringent as we head toward 2030 and as technology improves.
For vessels achieving a D rating for three consecutive years or an E rating in a single year, a corrective action plan would need to be developed as part of a Ship Energy Efficiency Management Plan (SEEMP).
SEEMP
The Ship Energy Efficiency Management Plan is an operational measure. It not only establishes a mechanism to improve the energy efficiency of a ship, but also provides an approach for shipping companies to manage ship and fleet efficiency performance over time.
Guidance on the development of the SEEMP for new and existing vessels showcases best practices for fuel efficient operation (such as improved voyage planning, more frequent propeller cleaning, and the use of waste heat recovery systems), as well as guidance for voluntary adoption of the Energy Efficiency Operational Indicator (EEOI) as a monitoring tool.
Implications for the maritime industry
Perhaps the most important commercial consideration inherent with the implementation of the Short Term Measure (and Mid Term Measure in due course) is who should bear the cost and responsibility of compliance.
The default position is likely to be that owners bear responsibility for compliance; more likely than not as part of a vessel’s seaworthiness obligations. However, depending upon the bargaining power of the parties, it is likely that bespoke solutions will be found that will require charterparties to be amended to re-allocate both risk and costs.
Clear delineation of the parties’ obligations in this regard is important because unilateral “quick fix” actions taken by an owner during the charter term or on the laden voyage are likely to result in potential breaches of contract, for example the decision to slow steam.
In order to improve a vessel’s CII rating under a time charterparty, an owner may unilaterally decide to slow steam. Without reaching prior agreement, this could place owners in breach of their obligations to proceed on voyages with utmost or due despatch and/or comply with charterers’ orders; or comply with any speed and consumption warranties.
Similar issues arise in a voyage charter context, and in respect of which owners would do well to make clear at the outset the operational limits within which a vessel must work to improve (or at least maintain) its CII rating, for example.
Comment
What is clear is that compliance with the Short Term Measure will require the parties to a maritime adventure to negotiate commercially and in the spirit of cooperation. A balance needs to be struck between the owners’ compliance obligations and the charterers’ requirements that the vessel be employed in a manner that meets their objectives and obligations to any third parties. It will be interesting to see how this balancing act is struck by industry drafting committees.
Related news & insights
News / One-off pilot error did not render port unsafe
21-03-2023 / Maritime
In this charterparty dispute, the arbitral tribunal rejected the Owners’ claim for damages for breach of the safe port warranty in a time charterparty, after a laden bulk carrier grounded at the entrance to the port of Chaozhou, China, while under compulsory pilotage. It also held that the vessel was unseaworthy, in breach of Article III.1 of the Hague Rules, due to lack of proper charts, but found on the facts that this was not causative of the grounding.
News / UK’s Electronic Trade Documents Bill progresses through Parliament
15-03-2023 / Maritime
On 15 March 2022, the UK’s Law Commission published its report, with draft legislation, for the legal recognition of electronic trade documents. One year later, the Electronic Trade Documents Bill introduced to the House of Lords is at the Report stage of the legislative process.
News / Court declines further adjournment of contempt application against sanctioned defendant
07-03-2023 / Maritime
In the recent case of PJSC National Bank Trust v. Boris Mints, the Court confirmed that sanctioned entities have a fundamental right of access to the English courts. In this case, the Court has made it clear that a defendant will not be permitted to delay any legitimate proceedings against him beyond what is reasonable on the basis that his sanctioned status may prevent him getting a fair trial.
News / Court finds hold reinspection should have been arranged with reasonable diligence
01-03-2023 / Maritime
On appeal from an arbitration award, the Court has agreed with the tribunal that there should be an implied term in the charterparty regarding the charterers’ obligations to arrange for a hold reinspection after a failed inspection. However, it has disagreed with the tribunal’s conclusion on whether this implied term had been breached.
News / Admiralty Court tackles crossing rule head on
24-02-2023 / Maritime
This is the first collision case since the Supreme Court decision in the Ever Smart, in which the Admiralty Court has applied the crossing rules. This article discusses the Court's decision, which is unusual because of the finding of 100% liability against one vessel.
News / Maritime Autonomous Surface Ships (MASS) – the work continues
24-02-2023 / Maritime
The international maritime industry is increasingly developing and relying on various levels of automation both onshore and on board. The IMO is leading the way forward and, among other things, has been taking a leading and proactive role in the introduction of commercially operated ships in autonomous mode.
