Short-range target

The regulatory drive to improve sustainability in the shipping sector is pushing full steam ahead. Despite being driven by the best intentions to address the urgency of climate change, sometimes that zeal can cause the regulatory process to miss some crucial nuances.

A case in point is the introduction of the carbon intensity indicator (CII), a rating system for ships that has been developed by the International Maritime Organisation (IMO). This will become a mandatory measure under MARPOL Annex VI when it comes into force in 2023 and will impact all cargo, RoPax and cruise vessels above 5,000 gross tonnage (GT) and trading internationally.

The CII determines the annual reduction factor needed to continuously improve a ship’s operational carbon intensity within a specific rating level. This is marked on a scale of A to E indicating a major superior, minor superior, moderate, minor inferior or inferior performance level. This is recorded in the vessel’s ship energy efficiency management plan (SEEMP). If a ship is rated D or E for three consecutive years, it will need to submit a corrective action plan to demonstrate how it will obtain an index rating of C or above. However, the problem arises from the fact that the CII is broadly based on distance travelled – a metric that does not sit well with how cruise ships operate.

“For other sectors, an intensity metric can drive down absolute emissions,” remarks John Haeflinger, senior vice-president of sustainability and maritime policy at Carnival Corporation. “However, for our industry sector, the current CII metric could be counter to our objective to reduce absolute greenhouse gas (GHG) emissions.”

“To be clear, we fully support the IMO’s efforts to reduce and eventually eliminate GHG emissions,” he adds. “The issue with the CII as currently defined is that it can create perverse incentives given its design, which includes distance to measure intensity of carbon emissions rather than absolute carbon reduction. Some of our ships would have to travel further and increase absolute emissions to achieve the numerical objectives of the CII metric.”

Carnival, which still expects to deliver a 40% reduction in GHG emissions per lower- berth-kilometre for its fleet by 2030 while reducing absolute emissions – despite what Haeflinger describes as the “perverse” nature of the CII metric – is not alone in raising concerns.

“It’s important to note that currently the entire passenger shipping industry – both cruise and ferry – is generally not confident that the current CII metrics are suitable to correctly assess vessel energy efficiency,” remarks Linden Coppell, vicepresident of sustainability and ESG at MSC Cruises.

“The discussion at the IMO’s Marine Environmental Protection last meeting – MEPC [Marine Environment Protection Committee] 78 – came to the same conclusions and it was recognised that the current CII metrics might not be adequate for the operational characteristics of the cruise and ferry industries and, therefore, actually incentivise emissions reduction,” she adds.

Bargaining for a better deal There has been concern that regulations in their current form could significantly disadvantage passenger vessels such as cruise ships. Concerns highlight that cruises spend a relatively long time at a port and when there, they consume more relative power than compared with, for example, most cargo ships. “Ships in a port simply burn fuel without travelling anywhere, which is a disadvantage over ships which spend a higher proportion of their time sailing, although with a higher level of absolute emissions,” Coppell explains.

“More precisely, the current CII formula, being basically a measure of carbon intensity by mile, would encourage more time at sea versus time spent in the port, thus incentivising increases in absolute emissions,” she adds. “The current CII calculation is based on emissions and distance, with a lower distance travelled resulting in a higher carbon emissions intensity.” This feeling within the industry is not a kneejerk reaction to new legislation. CII critics will argue it is a deeply considered and carefully calculated stance based on raw data. MSC, for instance, has been tracking the performance of its ships against the CII criteria and its required levels of conformity, enabling the organisation to understand exactly how each of its vessels currently in operation will perform based on their proposed future sailing itineraries.

Carnival, too, has carefully calculated the impact of CII and has worked hard to prepare a verified Ship Energy Efficiency Management Plan, or SEEMP Part III – as required from 1 January 2023 – to document how a vessel plans to achieve its CII targets.

“All of our ships have their updated SEEMP approved and on board,” says Haeflinger. “Again, for some ships, compliance with the CII as currently defined would result in higher carbon emissions, so it is our intention to continue to make this fact known, as other sectors are doing.

“We are comfortable that while we focus on reducing absolute GHG emissions – which, as a company, peaked in 2011 – and emissions per lower berth day, as an overall fleet we will reduce CII in line with the IMO’s goals,” he adds. “This, however, will not be at the individual ship level since our ships frequently change their deployment patterns to help optimise our emissions and our economics.”

While fully aware of the need to comply with incoming regulations, cruise lines are not taking the negative impacts of the CII calculations lying down. Instead, they are keen to engage with the IMO to make clear the problems that the CII causes for the cruise sector and, ultimately, suggest improvements in how the metric can be calculated.

“The issue with the CII as currently defined is that it can create perverse incentives given its design… Some of our ships would have to travel further and increase absolute emissions to achieve the numerical objectives of the CII metric.”
John Haeflinger

“We will continue to work with the IMO and industry to determine a more suitable metric that will align with everyone’s shared objective to reduce and eventually eliminate absolute GHG emissions,” Haeflinger continues. “As a company, we are focused on reducing absolute GHG emissions and believe the IMO should also.”

At last year’s meeting of the IMO intersessional working group on the reduction of GHG emissions from ships, members acknowledged and agreed that, as currently designed, the CII was not suitable. They contest that it does not achieve its intended objectives for all sectors of shipping, notably the cruise sector, and that it would need to be further evaluated to ensure alignment with absolute GHG emissions reduction.

“We support this outcome and will continue to work with the IMO to define a measure that will align with everyone’s shared objective to reduce and eventually eliminate absolute GHG emissions,” Haeflinger continues.

MSC is also committed to working with both its peers and the IMO to help define a more effective proposal for CII metrics. It hopes to ensure a more balanced and appropriate calculation for passenger vessels, which incentivise efficient cruise ship operations both in port and at sea.

“We are fortunate that we operate a relatively young fleet with high performance levels and comprehensive energy efficiency measures implemented on all of our ships that have helped us to drive down energy demand,” remarks Coppell. “With such measures in place, the hope is that additional steps that might be necessary with regard to itinerary modifications will be significantly reduced.”

An industry embracing sustainability

The potential disadvantages poised by the implementation of the CII seem particularly unfair on passenger ships, given the extent of the cruise industry’s efforts to improve sustainability and minimise the impact on the environment.

In truth, the industry has been steadily improving its green credentials for at least a decade. Indeed, the Cruise Lines International Association (CLIA) confirmed last year that €45bn of investment in sustainability has already been made in Europe by the maritime sector. The cruise sector has a legitimate claim to be ahead of the game when it comes to energy efficiency and the adoption of alternative fuels.

“While we can’t really speak to the opinion of others, we believe our employees and guests know the level of commitment from our team and are appreciative of the actions being taken to advance our environmental performance and sustainable operations as a whole because they see that commitment on board on our ships,” says Haeflinger. “For all of us at Carnival Corporation and in the cruise industry, sustainability is critically important to how we operate and conduct business.”

“From our strong focus on decarbonisation with our LNG-enabled ships to waste management and efforts to reduce single-use plastics and food waste, to promoting diversity, equity and inclusion at all levels of our workforce and seeing first-hand the economic benefits cruise brings to not only our global employee base, but the communities we visit,” he adds. “Despite the incredible challenges the global pandemic has placed on the cruise industry, and other areas of travel and tourism, our focus remains on long-term, sustainable operations.”

Discussions about the CII will no doubt continue as cruise lines make submissions to the IMO through CLIA and the Cruise Ship Safety Forum. It remains to be seen whether those voices will be heard, but it must be hoped that no setback can dampen the industry’s enthusiasm for a greener future.