The new IMO measures addressing greenhouse gas emissions (GHG) have been met with a lot of criticism from the industry as they are likely to slow down the demolition of older, less-efficient ships until they enter into force.
To remind, the 75th session of the IMO’s Marine Environment Protection Committee (MEPC 75) approved, among other things, amendments to MARPOL Annex VI. The amendments are expected to enter into force on January 1, 2023, pending adoption at MEPC 76 in June 2021.
The amendments relate to the Energy Efficiency Existing Ship Index (EEXI), operational Carbon Intensity Indicator (CII), which includes a rating scheme (A to E), and an enhanced SEEMP with mandatory content, approval, and subsequent audits.
The EEXI will impose a requirement equivalent to the Energy Efficiency Design Index (EEDI) Phase 2 or 3 to all existing ships and is intended as a one-off certification. The EEXI is to be verified and a new Energy Efficiency Certificate issued no later than the first annual International Air Pollution Prevention (IAPP) survey on or after January 1, 2023.
All cargo and cruise ships above 5,000 GT need to calculate a CII and will be given an annual rating of A to E. The rating thresholds will be increasingly stringent towards 2030.
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.
On or before January 1, 2023, all ships above 400 GT need to have an approved SEEMP on board, and the implementation of the SEEMP will be subject to audits. For ships above 5,000 GT, the SEEMP also needs to include mandatory content, such as an implementation plan on how to achieve the CII targets.
A Correspondence Group is yet finalize the necessary guidelines supporting the approved regulations, including baselines, methods of calculations and ship-segment-specific requirements.
Shipbroking firm SSY said that instead of speeding up the removal of aging ships from the market and replacing them with more eco-friendly newbuilds, the shipowners are expected to continue to slow steam as a way of meeting environmental targets.
The ordering activity is at a historically low, partly due to uncertainties over the future low carbon ship designs causing owners to take a ‘wait and see approach’ before investing in newbuilds.
The dry bulk carrier sector is one of the most extreme examples.
“The current bulker orderbook of 56.1 Mdwt represents just 6.3% of the existing capacity, the lowest percentage in almost 30 years,” said Derek Langston, Head of Research at leading shipbrokers SSY.
“At the same time, the dry bulk carrier fleet is ageing: the ratio of 15+ year old vessels to the orderbook is the highest since 2003.”
According to SSY, the biggest five-year concentration of dwt capacity was built in the years 2009-13 and will, therefore, be 13-17 years of age when IMO enforcement measures could begin to bite in 2026.
Without sharply increased anticipatory newbuilding orders, or a decline in dry bulk trade volumes, in the intervening years, a large portion of the middle-aged fleet will have to continue trading towards the end of the decade at potentially slower speeds in order to avoid a squeeze in cargo carrying capacity.
Carbon emissions, meanwhile, could continue to trend up.
A recent report by Marine Benchmark showed a net increase in maritime greenhouse gas emissions since 2011 as the effects of an expanding global fleet have exceeded efficiency gains. In the case of dry bulk carriers, Marine Benchmark estimates annual average growth in emissions of close to 3% p.a. since 2011.
“The combination of low newbuilding deliveries, a potential rebound in demand and an ageing fleet implies that CO2 emissions are more likely to track fleet growth this decade, which suggests that the shipping industry cannot deliver an absolute reduction in CO2 emissions by 2030,” cautioned Torbjorn Rydbergh, Managing Director of Marine Benchmark.
A similar situation is present in the tanker sector, as explained by Nikolas P. Tsakos, Founder, President, and Chief Executive Officer in a recent earnings call.
Tsakos believes the dry spell in ordering is good for the market, explaining that one of the main reasons behind owners’ reluctance to order new ships is the confusion on propulsion technology right now that would fit the ever stringent environmental regulations.
“With the confusion of all the regulations that are coming out, shipowners, very rightly so, are preferring to slow steam rather than find other solutions in order to achieve their environmental targets,” he said.
BIMCO’s figures show that the product tanker fleet is set to grow by 2.5% this year, down from the 4.7% of last year which was dominated by ordering ahead of IMO 2020.
Deliveries of oil product tankers have been low too, with some 4.7 million dwt delivered so far this year, putting the product tanker market on track for the lowest deliveries since 2002.
Deliveries of crude oil tankers have also fallen from the highs of the past few years. So far, 16.2 million dwt have been delivered, against demolitions of 1.1 million dwt, leaving year-to-date fleet growth at 3.1%. Full-year fleet growth is expected to be 3.5%.
Numerous governments and organizations have criticized the IMO measures for lack of ambition even though they seem like a good first step.
The European Sea Ports Organisation (ESPO) supports the Initial IMO GHG Strategy, however, it said that in order to deliver on its goals, coming discussions on mid- and long-term measures must provide for higher ambitions through robust and enforceable policies.
“But to ensure the robustness and effectiveness of the agreed mechanisms, the upcoming implementing work should be made as strict as possible in terms of enforcement,” ESPO pointed out.
“Together with the International Association for Ports and Harbours (IAPH), ESPO regrets that the agreed package settles for lower ambitions as concerns the scope, enforcement, and reduction factors of the measures. “
ESPO believes ports can be a key strategic partner in helping shipping decarbonise, and in delivering on ambitions on the international and European level.
Measures like ship-shore interface and the bunkering of low and zero carbon fuels in particular, and funding allocated to research supporting innovation in bunkering of those fuels can help the sector meets its targets.
“All efforts should go towards finding such an approach in order to minimise potential market distortions to the highly international maritime sector. However, if a sufficiently ambitious approach fails to materialise on the international level by 2023, ESPO favours a regional measure that ensures real and significant emission reductions and delivers on the European Green Deal, whilst accounting for potential market distortions on the regional level,” the organization said.
ESPO added that regional measures should be designed in such a way that they can be extended or replicated on the global level. Such regional proposals must also be thoroughly examined in view of safeguarding the competitiveness of the EU port sector, the organization added.
This post appeared first on Offshore Energy.