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| 1 minute read

EEXI & CII - 6 months and counting

A stark reminder, if one were needed, that we are now just 6 months away from the coming into force of the IMO's new EEXI and CII regulations. 

To say the market's reaction so far has been varied would be an understatement. Despite concerns about how the rules will be enforced, many industry players welcome the drive to reduce carbon emissions and will willingly lower speed or fit engine power limiters (EPLs) to comply with EEXI and maintain an acceptable CII rating. The technical work continues apace. It was reported this week that the majority of the bulker fleet will be fitting EPLs before January given that 68% would otherwise have fallen foul of EEXI next year.

For others, the regulations provide an opportunity to continue as before, if an owner and charterer are happy to live with a "bad" CII rating for a vessel on long term charter; or to prop up bulker demand, and therefore rates, through lower fleet speeds. 

Whatever the different views about how EEXI and CII will affect the commercial operation of vessels, the legal aspects are challenging and should be front and centre in analysing the risks that owners and charterers will face from January. Plenty of questions remain about how time charterparties in particular should handle the new rules and who should bear the costs and risks of compliance. Other tensions include the extent to which an owner will be in breach of existing performance or cargo-capacity warranties if they pull these levers to ensure compliance and keep a decent CII rating. And whilst BIMCO's new EEXI clause (with one on CII expected shortly) goes some way to addressing the problems, many owners and charterers are looking for bespoke provisions tailored to the specific needs of their business and customer base. 

The next 6 months will see more technical detail on implementation, and yet more differing market views. But individual businesses will hopefully use the time wisely to focus on what compliance post 1 January will look like for them.

There are concerns about how the market will react. Some expect business as usual, with ships slowing down or fitting engine power limiters to comply or improve their rating. Yet while there is a business case for doing this, owners that can convince charterers it is OK to get a bad rating also stand to benefit.

Tags

transportation, esg

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