This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
viewpoints
Welcome to Reed Smith's viewpoints — timely commentary from our lawyers on topics relevant to your business and wider industry. Browse to see the latest news and subscribe to receive updates on topics that matter to you, directly to your mailbox.
| 1 minute read

Transparency in shipping – Industry warns of unintended consequences of greener shipping

A leading tanker broker has recently warned that the IMO’s Carbon Intensity Indicator (CII) and Energy Efficiency Existing Ship Index (EEXI), due to come into effect on 1 January 2023, may give rise to unintended consequences for the tanker market and, at least in the short-term, render the global fleet less efficient.

Gibson’s recent Tanker Market Report notes that the EEXI is commercially easier to implement because compliance rests with owners. Compliance will come largely from technical modifications. CII on the other hand, which will measure a vessel’s efficiency over a 12-month period based on (i) the CO2 emitted; (ii) the cargo carried by the vessel; and (iii) the distance sailed, will inevitably be impacted by the vessel’s trading pattern.

As Gibson point out, in adjusting its trading patterns, a less environmentally-friendly ship will be more likely to engage in longer voyages in order to protect its CII rating. More environmentally-friendly vessels can instead undertake shorter voyages, but the impact will be countered by their fuel efficiency. The potential upshot? An overall less efficient global fleet and the risk of a net increase in CO2 emissions.

As we have already seen in the negotiation of charter terms to facilitate CII and EEXI compliance, compromise between owners and charterers will likely be required so that owners are not left commercially disadvantaged following an inefficient voyage. There may need to be compromise on charter terms that directly affect a charterer’s commercial operations, such as sailing speeds and scheduling. In practice, of course, compromise is easier said than done.

Industry practices will need to adapt, and some older vessels may likely need to be removed from trading in the long term in order to ensure the overall efficiency of the global fleet. The comments from Gibson are a reminder that steps towards greener shipping will inevitably mean the industry needs time to catch-up.

Regulation also sometimes fails to account for commercial practices which are not always compatible with technical directives from the IMO

Tags

transportation, shipping, transparency in shipping

Latest Insights

post featured image
post featured image