EEXI and CII both come into force in a matter of weeks, but many vessel owners and operators are still undecided about what to do. Others have decided to take a wait-and-see approach. With the clock rapidly counting down, we look at how taking action now is the true key to success.
The three most common reasons given for delaying the action needed to comply with EEXI and CII are:
“There is a natural reluctance to be a first mover,” explains Giulio Tirelli, Director of Business Development at Wärtsilä. “Many are hoping to postpone EEXI inspections until the end of 2023. Those needing to take action for ships in CII categories D and E are perhaps thinking that the end of 2024 seems like a long way away. However, in the current market situation, lead times are long and drydock slots are scarce.”
Giulio Tirelli, Director of Business Development at Wärtsilä
So thinking there is time to delay compliance is all just wishful thinking. Lobbying has resulted in no dramatic changes to the regulations, just slight adjustments to take into account a specific segment’s operations. In some cases, however, it has resulted in more precise – and stringent – definitions. So the idea that the regulations will somehow become less strict is misplaced optimism.
If you don’t upgrade your vessel in time, your only option to comply will be to reduce speed, and that is hardly a great way to stay competitive.
It’s true that you can postpone your EEXI inspection until the end of 2023 – but that is of no benefit if you haven’t ensured that your vessel will pass. And to do that, you need to start planning now.
With CII, you have until the end of 2024. But complying with CII is harder and can be more expensive and time consuming than complying with EEXI. If you only find out at the end of 2023 that you need to upgrade your vessel, it may already be too late to do so by the end of 2024.
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“The systems and components you need are already in high demand. This means scarce availability, higher prices and long delivery lead times. And even if you manage to procure the needed technology, a slot in a yard will be equally hard to secure. If you don’t upgrade your vessel in time, your only option to comply will be to reduce speed, and that is hardly a great way to stay competitive,” warns Tirelli.
It’s not all bad news though. Upgrading your vessels should also be financially rewarding, and there are three initiatives that should be on your radar. Two are cargo owner and operator initiatives, including from some big names in the business, and one is the growing influence of the Poseidon Principles on vessel financing. Let’s look at what they could mean for you.
It’s not just about regulatory compliance anymore. Having an efficient, sustainably operated vessel will become essential if you want to secure business with the world’s biggest freight buyers and cargo owners.
Cargo Owners for Zero Emission Vessels (coZEV) is a cargo owner-led initiative of big hitters like Amazon, Ikea and Unilever. In November 2022 they published their Roadmap to 2040, which, among other things, aims to:
Then there’s the Sea Cargo Charter, with 34 leading charterers and operators as signatories. The charter establishes a framework for assessing and disclosing the climate alignment of ship chartering activities around the globe. The aim is to enable cargo owners and shipowners to align their chartering activities with responsible environmental behaviour and incentivise international shipping’s decarbonisation.
“Both of these initiatives show a clear direction of travel: it’s not just about regulatory compliance anymore. Having an efficient, sustainably operated vessel will become essential if you want to secure business with the world’s biggest freight buyers and cargo owners,” says Tirelli.
Another thing to have on your radar for 2023 is the ever-growing number of banks that have signed up to the Poseidon Principles. There are now 30 leading banks, jointly representing approximately USD 200 billion in shipping finance, and that number is looking to grow. Their aim is to establish a framework for assessing and sharing the carbon footprint of ship finance portfolios. The framework would mean that the better the environmental performance of your vessel, the easier it will be to get financing – and the more favourable the terms will be.
“As we head into 2023, the regulatory requirements and market trends are already clear,” says Tirelli. “You need to know the status of every one of your vessels in terms of both EEXI and CII compliance to remain competitive and profitable.” Tirelli has three pieces of advice for cargo ship owners and operators who haven’t yet started the process:
“It’s time to invest in your ability to attract finance and the world’s biggest cargo owners by ensuring EEXI and CII compliance,” concludes Tirelli. “It’s the only way to secure your long-term competitiveness and profitability.”
If you want to find out more about how to ensure your vessel’s compliance with CII – and stay competitive and profitable, watch our webinar Are you geared up to comply with EEXI?