The New Class of CII Rating Specialist Impacting the Bottom Line
Mar 28, 2022
Reduction of vessels’ carbon intensity, contemplated as part of the Initial Strategy of the International Maritime Organization (IMO), is now moving towards actual implementation. Starting at the beginning of 2023, owners of vessels with gross tonnage of 5,000 or more, trading internationally, will be given a rating based on the ships’ Carbon Intensity Indicator (CII). The ratings parameters, scored on a scale with “A” reflecting the least CO2 intensity and “E” reflecting the highest intensity, will gradually tighten each year moving out to 2030. Each vessel’s Ship Energy Efficiency Management Plan (SEEMP), a requirement, will detail the actions necessary for meeting CII targets. The input values for the CII calculations (in simplest terms, the CO2 emitted based on the vessel’s potential carrying capacity in a year), which are still being fine-tuned for the varied vessel categories, are derived from data reported into the IMO’s Data Collection System. A vessel owner’s data and submissions are verified by a “Recognized Organization” (typically a Class Society) on behalf of the vessel Flag State.
The inputs for the CII calculation, sometimes called the Annual Efficiency Ratio, or “AER”, are the same data that feeds the annual reporting by financial institutions that are Signatories of the Poseidon Principles. Borrowers from Signatory capital providers can see real benefits in the form of lowered margins on debt. The Principles are soon to be applied to maritime insurance- where lower premiums will be the reward for a lower carbon metric. A similar (though not identical) measurement, known as the Energy Efficiency Operational Indicator, or “EEOI” is used for calculations under the Sea Cargo Charter, a global framework for large vessel charterers to report, annually, on the carbon emissions of their activities. Bespoke charter contracts can include specific wording on owners’ reporting of needed inputs (along with information templates for varied vessel types) through a charter party clause. Reports are then verified by a Class Society or other verifier.
With real money on the line, emissions data and all manner of calculations derived from it are now moving from the realm of “obscure” (lurking in the file cabinets of owners’ technical departments) to widely available public disclosures. Large owners have already been providing data on their annual emissions, now financiers, and charterers are doing the same. The business dynamic is also shifting, financiers might potentially provide capital only to customers meeting specific decarbonization numeraires, charterers might prioritize agreeing on vessel “fixtures” with owners similarly meeting specific emissions parameters- with shipping emissions falling into the Scope 3 category. This changed transactional and relationship landscape has opened up a new arena for profit-making data providers, some providing standalone offerings, while others are integrating CII and emissions data into existing products tied to vessel management and route optimization. Not surprisingly, a number of new product introductions occurred in conjunction with the IMO’s MEPC 77 then the COP26 meetings in November, 2021- where the CII ratings timeline over the next few years was solidified.
One group of solutions has a focus of providing ratings of CII.
RightShip, which describes itself as “…the world’s biggest third party maritime due diligence organization…”, was formed in 2001 by two Australian mining giants, with Cargill joining in 2006. It offers a suite of tools for vetting vessels, building upon its initial focus emphasizing safety and crew welfare, emphasizing drybulk vessels. In 2021, it began offering digital delivery of its Greenhouse Gas (GHG) ratings. The assessments- on a scale of A to G , use algorithms which considered varied vessel types, inputting estimates of emissions based on vessel design, combined with AIS data to capture trading patterns.
The Scope Group- a 20 year old provider of credit ratings and analytics, offers its Ship Review product, launched in September 2021, which it says provides ESG rattngs on 70,000 ships and CII ratings on 40,000 vessels. The data, derived from its affiliate Green Mare Services Lda. & Comandita (GMS), is accessed through a data portal “Scope One.”
Verifavia Shipping, which had its start as a verifier of emissions submitted to the European Union’s Monitoring, Reporting and Verification (MRV), launched a digital Dashboard, in late 2021, which provides CII ratings for vessels over 5,000 gross tons. According to the provider, “One of the main features of the dashboard is a calculator which can forecast a vessel’s CII rating for a single voyage, time period or reporting period.” Verifavia also offers digital tools for managing hazardous materials aboard ships.
Another group of offerings provide CII analytics tied in to ship management tools.
Storm-Geo, originally a vessel routing specialist (founded in the late 1990’s) and recently acquired by the industrial behemoth Alfa-Laval (notably ballast water treatment, scrubbers, and fuel treatment), now launched a new Carbon Intensity Indicator (CII) Dashboard. It provides vessel operators with a digital tool for calculating and reporting the CII rankings of their fleet. The Dashboard plugs into to StormGeo’s software and services suite, s-Suite, and is integrated into the s-Insight platform.
CIM (Carbon Intensity Monitoring) Service was launched in October, 2021 by Weathernews International (WNI), a Japan based information provider (formerly known as Oceanroutes), launched its upgraded CIM service- which provides shipowner customers with detailed visualizations of emissions through its dashboard. WNI is sensitive to the needs of charterers with its blockchain-fueled capabilities able to support the EEOI calculations required for cargo interests’ submissions to verifiers.
ZeroNorth , a maritime technology company (a spinoff from Maersk Tankers) aimed at optimizing fuel consumption, employing digital technologies to measure and accurately predict fuel usage, launched a CII analytic tool within its “Optimise” software platform, in late 2021. The CII tools look at vessel characteristics surrounding the vessel’s propulsion plant, and interfaces it with a routing capability aimed at minimizing the distance traveled (both figuring into a vessel’s carbon intensity).
Kongsberg Digital follows the emerging business model of stitching together existing vessel management offerings with newly launched digital capabilities- assembled together in the “Kognifai Marketplace”. In mid 2021, VESPER (from a Danish data specialist-Vessel Performance Solutions) , a new tool for optimizing operational efficiency using advanced modeling and analytics, was added. VESPER supports current reporting into the IMO’s DCS and the EU’s MRV. Plans are in place for VESPER to include calculation and analysis of CII.
OrbitMI, originally developed by Stena Bulk and then spun out in 2017, has a mission of “unlocking the hidden value in data generated by maritime to help the entire sector become more efficient, profitable and sustainable.” Its cloud based software platform provides shipowners with capabilities for individual vessel performance management and analytics which are integrated into an overall fleet management capability that includes tracking and routing. The management of CO2 emissions (including reporting into the IMO DCS and the EU) is integral in OrbitMI’s Sustainability solution set. Its “Post-Voyage Emission Scorecard” provides a summary that can be reported to charterers and other stakeholders. Owners can view CII computations through OrbitMI’s Fleet Dashboard. https://www.orbitmi.com/solutions-overview
Nautilus Labs, based in New York and serving fleets across the world, uses state-of-the-art machine learning to help its customers optimize vessels’ performance. Its CII Intelligence Package, working in concert with its Nautilus Voyage Optimization, enables customers to minimize fuel consumption while also reducing carbon emissions. Using high frequency data, the Nautilus Platform provides operating recommendations to the vessel’s crew and to shore-based personnel, taking into account numerous inputs and blending commercial considerations (time charter equivalents for particular port rotations, for example) with advanced weather routing capabilities. Recommended routings are highly specific, considering vessels’ individual hull geometry, propeller configuration, among other technical factors. https://nautiluslabs.com/nautilus-cii-intelligence/
What might be ahead in this space? The linkage of carbon intensity calculations with what had been “weather routing” is worth noting. Under the AER and EEOI methodologies, the ship’s distance traveled, a function of its routing, is an integral component. The shape of things to come will be fine-tuning of voyages to consider operational criteria interfacing with commercial factors including minimal waiting for berths upon arrival at ports; slowing down (or speeding up) impacts emissions. Weathernews’ CIM system is also set to interface with a yet to be developed digital marketplace, a carbon trading platform. Most likely, other vendors already offering routing and voyage optimizations will be adding CII capabilities. Adding another layer, it is not hard to imagine that ESG minded charterers will be able to more readily tap into this information.