Reducing Greenhouse Gas Emissions: A Guide to International Regulatory Compliance - Second Edition

Shipping - as one the world?s largest transport sectors - is experiencing major regulatory challenges to achieve the international targets on reducing GHG emissions. This new edition provides a comprehensive overview of all of these complex regulations in one place, guiding readers through compliance with the 2021 amendments to MARPOL Annex VI, the revised 2023 IMO GHG Strategy and the EU?s new Emissions Trading System (EU ETS).

The EU ETS began to apply to international shipping at the start of 2024 and EU allowances are due to be surrendered by shipping companies in 2025. A brand new chapter in this guide focuses solely on the EU ETS to explain how it currently applies to ships trading in and out of the EU. Readers can expect to be better informed on:

• The shipping company's responsibility under the EU ETS
• What voyages are covered by the EU ETS
• What to include on emissions monitoring plans
• How to calculate the amount of allowances owed and more

The interlinked relationship between reducing underwater radiated noise and GHG emissions is detailed, including a new appendix that lists approximately 100 different reduction measures.

'Reducing Greenhouse Gas Emissions: A Guide to International Regulatory Compliance' also plainly sets out the existing IMO regulations. Specifically, the application of the Energy Efficiency Design Index (EEDI) for new ships, Energy Efficiency Existing Ship Index (EEXI), Carbon Intensity Indicators (CII) and submission of Ship Energy Efficiency Management Plans (SEEMPs).

This guide is essential for shipowners, operators and managers subject to the regulations, particularly MARPOL Annex VI. It will also be valuable to those involved in the design of new ships and modification of existing ships, including naval architects.

Foreword

In July 2023, as part of worldwide efforts to mitigate dangerous climate change, the Member States of the United Nations International Maritime Organization (IMO) unanimously adopted the 2023 IMO Strategy for the Reduction of Greenhouse Gas (GHG) Emissions from Ships, or what is now known as the 2023 IMO GHG Strategy.

As well as setting out a net zero GHG target for international shipping, by, or close to, 2050, and ambitious indicative checkpoints for the reduction of international shipping?s absolute GHG emissions by 2030 and 2040, the revised IMO GHG Strategy sets out an important new level of ambition ?to increase uptake of zero or near-zero GHG emission technologies, fuels and/or energy sources to represent at least 5%, striving for 10%, of the energy used by international shipping by 2030?.

ICS fully supports these new GHG reduction targets. The enormity of this challenge, though, cannot be overstated. To make these highly ambitious targets and achieving them plausible, IMO intends to adopt a radical package of new regulations by 2025. This is expected to include a maritime GHG emissions pricing mechanism, as well as a Global Fuel Standard regulating the permitted GHG intensity of marine fuels, to be aggressively reduced between 2030 and 2040.

The first edition of this Guide was published in 2022 to coincide with the entry into force globally of new IMO regulations adopted in 2021, which are intended to improve the energy efficiency of ships. This new regime includes the introduction of carbon intensity indicators and what is now known as the CII framework, whereby will ships be issued with annual A-E operational efficiency ratings, starting in 2024. The second edition of this Guide coincides with the initial publication of these new A-E ratings.

While ICS fully supports the objectives of the CII framework, the methodology agreed by IMO to calculate the carbon intensity of individual ships has proved controversial, and is now the subject of an IMO review to be completed by 2026. In the meantime, ships have no choice but to comply with the CII framework and the other new IMO regulations which entered into force in 2022. These include the technical requirements of the Energy Efficiency Existing Ship Index (EEXI) and the ?enhanced SEEMP? concept, whereby Ship Energy Efficiency Management Plans are now subject to external verifications and audits. The details of this complex regulatory package, and how to achieve compliance, are explained within the new edition of this Guide, which also takes account of new IMO Guidelines adopted in 2023.

Although not an IMO requirement, the new edition of this Guide on regulatory compliance with GHG regulations contains a new chapter setting out the details of the European Union?s Emissions Trading System (EU ETS), which will start to apply to international shipping in 2024. This also includes non-EU flag ships, which are currently expected to be required to surrender allowances, purchased on the EU carbon market, for CO2 emitted throughout voyages to and from the EU.

As with the previous edition, this Guide is primarily intended for shipping companies and ship?s crews, to help them understand the IMO regulatory framework and its evolutions, including the 2021 amendments to MARPOL Annex VI, and to support decision-making on compliance with the latest mandatory requirements.

This Guide is structured in five main chapters:

• Chapter 1 provides an overview of the ship energy efficiency regulatory framework adopted by IMO;
• Chapter 2 focuses on the key technical concepts supporting this framework;
• Chapter 3 covers the new regulations including the 2021 amendments to MARPOL Annex VI (as
• well as existing IMO regulations on GHG reduction by ships) with detailed guidance on compliance;
• Chapter 4 contains an explanation of the application of the EU ETS to international shipping; and
• Chapter 5 contains practical information on efficiency improving solutions, that may help shipping companies achieve compliance with the IMO regulations.

Appendix B contains the long and short titles (used in this Guide) of all relevant IMO guidelines as well as other useful guidance documents currently available. Appendix E contains long and short titles of all relevant EU references as well as other useful guidance documents currently available.

In view of the ongoing development and regular changes being made to the IMO regulatory framework for GHG emissions, and to take account of experience gained during the initial implementation of these new requirements, revisions of this Guide are anticipated.

Abbreviations

Definitions

Editorial note

Chapter 1

Introduction

1.1 Overview

1.2 Air pollution from ships

1.3 The 2023 IMO GHG Strategy

1.4 Implications of the 2023 GHG Strategy

1.5 Annex VI of MARPOL Convention

1.5.1 History of MARPOL Annex VI

1.5.2 2021 Revised MARPOL Annex VI

1.6 Expected developments

1.6.1 Carbon Intensity Code (CIC)

1.6.2 Lifecycle assessment (LCA) guidelines

1.6.3 GHG fuel standard (GFS)

Chapter 2

Key concepts

2.1 Overview

2.2 Energy Efficiency Design Index

2.2.1 EEDI: Key facts

2.2.2 ?Attained EEDI? formula

2.2.3 ?Attained EEDI? correction factors

2.2.4 EEDI reduction rates and reference value

2.2.5 EEDI in practice

2.2.6 Ship minimum propulsion power

2.2.7 EEDI database and reporting requirements

2.3 Energy Efficiency Existing Ship Index

2.3.1 EEXI: Key facts

2.3.2 ?Required EEXI? reduction rates and reference line

2.3.3 ?Attained EEXI? formula

2.3.4 Challenges with some parameters

2.3.5 Compliance with EEXI in practice

2.4 Carbon Intensity Indicators

2.4.1 CII: Key facts

2.4.2 ?Attained CII? calculation

2.4.3 Correction factors and voyage adjustment

2.4.4 ?Required CII?

2.4.5 CII ratings for ship performance

2.4.6 Compliance with CII framework

2.5 Ship Energy Efficiency Management Plan

2.6 Data Collection System for Fuel Oil Consumption of Ships

2.6.1 Fuel oil consumption

2.6.2 Annual operational CII

Chapter 3

MARPOL Annex VI regulations, including the 2021 amendments

3.1 Overview

3.2 General provisions in MARPOL Annex VI

3.2.1 General application and definitions

3.2.2 Exemptions

3.3 MARPOL Annex VI, Chapter 4: Regulations on carbon intensity for international shipping

3.3.1 Application

3.3.2 Goal-based regulations

3.3.3 Regulations 22 and 24 ? EEDI

3.3.4 Regulations 23 and 25 ? EEXI

3.3.5 Regulation 26 ? SEEMP

3.3.6 Regulation 27 ? Collection and reporting of ship fuel oil consumption data

3.3.7 Regulation 28 ? Operational carbon intensity

3.4 Survey, certification and means of control

3.4.1 Introduction to MARPOL Annex VI, Chapter 2 regulations

3.4.2 Steps for the EEXI certification

3.4.3 Documentation and audits under the CII framework

3.4.4 Port state control

Chapter 4

Global implications of the EU Emissions Trading System

4.1 Overview

4.1.1 What is the EU ETS?

4.1.2 How the EU ETS functions

4.2 Phase-in timeline and scope

4.2.1 Ice-class ships

4.2.2 Excluded ships

4.3 Voyages covered by the EU ETS requirements

4.3.1 Transhipment ports for containerships

4.3.2 Exemptions

4.4 Port of call definition

4.5 Emissions calculation under the EU ETS

4.6 Updated emissions monitoring plan

4.7 Emissions reporting and verification

4.8 The Document of Compliance

4.9 Summary of key dates

4.10 The shipping company?s role and responsibility under the EU ETS

4.10.1 What entity is the shipping company?

4.10.2 Approaches to complying with the EU ETS obligations

4.11 Opening an account in the EU ETS Union Registry

4.11.1 Options to obtain EU allowances

4.11.2 A shipping company?s administering authority

4.12 Reporting of emissions

4.12.1 Application

4.12.2 EU MRV monitoring plans

4.12.3 Emissions to be reported

4.12.4 Shipping companies? annual emissions reporting

4.12.5 Change of company and partial emissions reports

4.12.6 Other issues

4.13 Surrender of EU ETS allowances, enforcement and penalties

4.13.1 Surrender of EUAs

4.13.2 Financial penalties

4.13.3 Detention and expulsion orders

4.14 Review and revision clauses under the EU ETS

4.14.1 Implementation of EU ETS and interlinkage with EU MRV

4.14.2 Possible alignment with IMO regulations

4.15 EU ETS market

4.15.1 What are EU allowances?

4.15.2 EU ETS Union Registry

4.15.3 Account opening in the EU ETS Union Registry

4.15.4 Bilateral sale and purchase of EUAs

Chapter 5

Efficiency improving solutions

5.1 Overview

5.2 How to categorise solutions

5.2.1 Improving a ship?s EEDI, EEXI or CII value

5.3 Machinery

5.3.1 Power limitation devices and engine de-rating

5.3.2 Carbon capture

5.4 Ship hydrodynamics

5.4.1 Hull

5.4.2 Propellers and rudders

5.5 Other energy saving solutions and assisted propulsion

5.5.1 Retrofitting options

5.5.2 Propulsion assistance

5.6 Operations optimisation (best practices)

5.6.1 Autopilot adjustment and use

5.6.2 Trim optimisation

5.6.3 Ballast operations management

5.6.4 Voyage optimisation

5.6.5 Speed management

5.6.6 ?Just in time? arrivals

5.6.7 Hydraulic system management

5.6.8 Main engine performance optimisation

5.6.9 Steam production

5.6.10 Electrical load management

5.6.11 Digital solutions

5.7 Alternative fuels

5.7.1 Fuel lifecycle

5.7.2 Fuel quality

5.8 GHG reduction measures and underwater radiated noise

Appendices

Appendix A The IMO GHG Strategy

Appendix B IMO references and useful resources

Appendix C GHG and underwater radiated noise reduction potential of available solutions

Appendix D Checklists for managers

Appendix D1 EEXI checklist for managers

Appendix D2 CII checklist for managers

Appendix E EU references and useful resources

ICS

The International Chamber of Shipping (ICS) is the principal international trade association for the shipping industry, representing shipowners and operators in all sectors and trades.

ICS membership comprises national shipowners' associations in Asia, Europe and the Americas whose member shipping companies operate over 80% of the world's merchant tonnage.

Established in 1921, ICS is concerned with all technical, legal, employment affairs and policy issues that may affect international shipping.

ICS represents shipowners with the various intergovernmental regulatory bodies that impact on shipping, including the International Maritime Organization.

ICS also develops best practices and guidance, including a wide range of publications and free resources that are used by ship operators globally.

https://www.ics-shipping.org/about-ics/about-ics