What MEPC75 means for tanker operators

Apr 15 2021


IMO’s “MEPC75” meeting in November formally agreed requirements on shipping companies to report emissions, requirements to make an assessment scheme, where a rating of ‘C’, if achieved by all ships, will keep the whole industry on a trajectory to meet IMO’s targets.

Tanker operators will be keen to know exactly what they need to do to comply with MEPC 75 – if they will be able to keep a certain vessel in compliant operation until 2030 just through slow steaming, and when they need to consider switching to LNG fuel.

 

But the difficulty with answering these questions is that every case is a bit different, said Tore Longva, principal consultant, regulatory affairs with DNV GL.

 

He was speaking at a webinar organised by DNV GL about MEPC 75 on November 26, 2020.

 

“You need to consult with your trusted classification society and see how they can help you with specific vessels. It depends on age, trade profile, investment willingness. There are a lot of factors playing into what is the most appropriate solution for each individual ship.”

 

Although Mr Longva notes, “we think you can achieve 40 per cent improvement in efficiency with the toolkit we have available today. It won’t always be cheap, but it can be done.” In other words, we can manage until 2030 without new fuels.

 

“Getting to the absolute reduction levels of 2050 is a different ballgame - there we need other options.”

 

MEPC discussions

The MEPC 75 meeting was held online over November 16-20. Because people were attending from their home countries, rather than travel to the IMO building in London, and all working in different time zones, the decision was made to restrict discussions to 3 hours a day, so 15 hours in total for the meeting.

 

The online format also did not allow as much interaction as usual, Mr Longva said. Many items were postponed to the next meeting (MEPC 76). Since the MEPC 75 meeting was originally planned for April 2020, it means some items are being postponed for a year. MEPC 76, planned for 2021, is also likely to be virtual, and so have a constrained agenda, and some issues may slide into MEPC 77.

 

A planned revision of guidelines for Exhaust Gas Cleaning Systems was pushed to MEPC 76. Correspondence groups have been established to look at licensing fuel oil suppliers, a shaft power limitation concept, and interim minimum power guidelines.

 

The work to agree a definition of Phase 4 of EEDI was “deprioritised”. Phase 4 will apply to newbuilds of a number of ship types from 2022, and  anticipated to come into force after 2025, so not considered urgent to discuss now.

 

Agreements at MEPC 75

At the November 2020 meeting, approval was given to the 4th IMO greenhouse gas study, by a consortium led by CE Delft, which counted emissions from shipping in 2018 of 1056 MT CO2 equivalent, up 9.6 per cent from 2012. Methane and nitrous oxide emissions were included (and converted to a CO2 ‘equivalent’ amount).

 

This study says that shipping’s share of global emissions was calculated to be 2.89 per cent in 2018, up from 2.76 per cent in 2012.

 

The study says that the overall “carbon intensity” of shipping decreased by either 21 per cent or 32 per cent over the period 2008 to 2018, depending on how it is calculated – 21 per cent if calculated by “capacity mile” or based on voyages, and 32 per cent if calculated by “tonne mile” (cargo carried). Carbon intensity is a measure of how much carbon is emitted per “transport work”.

 

If no additional policies are adopted to decarbonise, emissions are projected to end up growing by between 90 and 130 per cent by 2050, relative to 2008.

 

The focus of the MEPC work is to get emissions to a peak as soon as possible, and then reduce “carbon intensity” by 40 per cent by 2030, compared to 2008. (Note, 21 to 32 per cent reduction has already been achieved).

 

On the technical side, MEPC75 approved plans for an EEDI (Energy Efficiency Design Index) rule on existing ships, known as the “EEXI” (Energy Efficiency Existing Ship Index). This is described in more detail below.

 

On the operational side, it approved plans to ask shipping companies to write a “SEEMP” (Ship Energy Efficiency Management Plan), showing how they will reduce their operational emissions.  It is based around a Carbon Intensity Indicator – CII. This is also described in more detail below.

 

“You might as well learn these acronyms, it is hard to spell them out each time,” Mr Longva said.

 

Each member state is encouraged to develop its own national action plan, an example being Norway’s Green Shipping Program.

 

MEPC75 considered a proposal from a number of shipping industry associations, including the International Chamber of Shipping, World Shipping Council, Intertanko and the International Parcel Tankers Association, to raise money for research and development of fuels, levied on fuel purchases.

 

The meeting also did not discuss plans to set GHG / carbon intensity guidelines for other fuels, also including emissions made in producing the fuels and delivering them to vessels (“well to tank”), methane slip, nitrous oxides, and emissions from VOCs.

 

So for now, the regulations only relate to the amount of CO2 you emit per the amount of cargo tonne miles you make.

 

EEXI

EEXI is what will concern tanker operators the most.

 

It follows EEDI, the “Energy Efficiency Design Index”, which says that new ships being built over 2025 to 2030 must have a 30 per cent improvement in energy efficiency compared to a baseline, calculated as the average efficiency for ships being built between 2000 and 2010.

 

Under EEXI, existing tankers need to achieve a “delta”, or improvement, of 15 to 20 per cent, compared to the baseline, with the same time periods as for EEDI for achieving the improvement and the base line. The delta is different for different ship types. Cruise ships and LNG carriers must get 30 per cent, gas carriers must get 20 to 30 per cent.

 

So this should get existing ships “on par” with what is required for new ships, under EEDI phase 2 or 3.

 

Ships need to comply with EEXI by early 2024. Specifically, the deadline is the “first annual, intermediate or renewal IAPP (International Air Pollution Prevention) survey after 1 Jan 2023.”

 

So by early 2024 - all ships which are in scope need to comply with EEXI.

 

The index is calculated by a complex formula which takes ship's emissions, capacity and speed into account, with the speed based on that calculated in the sea trial, after the vessel was launched, or by other methods.

 

The way to reduce the score involving the least financial investment is probably to reduce the speed. The engine can be “de-rated”, so it operates at a slower speed, or you can set a “virtual” limit on engine power, basically an agreement that you will only operate the vessel with a certain power level. You are only allowed to exceed it in an emergency.

 

Shipping companies need to put all of this in a technical file, which is verified and approved in the first IAPP survey after Jan 2023.

 

SEEMP

All ships above 400 GT need to develop a “Ship energy efficiency management plan (SEEMP), by Jan 1, 2023.

 

A rating system will be designed by IMO so that if all ships are C or better, by 2030 shipping will reach its 40 per cent target of improving carbon intensity.

 

It will probably be calculated in emissions per deadweight mile. The threshold for reaching “C” will get more stringent in time.

 

Cargo and cruise ships above 5000 GT need to achieve rating "C" in their Carbon Intensity Indicator, every year from 2023, their SEEMP should show their plan to achieve this.

 

The plan should also have a continuous improvement focus.

 

Any ship scoring “D” for 3 consecutive years, or an E, will need to implement corrective actions, which will be included in their SEEMP, and need to be approved, for a vessel to receive its annual statement of compliance.

 

Offshore vessels, passenger vessels (not cruise ships or ROPAX) will not have any index. The reason is that these vessels are very diverse, so it is very hard to calculate how one vessel compares to others in its ‘class’. Although they are still required to collect and report data.

 

The policy will be reviewed by Jan 2026, looking at strengthening the enforcement mechanism and corrective actions.

 

IMO’s 2050 target is that CO2 emissions should be reduced by 70 per cent compared to 2008, counted as CO2 emissions per transport work, and total GHG emissions from the industry should be reduced by 50 per cent, compared to 2008.

 

The company’s CII may become public, since it is included on the vessel’s “statement of compliance”, which is a public document in many jurisdictions. This means the data may be included in the various online vessel rating schemes.

 

The verification and audit will be done by the organisations accredited as “recognised” by flag states – mainly the classification societies.

 

IMRDB

There is a proposal from industry bodies, including ICS, World Shipping Council, BIMCO and Intertanko, to set up a research fund to develop zero carbon technologies, paid for with a levy per tonne of fuel purchased, proposed at $2 per tonne for all ships above 5,000 GT, building a purse of $5bn over the lifetime of the program.

 

A full day of the MEPC 75 meeting (3 hours) was taken up by discussing this.

 

IMO members were talking about it as a “market based measure”, although the industry had been careful not to present it as a “market based measure”, saying that the money would be for research only, not to make certain fuels more viable.

 

There were inconclusive discussions about whether IMO could take on the responsibility of making this a legal mandate, Mr Longva said. 

 

“IMO agreed to invite further comment, so discussion will come back in MEPC 76.”

 

Other amendments

Other amendments made by IMO are changes to MARPOL Annex VI stating that you need to have a sampling point in your fuel system, either fitted or “designated”, for inspectors to sample and verify sulphur content. This needs to be approved by the first IAPP survey after April 2023. “There’s either technical or bureaucratic work to take care of,” Mr Nyhus said.

 

There are new verification procedures for how samples are to be analysed and what kind of bandwidth is acceptable on sampling results.

 

Also at MEPC 75 the International Convention on the Control of Harmful Anti-fouling Systems on Ships was amended to ban the biocide cybutryne.

 

There was a ban on use and carriage of heavy fuel oil in the Arctic from July 1, 2024, with exemptions for tanks with a double hull, or for Arctic coastline states which want to exempt their own ships in their own waters until 2029. This was a compromise agreed with certain Arctic states to get the ban passed.

 

Audience poll

Audience members were polled to find out what they anticipated their main measure would be to comply with EEXI.

 

21 per cent chose engine power limitation, 16 per cent retrofit energy efficiency devices, 17 per cent operational improvements, 25 per cent alternative fuels, 19 per cent said “I have not started looking into this.”

 

DNV GL’s Mr Longva noted that limiting engine power “is the simplest way of reducing EEXI to comply.” He said he was surprised so many companies were considering alternative fuels – although they will be necessary to get beyond the 2030 ambitions.

 

“For those that haven't started looking into this - we are strongly recommending you are looking at this for your vessel. Within 3 years all vessels need to comply. That means 20- 30,000 vessels need to have done calculations and possible upgrades.”

 

Eirik Nyhus, director environment with DNV GL, added that he was expecting more votes to go to engine power limitation. “It is the easiest way to go with it.”

 

“The fact that people are going for alternative fuels tells me that people are thinking about this in an alternative context. I think that’s good.”

 

Older vessels

Shipowners will consider whether they can get the required 30 per cent efficiency improvement by 2030 on older vessels just by reducing the speed. But this is the only way they can do it, if they are unable to use different fuels or adjust the engine to make it more efficient.

 

For example, companies agree to reduce the power of the engine to 70 to 80 per cent of its “maximum continuous rating” (MCR).

 

“At some point the speed is so slow the ship is commercially unattractive,” Mr Nyhus said. “Then it becomes a commercial decision [whether to scrap]. It has some impact on older tonnage.”

 

Other fuels

In terms of fuels other than oil,  currently only LNG, LPG and methanol are included in the regulations, with a stated lower “carbon factor”.

 

If you want to state that the vessel runs on LNG, you must have at least 50 per cent of your fuel tank capacity being LNG tanks. For methanol, it is not yet defined.

 

Operational improvements

Possible operational improvements shipowners can make include methods to improve efficiency of operations, including adjustments to the propeller, air lubrication under the hull, even wind power.

 

However this appears to only include hardware investments, not changes in how the ship is operated, such as optimising routing, speed and onboard power generation, apart from making an agreement to reduce the maximum power of the engine.

 

EU

Shipping companies also need to be aware of what is happening at the European Union. The 27 EU members comprise a big voting block at IMO. Also EU’s own policy initiatives and regulations will impact IMO, in particular around the “European Green Deal” which aims to make Europe climate neutral by 2050, including shipping.

 

The EU is also considering tightening its 2030 targets for land based emissions, currently 40 per cent reduction in emission compared to 1990, to be increased to 55-60 per cent.

 

“It would be disingenuous to think shipping will avoid being discussed in this context,” Mr Longva said.

 

There is a push from both the European Parliament (EP) and European Commission (EC) to include shipping in the Emission Trading Scheme (ETS), with EP saying 2022, EC saying 2024 may be more realistic. This would require shipping companies to buy carbon credits for the CO2 the vessels emit. There are disagreements on how the funds raised will be spent.

 

But the discussion is about “when” not “if” shipping will be included, he said.

 

Decisions are still ongoing about whether the ETS would apply only to the part of a voyage which is within European waters, or the whole voyage if it includes going to, or leaving, European waters.

 

We have seen that there are political implications of trying to levy carbon charges on transportation outside European waters, when such a scheme was introduced in aviation. “We don't know how that will play out, we expect to see more next year,” Mr Nyhus said.

 

The European Climate Law, likely to be adopted in June 2021, will be a “key vehicle” for future actions.

 

There will be revision of the MRV regulation, covering “monitoring, reporting and verification of carbon dioxide emissions from maritime transport.” This was originally based on IMO’s Fuel Oil Data Collection System (DCS) requirements, but the regulations have now diverged.

 

Charterers

In terms of the involvement of charterers, Mr Nyhus said that he did not anticipate they would get very involved in IMO itself. “Charterers don't have a seat at IMO other than as Non-Governmental Organisations (NGOs)”.

 

However, there are other mechanisms where charterers are engaged, such as the Sea Cargo Charter.

 

“Charterers seem to be moving quite proactively these days, I don't think they will wait, to be honest,” he said.

 



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