A Digital Foundation For CII

For many in shipping, this year is reminiscent of old school times. The world’s commercial ships have started their first round of examinations under the IMO’s Carbon Intensity Indicator (CII) regulation. While their official ratings won’t be formally calculated until the end of the year, the assessment is already well under way. Since the beginning of January, every sea passage, and every unit of carbon emitted, is building towards a vessel’s final score for the year.

While it is still early days, it is expected that CII ratings will influence a ship’s competitiveness moving forward, with pressure from both ends of the logistics chain. On the one hand, cargo owners, consumers and ESG-conscious companies will increase demand for sustainable shipping. On the other, top-rated vessels may receive better freight rates, loan conditions and interest rates, or lower insurance costs.

As a result, poorly rated ships may struggle to secure business and financing, while top-rated vessels are likely to have a competitive advantage. This will become apparent, especially starting in 2024, when the first CII ratings will be assigned for the vessels based on 2023 data.

A collaborative approach to CII

The CII era is shifting some of shipping’s most enduring paradigms. Perhaps most significantly, it demands that we rethink the relationship between owners and charterers.

If we are to make CII a success, owners and charterers need to work together more closely on operational decisions to improve a vessel’s fuel performance and ensure its compliance. This is because responsibilities and incentives are shared: on the one hand, owners oversee any technical improvements made to a ship and will be on the receiving end of a good or bad CII rating. On the other, charterers, for the most part, determine how the vessel is operated.

While much has been said about the contractual elements that will define this new relationship, it’s worth taking a look at the technology and software platforms needed to make this collaboration work in practice.

Simulating the future to improve it

In essence, both parties need a common platform where they can develop a shared understanding of how a vessel’s CII evolves throughout the year, and what can be done to improve or maintain it.

This is where data analysis and simulation tools come in. Our NAPA CII Simulator module, for instance, uses a ship’s digital twin, together with data on a vessel’s past and current operations and performance and information about planned future voyages, to predict its CII rating for every sea passage and for any desired date, such as the end of the year or after a given chartering period.

Crucially, the software can model the impact of technical and operational measures (including weather routing, slow steaming, or installing energy-efficiency devices) on the vessel’s rating for each voyage, and the overall result at the end of the year. It provides granular insights, even modelling the impact of hull cleaning at different moments in the year, so that these cleaning operations can take place when they will have the desired impact on CII.

This gives owners and charterers a common understanding of whether they are on track to achieve the agreed CII, and helps them make the best possible choices knowing what will achieve optimal outcomes for that specific ship. Data analysis tools can also play a key role to help prevent or resolve disputes under charter party agreements, which will be particularly important when maintaining a certain CII is part of the contract.

The case for a head start

Armed with that knowledge and the confidence that they are on the same page, owners and charterers can take a proactive approach to CII.

In tangible terms, this enables them to act early to correct the course of a vessel that is heading towards a poor CII rating. Early action is preferable, as this means being able to make minor adjustments for a longer period of time, rather than having to take drastic action in the last months of the year, by reducing speed significantly, for example, which would have a bigger impact on the ship’s competitiveness.

Together, owners and charterers can compensate for any unexpected events, including bad weather or a less efficient journey, to bring the vessel’s CII back in line with expectations. They can also identify when they have enough margin to take a hit on CII optimization and seize a business opportunity that will involve a less efficient or faster journey.

With simulation, performance monitoring and voyage optimization, the technological groundwork needed to make CII a success already exists. The next step is to use these tools collaboratively to advance shipping’s decarbonization in harmony with business strategies. More than an exam board, the world is watching