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MARINE | Carbon emissions In association with Marsh Specialty
Stephen Harris, Senior Vice President, Technical Advisor, Marine & Cargo, Marsh Specialty explains how the shipping industry stands to be heavily impacted by emissions-related regulatory changes in the coming months Amendments to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL), adopted in June by the 76th Marine Environmental Protection Committee (MEPC) meeting, presents the shipping industry with significant challenges. From January 1, 2023, vessels registered in MARPOL signatory countries will have their exhaust emissions tested at the vessel’s next annual, intermediate or renewal survey thereafter, using a scale known as the Energy Efficiency Existing Ship Index (EEXI). Testing will take place on all vessels of 400 gross tonnage (GT) or more, that are registered in MARPOL signatory countries. Since 2013, vessels under construction have undergone testing using a similar regime – the Energy Emissions Design Index (EEDI). The aim of these allied initiatives is to drive the shipping industry towards the International Maritime Organization’s (IMO) target of a 40% reduction in carbon emissions – compared to 2008 levels – by 2030. Further action may be needed, as the European Union (EU) stated recently that for all vessels visiting ports or sailing within its waters, a tougher 55% reduction in carbon emissions, compared to 1990 levels, will be required by 2030.
ENERGY EFFICIENCY CERTIFICATES A vessel’s emissions will have to meet the targets set out in the EEXI at testing, in order for it to receive a certificate of compliance, called the International Energy Efficiency Certificate (IEEC). Under EEXI standards, vessels will be tested on an emissions scale of A to E. Those in the A to C group will be issued with the IEEC. In order for vessels in the D and E categories to qualify for the certificate, their owners will have to state the actions they are going to take, to achieve an A to C emissions rating. Such statements must be acceptable to the testing authorities — simply promising to reduce speed, or to reduce the distance traveled, will not be regarded as sufficient action. It is important to realise that, prior to entry, ports may start requiring to see evidence of a vessel’s IEEC from the first vessel survey date after January 1, 2023. Vessels without the necessary certification on board may The Marine Insurer Claims Edition | September 2021
Shipping industry faces new standards on carbon emissions increasingly encounter difficulties in being allowed to proceed into a port or to a terminal. Ultimately, this could have consequences for a vessel owner’s obligations under a charterparty agreement, if the vessel is unable to proceed to ports, nominated by the charterer. Furthermore, failure to obtain an IEEC could be viewed as a breach of the MARPOL convention and, as such, may render the vessel technically “unseaworthy”. Such a charge could have unfavorable implications, not only for the vessel operators, who are usually contractually obliged under the terms of a charterparty agreement to provide a “seaworthy” vessel for their charterers, but also for individual cargo owners, under the terms of the affreightment or bills of lading contracts.
INSURANCE ISSUES The method a ship owner chooses to achieve EEXI certification, and the alternative fuel type they decide to adapt their engines to run on, will be largely up to them. However, the failure of an owner to achieve EEXI certification for a vessel and to obtain an IEEC, could have implications for insurance cover. Voyage policies often require the vessel to be seaworthy at the commencement of the voyage. Under a time policy, the vessel is required not to set to sea if the insured knows it to be in an unseaworthy state. While vessel charterers do not choose the fuel type, as vessel owners and operators make that decision, the new requirements, nonetheless, present them with a number of challenging decisions to make. As they often hire a ship for
