24/11/08
Carbon intensity reg pivotal to biobunkers in 2025
Carbon intensity reg pivotal to biobunkers in 2025
New York, 8 November (Argus) — The International Maritime Organization's (IMO)
carbon intensity indicator (CII) regulation will propel biofuel bunker demand in
2025 as its restrictions tighten. The CII regulation came into force in January
2023 and thus far has had a muted effect on shipowners' biofuel bunker demand.
But 2025 could be a pivotal year. CII requires vessels over 5,000 gross tonnes
(gt) to report their carbon intensity, which is then scored from A to E. A and B
vessel scores are regarded as superior energy efficiency, while C, D and E are
considered moderate to inferior scores. The scoring levels are lowered yearly by
about 2pc, so a vessel with no change in CII could drop from from C to D in one
year. If a vessel receives a D score three years in a row or E score the
previous year, the vessel owner must submit a corrective action plan. The IMO
has not established penalties or restrictions for vessels scoring D. Thus,
theoretically a ship owner could have scored D in 2023 and 2024 with no
consequences. Year 2025 will mark CII's third year, when ship owners whose
vessels were scoring D in 2023 and 2024 will need to rethink their
sustainability approach or risk getting D again and having to produce corrective
actions plans in 2026. That is in addition to the ship owners whose vessels will
score E in 2024. To improve its CII score, a ship owner could reduce its speed
and burn low-carbon fuels, among other solutions. Biofuel is the only
plug-and-play low-carbon fuel option that does not require a costly vessel
retrofitting. in 2023 of the vessels 5,000 gt and over, 3,931 scored D, 1,541
scored E and 3,967 did not report scores, according to the latest IMO data ( see
chart ). Assuming that the non-responders refrained from reporting to avoid
sharing their low D and E scores, then the total number of D and E scoring
vessels could be as high as 9,439, or 33pc of the total vessel count. The bulk
of the vessels reporting D and E were dry bulk carriers at 1,853 and 641,
respectively, followed by oil tankers at 743 and 349, respectively, according to
IMO data. The dry bulk carrier category also had the highest number of
non-responders at 1,015 vessels. The vessel classification society American
Bureau of Shipping concluded that a reference case container vessel with
154,000t deadweight could see its rating improve from D to C in 2025 if it
switched from burning conventional marine fuel to B25 biofuel. FuelEU, EU ETS:
All bark, no bite Separately from the CII regulation, ship owners traveling in,
out and within EU territorial waters will see the implementation of a new FuelEU
marine regulation on 1 January and the tightening of the existing EU ETS
regulation. But neither would be major driving forces behind biofuel for
bunkering demand in 2025. The EU ETS will require that vessel operators pay for
70pc of their CO2 emissions next year. But even with the added cost of CO2, a
B30 biofuel blend is more expensive than conventional marine fuel. In Rotterdam
in October, B30 — comprised of 30pc used cooking oil methyl ester (Ucome) and
70pc very low-sulphur fuel oil (VLSFO) — with a 70pc CO2 cost added would have
averaged $924/t, compared with VLSFO with added 70pc CO2 cost at $682/t,
according to Argus data. In order for the EU ETS to entice ship owners to burn
biofuels, at current VLSFO and Ucome prices, the price of CO2 has to rise up to
$300/t. And CO2 has fluctuated from $55-$102.5/t from January 2023 to October
2024. Starting on 1 January 2025, the EU's FuelEU regulation will require that
vessel fleets' lifecycle greenhouse gas intensity is capped at 89.34 grams of
CO2-equivalent per megajoule (gCO2e/MJ) through 2029. For vessels which do not
meet this cap, a low biofuel blend can meet the requirement. A B5 blend,
comprised of 5pc Ucome and 95pc VLSFO, emits less than 89 gCO2/MJ. At this rate,
albeit higher, demand for biofuels would not spike dramatically. Unlike the CII
scores which apply to individual vessels, FuelEU applies to vessel pools.
Different shipping companies are allowed to pool their vessels together to share
compliance and meet the EU ETS emissions limits. Thus several biofuel or LNG
burning vessels can compensate for the emissions generated by the majority of
the older, less fuel efficient vessels burning conventional marine fuel in the
pool. By Stefka Wechsler CII vessels rating Number of vessels (5,000 GT and
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