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Carbon intensity reg pivotal to biobunkers in 2025

  • : Biofuels, Oil products
  • 24/11/08

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.

CII vessels rating Number of vessels (5,000 GT and over)

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24/12/10

Brazil's inflation accelerates to near 5pc in November

Brazil's inflation accelerates to near 5pc in November

Sao Paulo, 10 December (Argus) — Brazil's headline inflation accelerated to a 14-month high in November, led by gains in food and transportation, according to government statistics agency IBGE. The consumer price index (CPI) rose to an annual 4.87pc in November from 4.76pc in the previous month, IBGE said. Food and beverage costs rose by an annual 7.63pc in November, accounting for much of the monthly increase, following a 6.65pc annual gain in October. Beef costs increased by an annual 15.43pc in November following an 8.33pc annual gain for the prior month. Higher beef costs in the domestic market are related to the Brazilian real's depreciation to the US dollar, with the exchange rate falling to a record-low R6.11/$1 at the end of November. The stronger dollar leads producers to prefer exports over domestic sales. Beef prices rose by 8pc for the month alone. Soybean oil prices rose by 27.75pc over the year. Transportation costs, another major contributor to the monthly acceleration, rose by an annual 3.11pc in November after a 2.48pc gain in October. On a monthly basis, transportation costs rose by 0.89pc in November, reversing a contraction of 0.38pc in October. Housing costs rose by 4pc over the 12-month period. Brazil's central bank last month hiked its target rate to 11.25pc, its second increase off a low of 10.5pc between May and September, to try to head off a resurgence in inflation. It was at a cyclical peak of 13.75pc from August 2022 through July 2023 as it sought to tamp down the post-Covid-19 surge in inflation. Fuel prices rose by an annual 8.78pc in November after a 7.22pc gain in October. Motor fuel costs fell by 0.15pc in November compared with a 0.17pc drop in October — thanks to lower ethanol and gasoline prices. Diesel prices contracted by 2.25pc in the 12-month period. Power costs slowed to an annual 3.46pc in November following a 11.58pc gain in October. Electricity prices contracted by a monthly 6.27pc after a decrease in power tariffs on 1 November. Monthly inflation slowed to 0.39pc in November from 0.56pc in October. The central bank's inflation goal for 2024 is 3pc, with a margin of 1.5pc above or below. By Maria Frazatto and Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico’s CRE lays off officials after reform


24/12/10
24/12/10

Mexico’s CRE lays off officials after reform

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Assad’s ouster removes key outlet for Iran’s crude


24/12/10
24/12/10

Assad’s ouster removes key outlet for Iran’s crude

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Braya may idle Canada RD plant by year-end


24/12/09
24/12/09

Braya may idle Canada RD plant by year-end

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German heating oil demand surges before CO2 tax hike


24/12/09
24/12/09

German heating oil demand surges before CO2 tax hike

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