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DNV on IMO MEPC 81: Negotiations on new GHG reduction requirements continue

MEPC 81 continued its negotiation of GHG fuel intensity requirements, potentially in combination with a GHG pricing mechanism; approved proposals to designate Canadian Arctic and Norwegian Sea as ECAs for NOx, SOx and PM.

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Classification society DNV on Saturday (23 March) published a technical regulatory news titled ‘IMO MEPC 81: Negotiations On New Ghg Reduction Requirements Continue’. The following are excerpts from the update related to bunker fuel:

The 81st session of the IMO’s Marine Environment Protection Committee (MEPC 81) continued its negotiation of GHG fuel intensity requirements, potentially in combination with a GHG pricing mechanism. 

Other important decisions include the reporting of transport work and more granular fuel consumption data in the data collection system, and approval of proposals to designate the Canadian Arctic and the Norwegian Sea as NOx, SOx and PM Emission Control Areas.

Energy efficiency

Use of ShaPoLi/EPL systems in the EEXI framework

To ensure a consistent and uniform approach to the immediate availability of power, including the power reserve, when using overridable shaft/engine power limitation (ShaPoLi/EPL), MEPC 81 revised the ShaPoLi/EPL guidelines. The revisions are based on provisions set out in IACS Recommendation 172 for systems which do not physically limit shaft or engine power and where the override of shaft power limitation can be indicated by giving an alarm. In this context, manual shaft power limitation systems can inhibit the initiation of the exceedance alarm for up to 5 minutes.

Review of the Carbon Intensity Indicator (CII)

MEPC 81 did not agree on a resolution stating that the CII rating system is currently within an experience building phase and that key elements of the system should be considered interim. Although recognizing that there are shortcomings in the CII framework, it was agreed that the CII is not a provisional measure and that such a resolution would undermine the CII. The concerns raised should be considered as part of the upcoming CII review.

Revision of the Data Collection System (DCS)

MEPC 81 adopted revised guidelines on SEEMP related to reporting fuel oil consumption per consumer type and transport work. This supports the adopted amendments to MARPOL Annex VI mandating the reporting of additional data elements through the DCS.

Carriage of biofuel blends

A proposal to allow for carriage of blends of up to 30% biofuel on bunker barges certified according to MARPOL Annex I was forwarded to the ESPH (Evaluation of Safety and Pollution Hazards of Chemicals) Working Group for further consideration.

Unified Interpretations

MEPC 81 agreed on Unified Interpretations to MARPOL Annex VI regarding:

  • the definition of heavy load carriers and
  • the application of the required EEDI to LNG carriers, cruise passenger ships, ro-ro passenger ships, ro-ro cargo ships (vehicle carrier) and ro-ro cargo ships, delivered on or after 1 September 2019.

Reduction of GHG emissions

Mid and long-term measures to reduce GHG emissions

To ensure shipping achieves the ambitions of the 2023 IMO GHG Strategy, the MEPC 80 decided to implement a basket of measures consisting of two parts:

  • A technical element,which will be a goal-based marine fuel standard regulating the phased reduction of marine fuel GHG intensity
  • An economic element,which will be GHG emissions pricing mechanism, linked directly to the GHG intensity mechanism or as a stand-alone mechanism

The measures are scheduled to be adopted in 2025 and enter into force around mid-2027.

At MEPC 81, several regulatory proposals were on the table. While there was no agreement on the package of measures, there was convergence between member states, along with agreement on an overarching structure for the needed regulatory amendments, the “IMO net-zero framework”, in MARPOL Annex VI. This is intended to form the basis for refined proposals, including possible legal language, to be discussed at MEPC 82 in October 2024.

MEPC 81 also agreed to organise the expert workshop on the further development of the basket of mid-term measures, intended to facilitate the understanding of the preliminary findings of the comprehensive impact assessment, which are expected to be available by mid-summer.

Life cycle GHG/carbon intensity for marine fuels

MEPC 81 adopted amendments to the “Guidelines on Life Cycle GHG Intensity of Marine Fuels” (LCA Guidelines), which set out methods for calculating well-to-wake and tank-to-wake GHG emissions for all fuels and other energy carriers (e.g. electricity) used on board a ship. The amendments included the quantification of parameters related to biofuel production, the evaluation of GHG intensity of electricity and the actual tank-to-wake methodologies for actual/onboard emission factors, amongst others.

The LCA Guidelines do not include any provisions for application nor requirements; they are intended to support the GHG Fuel Intensity regulation under development. 

A GESAMP Working Group was established to consider new default fuel pathway values, certification of actual well-to-tank and tank-to-well emission factors, and more general methodological LCA issues. A Correspondence Group was established to address other social and economic sustainability topics and aspects of marine fuels, for possible later inclusion in the LCA Guidelines.

MEPC 81 considered how to develop a framework for the measurement and verification of tank-to-wake emissions of methane (CH4) and nitrous oxide (N2O) in the context of the LCA Guidelines. A separate Correspondence Group was established to further progress the matter.

On-board carbon capture

MEPC 81 discussed the issue of on-board carbon capture and established a Correspondence Group to further discuss the matter and develop a working plan on the development of a regulatory framework for the use of on-board carbon capture systems.

Identification and protection of Emission Control Areas (ECAs)

MEPC 81 approved proposals to designate the Canadian Arctic and the Norwegian Sea as ECAs for nitrogen oxides (NOx), sulphur oxides (SOx) and particulate matter (PM).

For the Canadian Arctic, assuming adoption at MEPC 82, the requirements take effect as follows:

  • The 0.10% fuel sulphur content requirement takes effect from1 March 2027.
  • TierIII NOx requirements will apply to ships constructed on or after 1 January 2025, although the requirements will enter into force at the earliest on 1 March 2026.

For the Norwegian Sea, also assuming adoption at MEPC 82, the requirements take effect as follows:

  • The 0.10% fuel sulphur content requirement takes effect from 1 March 2027.
  • TierIIINOx requirements will apply to ships contracted on or after 1 March 2026; or, in the absence of a contract, keel-laid on or after 1 September 2026; or delivered on or after 1 March 2030.

Recommendations

DNV recommends that our customers take into account the work on new GHG reduction ambitions when considering energy efficiency, alternative fuels and other GHG reduction options for their existing fleet and newbuilds, and note the requirements with expected entry into force around mid-2027.

Companies operating in the Canadian Arctic and Norwegian Sea are advised to note the establishment of ECAs and the attendant effective dates of the requirements.

We also recommend signing up for our dedicated webinar, discussing the outcome of MEPC 81, taking place on 3 April 2024: https://www.dnv.com/events/mepc-81-meeting-summary-ghg- emissions-regulations-and-more/ 

Note: The full TECHNICAL REGULATORY NEWS No. 07/2024 – STATUTORY can be downloaded here.

 

Photo credit: shraga kopstein on Unsplash
Published: 25 March 2024

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EU ETS

Fuel EU – Achieving compliance; banking, borrowing, pooling and paying

Reed Smith lawyers look at how a ship can achieve compliance and obtain the important FuelEU document of compliance as well as the consequences of not complying.

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Global law firm Reed Smith on Friday (7 June) published ‘FuelEU – Achieving compliance; banking, borrowing, pooling and paying’ looking at how a ship can achieve compliance and obtain the important FuelEU document of compliance as well as the consequences of not complying.

Authored by Antonia Panayides and Alexander Drury

While the shipping industry is still coming to terms with the EU Emissions Trading Scheme (EU ETS) the next decarbonisation initiative, FuelEU Maritime (FuelEU), is rapidly sailing into view.

FuelEU is part of the EU’s Fit for 55 Package and aims to support decarbonisation in the shipping industry by setting and gradually reducing, emission targets from journeys to/from EEA ports. The scheme targets the greenhouse gas intensity of energy used on a vessel. This is largely determined by the fuel used, with the Regulation rewarding cleaner fuels.

FuelEU enters into force from 1 January 2025 but monitoring plans for vessels already calling at EEA ports must be submitted by 31 August 2024.

What is the compliance process?

To comply, a ship must not exceed its set emission target, expressed as greenhouse gas emissions per megajoule of energy used on board. If a ship is at, or under, the target stipulated by the EU, it will receive a FuelEU document of compliance. However, if a ship is over the emissions limit, it can still achieve compliance through a few different mechanisms and receive a FuelEU document of compliance.

Paying the price

On 1 June of the verification period, a company’s administering State shall ensure that any ships with a compliance deficit, i.e. those that are over polluted during the year, are issued with a FuelEU penalty.

If the penalty is paid by 30 June, the ship will receive a FuelEU document of compliance. If a ship has a compliance deficit for consecutive reporting periods, an uplift multiplier is applied to the penalty.

Using the bank

Where a ship has a compliance surplus, and therefore does better than the EU’s target, the company may ‘bank’ the unused emissions for the next reporting period. The decision to bank is subject to the appointed verifier’s approval and must be made before a FuelEU document of compliance is issued. The banked surplus can be used to achieve compliance the next year.

Borrowing from the future

A ship with a compliance deficit may borrow a proportion of the next year’s emission allowance to help it achieve compliance. However, this borrowed allowance and a premium is deducted from the following reporting period, making it even harder to achieve compliance that year. A ship cannot borrow in two consecutive years.

Pooling

Finally, a ship can enter a pool. This is not to be confused with a commercial pool. A pool for the purposes of compliance with FuelEU is a voluntary mechanism allowing ships to share their compliance surplus/deficit – as long as the pool’s total emissions result in a compliance surplus. Pools can consist of ships from different companies, but every company must approve the pool composition and allowance distribution across the pool.

The compliance is then assessed across the entire pool rather than looking at individual ships. This allows a cleaner ship to share any compliance surplus with more polluting ships.

Verifiers will confirm a ship’s emissions by 31 March and companies then have until 30 April to finalise their pooling arrangements, which the verifier must also confirm.

Consequences of non-compliance

A FuelEU document of compliance allows a ship to trade in EEA ports for 18 months, or until the next FuelEU document of compliance is issued. However, Member States must lay down rules on sanctions for non-compliance. If a ship has no FuelEU document of compliance for two consecutive years, it could be detained or expelled from EEA ports.

 

Photo credit: Thanasis Papazacharias from Pixabay
Published: 14 June 2024

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Methanol

Methanol Institute: Breakthroughs and Strategic Moves in Sustainable Marine Fuels (Week 23, 3-9 June 2024)

This week, the maritime industry made pivotal advancements in methanol fuel technology, forged strategic partnerships, and achieved key regulatory milestones, highlighting a concerted effort toward greener marine operations.

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The Methanol Institute, provides an exclusive weekly commentary on developments related to the adoption of methanol as a bunker fuel, including significant related events recorded during the week, for the readers of bunkering publication Manifold Times:

More heavy hitters are getting behind the supply of methanol to marine customers as the demand for newbuildings continues to strengthen.

The ramp-up in biofuels provided by energy major ExxonMobil are expected to support the industry’s decarbonization process as owners place further orders, vessels hit the water and new bunkering operations are planned.

Methanol marine fuel related developments for Week 23 of 2024:

ExxonMobil Expands Marine Biofuels Offering for Shipping Industry
Date: June 4th, 2024

Key Points: ExxonMobil is expanding its marine biofuels offering, actively engaging with multiple customers, including Hapag Lloyd and Wallenius Wilhelmsen. Recent deliveries from its Fawley refinery to several UK ports have demonstrated successful biofuel use without engine modifications. Biofuels are expected to play a significant role in the first phase of shipping's decarbonization, with a future shift towards methanol, ammonia, and hydrogen. ExxonMobil is exploring technologies and pathways to meet the industry's low-emission fuel needs.

DNV: Growing Demand for Methanol-Fueled Vessels Evident in May Newbuild Orders
Date: June 4th, 2024

Key Points: DNV's recent data shows a significant increase in orders for methanol-fueled vessels, with 23 out of 33 new orders in May being methanol-powered. This trend highlights the maritime industry’s growing appetite for methanol as a viable alternative fuel, driven by its lower emissions and alignment with decarbonization goals. Methanol's role is increasingly pivotal as the shipping sector seeks sustainable and compliant fuel options to meet future environmental regulations.

NKT Orders Methanol-Powered Cable-Laying Vessel
Date: June 5th, 2024

Key Points: NKT has ordered a 176-meter dual-fuel cable-laying vessel, the NKT Eleonora, capable of running on methanol, HVO, and MDO. Scheduled for operation in 2027, this vessel reflects NKT's commitment to sustainability and enhancing installation capacity. The decision to build a methanol-fueled vessel aligns with NKT’s strategic goal of providing greener power cable solutions, supporting the industry's shift towards environmentally friendly fuels.

Hagland Shipping Orders Methanol-Convertible Bulk Carriers
Date: June 5th, 2024

Key Points: Hagland Shipping has ordered four 5,000 DWT dry bulk carriers from Dutch shipyard Royal Bodewes. These vessels are designed to be easily converted to methanol propulsion in the future, reducing CO2 emissions by 40-50% and NOx emissions by 90-95% compared to the oldest ships in their fleet. The first ship is expected to be delivered by the end of 2025, enhancing Hagland's commitment to sustainability and emission reduction in Northern Europe and the Baltic region.

Headway Technology Group Opens New Office in Greece
Date: June 6th, 2024

Key Points: Headway Technology Group (Qingdao) Co., Ltd. has inaugurated a new office in Greece, coinciding with the first day of the Posidonia 2024 exhibition. This expansion aims to strengthen Headway's presence in the European low-carbon shipping sector, providing enhanced technical support and services. The new office will showcase Headway's methanol fuel supply systems and other green technologies, reinforcing their commitment to sustainable maritime solutions and supporting the global shift towards low-emission shipping practices.

Vopak Partners to Establish Green Methanol Bu Methanol Bunkering in China
Date: June 6th, 2024

Key Points: Vopak has signed a strategic cooperation agreement with the vice mayor of Tianjin to develop a green methanol bunkering operation in Northern China's Tianjin port. This initiative aims to repurpose existing infrastructure for new energy projects, positioning Tianjin as a crucial logistics hub for green methanol development. The partnership with Tianjin Port Group underscores Vopak's commitment to supporting sustainable maritime fuels and contributing to the global energy transition.

New Methanol-Ready Fallpipe Vessel Named "Yellowstone"
Date: June 7th, 2024

Key Points: DEME Group's new fallpipe vessel, the 37,000 DWT "Yellowstone," has been officially named in a ceremony held in Zeebrugge, Belgium. The vessel, designed for future conversion to methanol dual-fuel propulsion, features a hybrid power plant with a 1 MWh Li-ion battery. The naming ceremony, attended by Her Royal Highness Princess Astrid, underscores DEME's commitment to innovation and sustainability in marine operations.

 

Photo credit: The Methanol Institute
Published: 14 June 2024

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Alternative Fuels

IUMI: How can liability and compensation regimes adapt to alternative bunker fuels and cargoes?

Existing international liability and compensation regimes do not fully cater to the changes that the use of alternative marine fuels will bring.

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By Tim Howse, Member of the IUMI Legal & Liability Committee and Vice President, Head of Industry Liaison, Gard (UK) Limited

The world economy is transitioning, with industries across the board seeking to reduce their carbon footprint and embrace more sustainable practices. As part of this, there is a huge effort within our industry to look to decarbonise, using alternative fuels such as biofuel, LNG, LPG, ammonia, methanol, and hydrogen.

Until now there has been much focus on carbon emissions and operational risks associated with the use of alternative fuels. This includes increased explosivity, flammability, and corrosivity. An ammonia leak causing an explosion in port could result in personal injuries, not to mention property damage, air, and sea pollution. In addition, alternative fuels may not be compatible with existing onboard systems, increasing the risk of breakdowns and fuel loss resulting in pollution. Apart from these safety concerns, which particularly concern crew, air pollution and other environmental impacts need to be addressed.

However, the green transition also presents us with a separate regulatory challenge, which has received less attention so far. So, whilst carbon emissions and safety concerns are rightly on top of the agenda now, the industry also needs to prioritise the potential barriers in the legal and regulatory frameworks which will come sharply into focus if there is an accident.

If anything, historic maritime disasters like the Torrey Canyon spill in 1967, have taught us that we should look at liability and compensation regimes early and with a degree of realism to ensure society is not caught off-guard. With our combined experience, this is perhaps where the insurance industry can really contribute to the transition.

Currently, existing international liability and compensation regimes do not fully cater to the changes that the use of alternative fuels will bring. For example, an ammonia fuel spill would not fall under the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunkers Convention), potentially resulting in a non-uniform approach to jurisdiction and liability. Similarly, an ammonia cargo incident would not fall under the International Convention on Civil Liability for Oil Pollution Damage (CLC). Uncertainties may also exist in the carriage of CO2 as part of Carbon Capture and Storage (CCS) projects, which may be treated as a pollutant, with corresponding penalties or fines.

A multitude of questions will arise depending on what happens, where it happens, and the values involved, many of which may end up as barriers for would be claimants. How will such claims be regulated, will there be scope for limitation of liability, and would there be a right of direct action against the insurers? In the absence of a uniform international liability, compensation and limitation framework, shipowners, managers, charterers, individual crew, and the insurers may be at the mercy of local actions. Increased concerns about seafarer criminalisation (even where international conventions exist, ‘wrongful’ criminalisation does still occur) may emerge, creating another disincentive to go to sea.

When being carried as a cargo, the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS), which is not yet in force, may resolve some of these issues for alternative fuels and CO2. However, until HNS comes into force, there will be no international uniformity to liability and compensation for the carriage of alternative fuels and CO2 as cargoes. This creates uncertainties for potential victims and their insurers, who may face increased risks and costs, due to the potential inability of existing regulations to provide protections.

The situation is even less clear in the case of bunkers. The rules for using alternative fuels as bunkers might require a separate protocol to HNS, a protocol to the Bunkers Convention, or a whole new convention specifically for alternative fuels.  Relevant considerations for the appropriate legislative vehicle include states’ preparedness to reopen the Bunkers Convention, the ability to conclude a protocol to HNS before it comes into force, and whether a multi-tier fund structure is needed for alternative fuels as bunkers (perhaps unnecessary because bunkers are usually carried in smaller quantities compared to cargoes).

Until then, what we are left with are the existing international protective funds, designed to respond at the highest levels to pollution claims resulting from an oil spill, without any similar mechanism in place to respond to a spill of alternative fuels, which are themselves so central to a green transition. Somewhat perversely, victims of accidents involving an oil spill may therefore enjoy better protections than victims of an alternative fuels spill.

In summary, while the use of alternative fuels will no doubt help to reduce the industry's carbon footprint, there are safety and practical hurdles to overcome. Stakeholders must also come together to find solutions to complex - and urgent, in relative terms - legal and regulatory challenges.

 

Photo credit: Manifold Times
Source:  International Union of Marine Insurance
Published: 13 June 2024

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