Tag Archives: carbon intensity

New shipping regulation to combat global warming is under fire

The International Maritime Organization (IMO) has issued their rules for the Carbon Intensity Indicator (CII), which is intended to combat global warming by reducing carbon emissions. It’s been years in the making.

But some of those affected by the regulation think there are flaws in the index which can produce some unintended consequences.

We know that many ships are chartered– they are operated by firms or people who are not their owners. Charter contracts determine how the ship will be operated and how the ship owner will be paid for allowing the use of his ship. But the contracts may allow the charterer to operate the ship in a way that reduces the CII score and causes the ship to fall into a lower class. Perhaps the ship falls into Class E which says the ship should be withdrawn from commerce– sentenced to the shipbreaker.

The Baltic and International Maritime Council (BIMCO), a non-governmental group that offers clauses for contracts addressing numerous international shipping issues, has prepared a contract clause for chartering contracts. This is a useful starting point, because BIMCO contracts and clauses are often used as a starting point for making a charter contract. Use of the BIMCO contracts or clauses is totally voluntary.

The article below explains some of the issues that can arise between charterers and owners, with equations to boot. The essence of the problem is that the index is based on ship capacity, not cargo carried. So sailing empty miles improves your score on the index two ways– first because sailing light burns less fuel, and second because the miles add to the denominator of the measure, reducing it. The examples given show the effect.

Many feel the index should be based on carrying cargo. And some believe the BIMCO clause will not be workable in contracts, and will not use it. But the problem remains of how to divide responsibility between ship owner and charterer for managing the CII score.

I tend to believe any rule is better than nothing. And I think charterers and shipowners will work out how to manage the contract problem. As for empty sailing or sitting in port, I don’t think anyone wants to sail without a paying cargo, or suffer delays even to improve the index. So everyone, owners and charterers, will continue to fill their ships when they can, and sail shorter routes when they can, simply because it’s expensive to operate the ship you’ve chartered; you have to earn a profit at it.

For all the complaining, the CII is still a good thing. We will have to see if it can be tweaked to everyone’s satisfaction.

Greg Miller·Wednesday, December 21, 2022

New shipping regulation to combat global warming is under fire

IMO’s Carbon Intensity Indicator comes in for further criticism

A critique of the International Maritime Organization (IMO)’s new Carbon Intensity Indicator (CII) which comes into effect January 1, 2023.

The CII assigns a rating to ships based on their carbon efficiency. It takes into account their actual trips rather than just design. It also can change over time, as the ship encounters actual use and those measures are reported back.

For ships sailed by owners this is not so bad. But for chartered ships, the charter agreement could place the owner at a disadvantage, since the charter operator may use the vessel on routes or with sailing practices that reduce the measurements for the ship’s CII.

The article is interesting and quotes several commentators who think the problems will result in less sustainable shipping instead of more.

Sam Chambers September 12, 2022

IMO’s Carbon Intensity Indicator comes in for further criticism – Splash247

Eclipse Ventures Launches Framework to Quantify Climate Impact Potential for Technologies Disrupting Physical Industries

Eclipse Ventures is a VC firm based in Palo Alto, CA. Their goal here is to provide venture investors with information on the carbon reduction potential of different technologies for physical industries. It actually goes further to identify a few companies working on each sort of technology. For investors, it gives a tool to estimate the market for a technology and an indication of how a startup might perform.

It does so using an open platform called CRANE, which they claim will soon be open-source. CRANE was developed by Prime Coalition, a climate non-profit, and Rho Impact, a climate advisory service.

The idea of such a tool is to encourage investors to back firms that will genuinely reduce carbon impact. Time will tell if people will use the tool, and also how accurate its prognostication is.

I am usually quite skeptical of ‘black-box’ predictors and analytical tools. It’s important to understand how they are actually doing the computations.

However, physical industries are major contributors to carbon pollution, and offer a tremendous opportunity for carbon reduction. Any way we measure it, reducing carbon output in those industries is a priority. Clearly identifying startups that could make an impact in those physical areas would be good.

We can couple that with the fact that physical industry startups have different requirements from software and artificial intelligence startups. They need substantial early funding, because their physical solutions require a test bed. And they need to be located near the physical processes they are trying to improve, rather than in some incubator or accelerator near the money sources.

Physical products from the start need to deal with serviceability. The ability to service the product must be designed in from the start. Products that fail to be serviceable will never be selected by operations people.

Software, on the other hand, follows a development path using a minimum viable product, which meets some customer needs, but not others. Software developers today rely on feedback from users to make the product more serviceable. Early adopters provide that input and drive the serviceability trajectory. And the engineers, or a few added customer engineers, can provide the support. As more and more users appear, they need more and more help and place larger demands on the software firm. Eventually, if a software firm is successful, the service of existing customers becomes much more important and more costly than new development. This trajectory has played out so often in the software industry as to be a cliche.

But the big jump in software service expense most often occurs long after the firm has exited the VC or early funding stages, either through an IPO or private placement or through sale to a large company. Early investors no longer have responsibility for the financing. So the venture investors don’t care.

This phenomenon explains why software ventures get funded more easily than physical product ventures.

I’m glad to see someone trying to make the case for physical industry investment, especially for sustainability and carbon intensity.

Full report: https://eclipse.vc/eco-report/

NEWS PROVIDED BY Eclipse Ventures 

Aug 10, 2022, 09:00 ET

Eclipse Ventures Launches Framework to Quantify Climate Impact Potential for Technologies Disrupting Physical Industries