Clarifications on the IMO DCS/CII and EU MRV/ETS, use of biofuel

The 2023 EU MRV and IMO DCS reporting period will soon come to an end, whilst the EU ETS regulations are coming into effect from the start of the new year. As we approach year-end, this news summarizes some important clarifications on the EU MRV, IMO DCS and EU ETS.

Relevant for ship owners and managers, yards and flag states, but also suppliers and design offices could benefit from this.

Below is a summary of updates and clarifications on:

• IMO DCS/CII
• EU MRV:
  • ISM company mandate for ETS
  • Partial emissions report
  • Cargo and bunker sampling
  • Leisure stops (relevant for cruise ships only)
  • Dry-docking and emissions
  • Biofuels

IMO DCS/CII

The Carbon Intensity Indicator (CII) is a measure of how efficiently a ship can transport goods or passengers and is given in grams of CO2 emitted per cargo-carrying capacity and nautical mile, based on reported IMO DCS data. The ship is then given an annual rating ranging from A to E, where the rating thresholds will become increasingly stringent towards 2030. For ships that achieve a D rating for three consecutive years or an E rating in a single year, a Corrective Action Plan (CAP) needs to be developed (and approved) as part of the Ship Energy Efficiency Management Plan (SEEMP) Part III, before the DCS Statement of Compliance can be issued. This functionality will be available in DNV's SEEMP Part III tool from 1 January 2024:

Upon receiving the uploaded DCS data in early 2024, DNV will inform its customers via email for ships having a CII E rating (where urgent action is needed). Furthermore, our customers will receive a notification of the ship rating during the submission process.

Required and attained CII calculation after change of DWT/GT during 2023

As outlined in MEPC.348(78), permanent alterations to a vessel’s deadweight (DWT) and/or gross tonnage (GT) can be implemented as a measure within SEEMP Part III or as a CAP to enhance the ship’s operational carbon intensity performance. For vessels that underwent changes in DWT and/or GT after 1 January 2023, a new methodology for calculating attained and required CII will apply:

a. For changes listed in the SEEMP Part III or the CAP:
The required CII is calculated based on the original DWT/GT*. For the year of the conversion, the attained CII is calculated and verified based on the average DWT or GT value weighted on distance travelled before and after conversion. For subsequent years, the attained CII is based on the new DWT/GT.

b. For changes not listed in the SEEMP Part III or the CAP:
For the year of the conversion, the required CII and attained CII are calculated and verified based on the average DWT or GT value weighted on distance travelled before and after conversion. For subsequent years, the required CII and attained CII are based on the new DWT/GT.

EU MRV/ETS

Firstly, a brief recap of the revised EU MRV regulations:

ISM company mandate for ETS

As announced in our news from 17 November (see "References" below), the EC has adopted an implementing regulation detailing which company is responsible for monitoring and reporting GHG emissions and surrendering emission allowances. The default responsible entity is the registered owner. The responsibility can be shifted to the ship manager – i.e. the ISM company – only if an agreement between the registered owner and the ISM company explicitly states this shift in responsibility.

In the event that the shipowner delegates the EU ETS obligation to a shipping company, the shipping company shall provide its administering authority with a document clearly indicating that it has been duly mandated by the shipowner to comply with the ETS obligations. DNV has prepared a template for such an agreement, available free of charge for our customers in Fleet Status on Veracity:

In addition to the above, in the updated MRV MP online form our customers will find the same document template and can populate it with relevant data. The functionality is available under the “Important information for ISM companies” button found on the “Administrative data” tab.

The mandate document shall be duly filled out and signed by both the shipowner and the shipping company. It should be provided upon MRV MP submission in THETIS MRV portal to your MRV verifier and made available to the administering authority.

Partial emissions report

The issuance of the partial emissions report was also mentioned on our news from 17 November, but a few clarifications need to be added: from 5 June 2023, the revised MRV regulation requires that upon change of company, a partial MRV emissions report (ER) is to be submitted for verification. The verified partial MRV ER should be submitted to the administering authority, flag state authorities of the Member State, the European Commission and to the new company as close as practical to the day of change of company and no later than three months thereafter. The verified data covering the previous company’s responsibility period should form a part of the MRV ER that will be submitted by the company responsible at the end of the reporting year.

However, the previous company’s emissions for a vessel which has been taken over by a company will not be a part of the aggregated emissions data at the company level for the new company. Therefore, the company taking over the ship will not be liable to surrender allowances for the period when the vessel was under the previous management or ownership. Nevertheless, the current owner/manager still needs to request the verified aggregated MRV data for the previous company’s period to fulfil MRV obligations at the end of the year. This data, combined with the log abstract data, will form a full-year MRV ER.

Taking into consideration that changes have only been recently implemented in THETIS-MRV and an administering authority must be first assigned to the companies to fulfil the obligations of the MRV Regulation Article 11.2, DNV will support verification of partial MRV ER from January 2024. Submission and verification of 2023 partial MRV ERs will also be enabled.

Cargo and bunker sampling

For some time, with the public attention on verified emissions data rising and the EU ETS soon effective, regulators and accreditation bodies have been increasing the stringency of formal verification requirements. This means that DNV is now required to review documents on reported bunkering and cargo data, including evidence for reported bunkering and reported MRV-relevant cargo figures per emissions report. This ensures the MRV ERs will have the required quality considering the increasing relevance of verified emissions data. Additional information is available in Fleet Status on Veracity:

Leisure stops (applies to cruise ships only)

In the context of the MRV/ETS, see Appendix for clarification on leisure stops for cruise ships.

Dry-docking and emissions

The European Commission informed at an MRV/ETS implementation event held on 14 November that emissions released during dry-dock are included in the MRV and ETS assessment. The new approach does not affect the MRV reporting requirements. The following example illustrates this point:

Biofuels

The different regulations have different approaches on how to deal with biofuels, summarized in the following:

When aggregated and put side-by-side, total carbon emission from the use of biofuel will vary substantially between the three schemes. EU MRV emissions data is the basis for determination of total emission of GHG to be reported under the EU ETS Directive. However, by applying a CO2 factor of zero for biofuel fraction of fuel used, the ETS-relevant emission is reduced. For CII, a completely different set of rules is applied, focusing on the life cycle’s emissions of fuel. Different criteria for the application of the methodology as described above should be noted and consulted with the fuel supplier before the fuel purchase, with the aim to claim benefits from the use of biofuel in GHG reporting.

Further information on how to report the use of biofuels is available on the OVD resources page. If guidance is needed on how to update the SEEMP Part II and the MRV Monitoring Plan in relation to the use of biofuel, we invite you to contact our DATE experts.

Recommendations

DNV encourages its MRV/DCS/ETS customers to immediately upload any emissions data to check the data quality. By using DNV’s quality check (pre-verification checks), any incorrections in reported data can easily be identified. By reviewing the data quality now, before submission, the time spent on corrections is reduced, leading to early submission and approval of the emissions report and fuel oil consumption report. 

DNV also recommends that customers visit our Emissions Insights in My Fleet on Veracity, which is a dashboard designed for monitoring the carbon emissions of your fleet. It focuses on compliance monitoring, allowing users to track parameters related to CII and ensure vessel compliance. The most recent update includes the EU ETS.

References

• MRV – Monitoring, Reporting and Verification (EU and UK) topic page
• IMO DCS topic page
• EU ETS – Emissions Trading System topic page
• Preparing for the EU ETS - next steps (Technical & Regulatory News from 17 Nov 2023)
• Operatoinal Vessel Data (OVD) page

Contact

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