Carbon Intensity Indicator (CII) Rating Scheme
Status: In-force — CII ratings are operational and increasingly influencing charter rates, asset values, and lending decisions.
What Is It?
The Carbon Intensity Indicator (CII) is an operational efficiency measure adopted by the International Maritime Organization under MEPC.352(78) and MEPC.353(78), requiring ships of 5,000 gross tonnage and above to calculate and report their annual operational carbon intensity — measured as grams of CO2 per deadweight-tonne per nautical mile (AER) or transport work equivalent. Each vessel receives an annual rating from A (major superior) to E (inferior) based on its attained CII relative to a reference line and annual reduction factors.
The CII reduction factors tighten progressively: from 2023 onwards, vessels must achieve increasingly stringent efficiency targets with an annual reduction rate of approximately 2% per year. Vessels rated D for three consecutive years or E in any single year must submit a corrective action plan as part of their Ship Energy Efficiency Management Plan (SEEMP Part III), demonstrating how they will achieve a rating of C or better.
While the CII does not currently carry direct financial penalties from the IMO, its impact on commercial operations is substantial and growing. Major charterers including Cargill, Trafigura, and the major oil companies increasingly consider CII ratings in chartering decisions, with D and E-rated vessels facing charter rate discounts of 5-15% or outright exclusion from fixture lists. Classification societies and flag states are intensifying scrutiny of corrective action plans, and the Poseidon Principles use CII alignment trajectories in maritime lending decisions.
Who It Affects
The CII rating scheme applies to all cargo and passenger ships of 5,000 gross tonnage and above engaged in international voyages, as required under MARPOL Annex VI. This encompasses the majority of the global deep-sea fleet including bulk carriers, tankers, container ships, gas carriers, LNG carriers, general cargo vessels, refrigerated cargo vessels, combination carriers, ro-ro cargo ships, ro-ro passenger ships, and cruise ships. Flag state administrations are responsible for collecting and verifying CII data, and classification societies act as recognized organizations for SEEMP Part III verification.
Key Dates
CII rating scheme enters into force under MARPOL Annex VI — first operational rating year begins
Reduction factor tightens; first full year of ratings available for 2023 performance
Deadline for reporting attained 2023 CII to flag state administrations
IMO comprehensive review of CII framework — potential methodology and reduction factor revisions
Post-review CII framework expected to take effect with potential enhanced reduction trajectory
Requirements
- Calculate the attained annual operational CII for each vessel of 5,000 GT and above using the approved methodology (AER or cgDIST)
- Report the attained CII to the flag state administration and receive an annual rating from A to E
- Develop and maintain a Ship Energy Efficiency Management Plan (SEEMP Part III) with an implementation plan to achieve the required CII
- Submit a corrective action plan if rated D for three consecutive years or E in any single year
- Document all CII-relevant operational data including fuel consumption, distance sailed, and cargo carried
- Consider voluntary CII correction factors for ice-class vessels, shuttle tankers, and vessels with cargo heating requirements
Penalties & Non-Compliance
The CII framework does not impose direct financial penalties from the IMO, but the consequences of poor ratings are material and increasing. Vessels rated D for three consecutive years or E in any year must develop and implement a corrective action plan subject to flag state and classification society approval. The most significant consequences are commercial: major charterers and cargo owners are implementing CII rating requirements in their vessel selection criteria, effectively creating a two-tier market where high-rated vessels (A-C) command premium rates and poor-rated vessels (D-E) face rate discounts, trading restrictions, or exclusion from fixture lists. Maritime lenders following the Poseidon Principles assess CII trajectories in credit decisions, and investors increasingly view poor CII performance as a material risk factor in asset valuations.
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