Carbon Intensity Indicator (CII)

The Carbon Intensity Indicator (CII) provides a global structure for reducing emissions by incorporating how ships are operated into emissions benchmarking. Vessels within the same size range and ship type are compared against predetermined reference lines, with increasingly strict annual targets.

The IMO’s reduction targets become more stringent over time, requiring a combination of technical and operational measures to maintain compliance. This includes the installation of Energy Saving Devices (ESDs) or reducing speed to burn less fuel.

A vessel’s operating speed and trade route are often the dominant factors influencing CII. As a result, two identical ships trading on different routes may receive very different CII outcomes.

 

How CII is Calculated

CII is calculated annually based on aggregate voyages from the previous calendar year, as submitted to the IMO Data Collection System (DCS) and using the IMO’s definition of transport work (AER – Annual Efficiency Ratio). This process determines the ship’s CII rating for the year ahead.

The CII rating is based purely on the summer deadweight of the vessel. Cargo lifted or ballast voyages are not treated differently. This means the regulation does not reward transport efficiency gained through triangulation.

 

Implications for Time Charter Operations

The CII regulation introduces significant complexity for vessels operated under time charters, as charterers may instruct higher speeds, which can negatively affect the owner’s CII rating. Trades requiring:

  • Higher operating speeds
  • Short voyage distances
  • Long port stays

can all lead to adverse CII ratings under the current framework.

 

Dry Bulk Route Assumptions

For dry bulk vessels, CII is determined annually by dividing the total fuel consumed by the product of distance sailed × ship DWT, based on IMO DCS data verified by class societies or other recognised organisations.

Each year from 2023 onward, the reference line (target) is reduced by 2%, making ratings progressively harder to maintain.

AER calculations form the basis of CII, and results are provided per voyage for Baltic Exchange-described routes.

Note: Bulk carrier routes are not round voyages.

This per-route CII rating offers a useful indication of how a proposed voyage will impact year-end CII compliance:

  • Efficient routes or slower speeds, typically rated "A", contribute positively to annual compliance.
  • Conversely, less efficient routes or faster speeds, typically rated "E", may increase the risk of non-compliance.

The differences between route ratings can inform commercial and operational decisions, including pricing, voyage selection, and speed choice.

 

Tanker Route Assumptions

For tankers, the CII is also determined annually using IMO DCS-reported data:

  • Calculations are based on round voyages between defined ports.
  • The reference line target is reduced by 2% annually from 2023 onward.
  • AER calculations are provided per voyage for the described routes.

As with dry bulk, the route’s CII rating is an indication of the voyage’s impact on the vessel’s overall rating for the year:

  • "A"-rated voyages improve year-end CII performance.
  • "E"-rated voyages may contribute negatively.

Speed assumptions:

  • Fast speeds: 12.5 knots ballast / 13 knots laden
  • Slow speeds: 11 knots ballast / 11 knots laden

Note: Cargo heating and cargo discharge fuel consumption are excluded from the AER calculation, in line with IMO guidelines.

 

Conclusion

The CII regulation represents a significant shift in how operational efficiency is measured and rewarded. Because the rating is sensitive to speed, route, and fuel use, it introduces real commercial implications — particularly for owners with time-chartered ships.

Baltic Exchange provides route-specific CII benchmarks to help the market evaluate the impact of voyage choices on annual ratings and compliance with IMO regulations.