Annual Efficiency Ratio (AER): the shipping carbon metric

The Annual Efficiency Ratio (AER) is a carbon-intensity metric that divides a ship’s total annual CO2 emissions by the product of its deadweight tonnage and the distance sailed, producing a figure in grams of CO2 per deadweight-tonne-nautical-mile. It’s the metric that ship-finance banks, charterers, and the commercial vetting industry run against decarbonization trajectories to decide whether a vessel aligns with the IMO’s climate targets.

The AER was not invented by regulators. It grew out of commercial practice in the years before the IMO settled on a formal operational metric, and it became embedded in lending frameworks and vetting tools before the Carbon Intensity Indicator was ever adopted. Today, AER and CII converge on the same arithmetic for most cargo-ship types, but the two names still carry different authority: CII is the mandatory regulatory grade under MARPOL Annex VI; AER is the metric behind private financial-sector climate alignment, particularly the Poseidon Principles, the Sea Cargo Charter, and RightShip’s GHG rating. A shipowner dealing with a lender, a major charterer, and a flag-state survey in the same year is working three different uses of essentially the same number, and understanding where they agree and where they diverge is the practical starting point.

If you want to compute the figure for a specific ship, the AER calculator takes fuel consumption by fuel type, deadweight, and distance and returns the attained value. The AER attained-vs-required calculator lets you check it against a target trajectory.

How AER emerged before the IMO formalized it

The AER didn’t come from a regulation. It came from ship-finance banks and vetting organizations that needed a way to benchmark fleet carbon intensity before any mandatory metric existed.

The IMO had published voluntary EEOI guidelines in 2009 (MEPC/Circ.684) as a tool for operators to track their own operational efficiency. EEOI uses actual cargo carried, which makes it a better measure of transport work, but it also makes it impossible to compute from public data alone: cargo quantities are commercially sensitive and don’t flow into any mandatory reporting stream. A bank holding a loan against fifty ships couldn’t independently calculate EEOI for any of them without asking each operator to share voyage-level cargo records, which most wouldn’t do.

The deadweight-based proxy solved that problem. Deadweight is on every ship’s class certificate and stability booklet. Distance sailed was already being tracked by AIS systems from the early 2010s onward. Fuel consumption, initially estimated from AIS-derived speed and generic consumption curves, became more direct when the EU Monitoring, Reporting and Verification regulation took effect in 2018 and the IMO DCS in 2019. By the time the Poseidon Principles launched in June 2019, it was possible to estimate a plausible AER for any ship in the world fleet from publicly available or easily licensed data.

RightShip had been developing its GHG rating since the mid-2010s and built the operational component around the same DWT-distance denominator. The common denominator between the two frameworks made comparisons possible and created de-facto standardization before the IMO had even adopted CII.

When MEPC.336(76) was adopted in June 2021, the IMO effectively validated the AER formulation by making it the basis of the mandatory operational metric for most cargo-ship types. The formula wasn’t invented at MEPC 76; it was ratified there. That history explains why CII and AER are numerically identical for bulk carriers and tankers: they were always the same calculation, just managed under different governance frameworks.

What AER measures and how it’s defined

AER is a ratio. The numerator is annual CO2 output in grams, built from fuel-consumption records multiplied by per-fuel carbon conversion factors. The denominator is the ship’s deadweight tonnage multiplied by the nautical miles sailed in the same year. The result is expressed in grams of CO2 per deadweight-tonne-nautical-mile, abbreviated gCO2/dwt-nm, and a lower number means a cleaner year.

Inline: the formula is

where $CF_j$ is the carbon conversion factor for fuel type $j$ (tonnes of CO2 per tonne of fuel, set by MARPOL Annex VI Table 1 of MEPC.328(76)), $FC_j$ is the mass of fuel $j$ consumed during the year in tonnes, $\text{DWT}$ is the ship’s deadweight tonnage in tonnes, and $D$ is the total distance sailed in nautical miles. To convert the numerator from tonnes of CO2 to grams, multiply by $10^6$. The standard Poseidon Principles form uses grams throughout.

A worked example grounds the scale. Take a Supramax bulk carrier: 58,000 dwt, 54,000 nautical miles in the year, and fuel consumption of 6,500 tonnes of VLSFO (CF = 3.114). Annual CO2 is $6{,}500 \times 3.114 = 20{,}241$ tonnes, which is $20.241 \times 10^9$ grams. The denominator is $58{,}000 \times 54{,}000 = 3.132 \times 10^9$ dwt-nm. AER is $20.241 / 3.132 = 6.46\ \text{gCO}_2/\text{dwt-nm}$. Whether 6.46 is good or bad for that ship can only be resolved by comparing it to the reference trajectory for a 58,000-dwt bulk carrier.

The carbon factors are fixed by the IMO, not measured on each ship. VLSFO and HFO both sit at 3.114. Marine gas oil and marine diesel oil are 3.206, reflecting the higher mass fraction of carbon in lighter distillates. LNG is 2.750 on a tank-to-wake basis, the lowest of the common fuels. LPG propane is approximately 3.000. Methanol is near 1.375. When a vessel burned more than one fuel type across the year, each stream is multiplied by its own CF and the products are summed before dividing. Blending the factors into a single average is a common computation error that can shift the result by a percent or two in either direction.

Carbon factors: the key inputs to the numerator

The numerator of AER is annual CO2 in grams, and that number comes from fuel consumption records multiplied by per-fuel carbon conversion factors. The CF values are fixed by regulation in MARPOL Annex VI, Table 1 of MEPC.328(76), not measured on each ship.

The most common fuels and their MARPOL-defined CF values:

A few things stand out from this table. First, the variation between conventional fuels is modest: MGO at 3.206 and HFO at 3.114 differ by only 3%. Switching from HFO to MGO on its own barely moves AER. The meaningful jump comes from switching fuel chemistry, not just sulfur grade.

Second, LNG’s 2.750 looks attractive, but that number counts only the CO2 at combustion. It doesn’t count the CO2 equivalent of methane that slips unburned through a low-pressure dual-fuel engine’s scavenging cycle. Methane has a global-warming potential of approximately 82 times CO2 over a 20-year horizon (GWP-20), meaning even a 1% unburned methane slip rate wipes out most of LNG’s apparent AER advantage on a real climate basis. AER doesn’t see this; the well-to-wake intensity metric does.

Third, hydrogen and ammonia show zero CO2 at combustion, which means a ship burning either as its primary fuel would post a near-zero numerator and therefore a near-zero AER. The “near-zero” qualifier matters: if any fossil fuel is still being burned for auxiliary power or during startup, that portion contributes. A fully zero-emission voyage is possible in principle under AER arithmetic even with ammonia engines that emit some NOx, because NOx doesn’t enter the CF calculation.

When a ship burns multiple fuels in a year, the correct calculation sums each fuel’s CO2 contribution separately:

where $j$ indexes each fuel type. Mixing a single blended CF is the most common computation error in AER and CII calculations. If a ship burned 5,800 tonnes of VLSFO and 600 tonnes of MGO, the correct CO2 is $(5{,}800 \times 3.114) + (600 \times 3.206) = 18{,}061 + 1{,}924 = 19{,}985$ tonnes. Using a blended factor of $(5{,}800 \times 3.114 + 600 \times 3.206) / 6{,}400 = 3.122$ applied to the total consumption gives $6{,}400 \times 3.122 = 19{,}981$ tonnes, which is close but not identical. Over a large fleet the error accumulates.

The deadweight denominator: capacity versus cargo

The most consequential design choice in AER is what sits in the denominator. AER uses deadweight tonnage, which is the maximum weight the ship can carry including cargo, fuel, stores, and crew. It’s a fixed physical property of the hull. It is not the weight of cargo actually loaded.

This choice was deliberate and pragmatic. The IMO Data Collection System, which has been mandatory for ships of 5,000 GT and above since 2019, collects fuel consumption and distance sailed. It does not collect actual cargo quantities. Cargo data is commercially sensitive, varies voyage to voyage, and was never part of the DCS design. By using deadweight instead of actual cargo, AER can be computed entirely from data the ship is already required to report under MARPOL Annex VI Regulation 22A, which entered force on 1 March 2018.

The Energy Efficiency Operational Indicator, EEOI, takes the other path. EEOI uses actual cargo tonnes carried, weighted by distance on each leg. Its formula is

where $m_{cargo,k}$ is the actual cargo mass on voyage leg $k$ and $d_k$ is the distance of that leg. EEOI is a genuine transport-efficiency metric: if you carry more tonnes for the same fuel burn, the indicator improves. AER doesn’t see that distinction. A ship that sailed 54,000 miles with an average load factor of 45% posts the same AER denominator as one that ran at 95% load factor over the same distance. The EEOI denominator shrinks on the half-laden ship and its indicator worsens accordingly. You can model both measures using the EEOI calculator.

The practical consequence is that AER can be improved by:

• Burning less fuel through hull maintenance, trim optimization, or slow steaming
• Sailing greater distances (which increases the denominator without necessarily changing the numerator proportionally)
• Switching to fuels with lower carbon factors

But it is not improved by carrying more cargo per voyage, which is the most direct way to improve genuine cargo efficiency. An operator who maximizes AER and an operator who maximizes actual cargo efficiency will make mostly the same decisions, but they diverge in situations where running at higher load factor comes at a fuel-consumption cost.

Where AER data comes from

AER is computable from data already flowing through the IMO reporting chain. Under MARPOL Annex VI Regulation 22A and subsequent amendments, ships of 5,000 GT and above engaged on international voyages must collect monthly records of fuel consumption by fuel type, total distance sailed, and hours under way. These are aggregated to an annual Data Collection Plan, verified by the company, and submitted to the ship’s flag administration by 31 March the following year. The flag state then transmits the aggregated data to the IMO GISIS database.

The IMO DCS versus EU MRV comparison article sets out how the European Union’s Monitoring, Reporting and Verification regulation, which has operated since 2018, overlaps with and differs from the IMO DCS framework. For AER purposes the important difference is that EU MRV collects cargo quantities on voyages to, from, or between EU ports, which in principle allows EEOI to be calculated for EU-calling ships. IMO DCS does not, which is why the global AER framework defaults to deadweight.

Poseidon Principles signatories collect AER data through an audited third-party data exchange. From the 2021 reporting cycle onward, signatories submitted data to a standardized template verified by independent auditors before inclusion in the annual climate-alignment disclosure. RightShip sources its operational AER inputs from DCS submissions and from voluntary data sharing by vessel operators and managers. The data chain from flag-state submission to commercial application involves at most two intermediary organizations, not a direct ship-to-bank feed.

AER, CII, and the IMO regulatory link

The IMO didn’t call its metric AER when it formalized it in MEPC.336(76) in June 2021. It called it the operational Carbon Intensity Indicator, CII, and defined it by ship type. But for the seven cargo-ship categories that dominate global tonnage, bulk carriers, tankers, gas carriers, container ships, general cargo ships, refrigerated cargo carriers, and combination carriers, the CII formula for the denominator is explicitly DWT times distance, which is identical to AER. The IMO used the term Annual Efficiency Ratio as an alias in the guidelines documents.

For passenger-type vessels the denominator switches. Ro-pax ships and ro-ro vehicle carriers use gross tonnage times distance (the cgDIST variant), because deadweight understates their transport work. Cruise ships similarly use GT times distance. So for those segments AER (using DWT) and CII (using GT) diverge structurally, not just in name.

The practical result is that for the bulk of the world fleet by tonnage, AER and IMO CII are the same calculation. A bulk carrier’s IMO-reported CII and its Poseidon Principles AER will agree on the attained value to the decimal. What differs is the trajectory they’re measured against: IMO CII uses the declining reference-line system under MEPC.337(76) and MEPC.338(76), while the Poseidon Principles use a separate decarbonization trajectory the secretariat maintains and publishes annually, aligned to IMO strategy but not identical to the CII required line at every point.

The table below sets out the three metrics together to show where they converge and where they split.

The CII regime places additional complexity on top of the raw AER number. MEPC.355(78) introduced correction factors and voyage adjustments for situations such as ice-class operation in non-ice conditions, reefer cargo demands on general cargo ships, and shuttle-tanker duty cycles. These corrections modify the reported CII but not the raw AER that feeds commercial frameworks. A shipowner reporting to their Poseidon Principles bank and to their flag state in the same year may submit slightly different values depending on whether corrections are applied, and it’s worth auditing exactly which version of the number each party expects.

How the Poseidon Principles use AER

The Poseidon Principles launched in June 2019 at a Global Maritime Forum event in New York, signed initially by eleven banks: ABN AMRO, BNP Paribas, Citi, Credit Agricole CIB, Danish Ship Finance, DVB Bank, ING, Societe Generale, and several others. By the 2023 annual disclosure the signatory count had grown to 32 financial institutions claiming to represent approximately $185 billion in shipping loans, roughly half the global ship-finance book by lending volume.

The framework’s central output is the Climate Alignment Score, expressed as a percentage above or below a decarbonization trajectory. A portfolio with a score of +5% is 5% above the trajectory, meaning the ships it financed emit more carbon intensity than the target. A score of -5% is 5% below, ahead of the trajectory. Each bank calculates its score by weighting its vessels’ AER values by loan exposure and comparing the portfolio average against the trajectory for each ship type and size band.

The trajectory is the key piece of machinery. The Poseidon Principles secretariat publishes a trajectory table each year, giving required AER values by ship type and GT size band for each year from the baseline to 2050. The 2023 methodology update realigned the trajectories to the IMO 2023 GHG Strategy adopted at MEPC 80 in July 2023 (MEPC.377(80)), which raised ambition to net-zero GHG from shipping by or around 2050 and introduced intermediate checkpoints in 2030 and 2040. Banks that signed before the IMO raised its ambition had to revise their portfolio assessments against the steeper new trajectory.

The data exchange that underpins the score involves the ship operator or manager providing AER data (often sourced from the IMO DCS submission) through a platform administered by the Poseidon Principles secretariat. The data is independently audited before being included in the annual disclosure report, which each signatory publishes publicly. That public disclosure creates reputational pressure even in the absence of regulatory penalties: a bank whose portfolio persistently scores above the trajectory faces scrutiny from its own sustainability reporting, from investors applying ESG screens, and from cargo owners who cross-reference the Poseidon Principles list against their approved lenders.

How the Sea Cargo Charter uses AER

The Sea Cargo Charter, launched in 2021, is the cargo-owner parallel to the Poseidon Principles. Where the lender framework assesses banks on the climate alignment of the vessels they finance, the Sea Cargo Charter assesses charterers on the climate alignment of the vessels they charter. The metric is again AER, measured against the same IMO-aligned decarbonization trajectories.

Signatories include major commodity trading houses, mining companies, energy producers, and agribusiness firms. Reporting aggregates a charterer’s entire spot and time-chartered tonnage by ship type, applies the AER value for each vessel-year, and compares the weighted portfolio against the trajectory. The practical consequence is that cargo owners with commitments under the Sea Cargo Charter have reason to prefer vessels with lower AER values when fixing tonnage, which feeds back into chartering behavior and eventually asset values.

The data challenge for cargo owners is steeper than for banks. A bank holding a ship-mortgage loan knows exactly which vessel it financed. A commodity trader running hundreds of voyage charters across a year needs to collect AER data for each vessel used, in many cases from operators who aren’t otherwise obligated to share it. The Sea Cargo Charter methodology allows estimates from class-society or DCS data where direct data isn’t available, but the quality of a charterer’s disclosure depends heavily on data collection agreements written into fixture terms.

How RightShip uses AER

RightShip is the world’s largest maritime vessel-vetting service, originally owned by BHP, Rio Tinto, and Cargill before those stakes were transferred to a non-profit structure. Its GHG rating, expressed on an A-to-G scale, combines a design-index component based on the Existing Vessel Design Index (EVDI, analogous to EEDI) with an operational component drawn from AER.

The rating methodology as of 2023 weights design and operational performance in a composite score that produces a single letter. The operational AER feeds into the rating through a comparison against type-and-size benchmarks: a vessel whose AER is well below the median for its class scores better on the operational component. Because RightShip ratings feed directly into pre-fixture vetting decisions at major bulk and dry-cargo charterers, a poor GHG rating (E, F, or G) can exclude a ship from a charterer’s approved list before any offer is made.

The GHG rating is publicly visible through the RightShip platform and is checked by surveyors, operations teams, and sustainability managers during the charter-approval process. The connection between AER, the rating, and actual fixture decisions makes RightShip the mechanism through which AER most directly influences a vessel’s commercial income, more so even than Poseidon Principles in the short term, because a poor rating blocks individual fixtures while a poor bank score affects long-term lending relationships.

AER reference lines and decarbonization trajectories

A raw AER number has no meaning without a reference point. The reference architecture works in two layers: a static reference line for each ship type and size, and a dynamic trajectory that pulls the required value down each year.

The IMO CII reference lines, set in MEPC.337(76), are power curves of the form $CII_{ref} = a \times DWT^{-c}$, where $a$ and $c$ are ship-type-specific coefficients calibrated against 2019 IMO DCS baseline data. Larger ships produce lower reference-line values because of the well-established economies of scale in hull resistance: a 300,000-dwt VLCC moves far more cargo per litre of fuel than a 50,000-dwt Aframax, and the reference line reflects that. The trajectory then applies annual reduction factors from MEPC.338(76), set at 5% for 2023, 7% in 2024, 9% in 2025, and 11% in 2026 versus the 2019 baseline, tightening by 2 percentage points a year. Post-2026 reduction factors were under review at MEPC 81 in April 2024 and are not yet fixed, but the direction of travel is unambiguous.

Poseidon Principles trajectories follow a parallel but not identical path. The secretariat builds its own trajectory tables, calibrated to the IMO GHG strategy but set at what the Poseidon Principles Steering Committee determines represents a credible pathway to net-zero by 2050. In practice the Poseidon Principles trajectory is generally more demanding than the CII required line in the near term, because the IMO trajectory is designed to be achievable across the full existing fleet while the Poseidon Principles trajectory is designed to align with the more ambitious tail of the IMO strategy.

Sea Cargo Charter and Poseidon Principles share the same underlying trajectory data: the secretariat publishes one set of trajectories for both frameworks, versioned by methodology release year. The 2023 trajectory, aligned with MEPC.377(80), was materially steeper than the 2021 trajectory for vessels in the 2030 to 2050 range.

Strengths of AER as a monitoring metric

AER’s commercial adoption rests on four practical advantages, none of which are claims about its theoretical superiority.

First, the data is already there. Because AER is computable from IMO DCS submissions, no additional measurement burden falls on the ship or its operator. Fuel consumption, deadweight, and distance are already required reporting. The metric costs nothing to generate beyond the reporting obligations that already exist.

Second, deadweight is stable and verifiable. Unlike actual cargo weight, which varies per voyage and is often commercially confidential, a ship’s deadweight is a physical property recorded in its stability booklet and class certificate. It doesn’t change between fixtures, isn’t subject to commercial sensitivity, and can be independently verified. This makes portfolio-level aggregation across hundreds of ships tractable in a way that EEOI-based aggregation isn’t.

Third, the formula is simple enough to audit. A bank’s internal credit team, an external auditor, and the ship’s technical manager can all verify the AER from the same DCS submission without specialized software. The EEOI requires voyage-by-voyage cargo data that often doesn’t travel with the fuel consumption record.

Fourth, the metric is now embedded in lending agreements, charter clauses, and vetting platforms. Changing the denominator from deadweight to actual cargo would require re-baselining every existing trajectory, renegotiating data-sharing terms in thousands of loan agreements, and rebuilding vetting tools that took years to develop. The switching cost is high enough that even industry participants who prefer EEOI on theoretical grounds are unlikely to see AER displaced in the commercial frameworks within this decade.

Limitations

The same deadweight denominator that makes AER practical also produces its most debated distortions, and practitioners in ship finance and chartering are aware of them even when they can’t easily correct for them.

Ballast penalty. A vessel returning empty from a discharging port burns fuel without delivering cargo. Its AER for that leg treats deadweight as the capacity term, so the empty ballast leg contributes fully to the numerator (fuel burned) while the denominator (DWT times distance) stays the same as if the ship were laden. A tanker running a round trip that is 50% loaded and 50% ballast posts the same denominator for both halves but the laden half typically burns more fuel. On a full-year basis, a vessel with frequent empty ballast legs looks worse under AER than one running consistently laden, even if they are mechanically identical ships.

Slow-steaming effect. Reducing speed cuts fuel consumption by approximately the cube of the speed reduction (halving speed cuts fuel to roughly an eighth). An AER-focused operator can post an impressive year by slow-steaming heavily on long legs. But slow steaming reduces actual cargo throughput: the same cargo takes longer to deliver, and the ship completes fewer round trips in the year. The AER improves while genuine transport-work productivity declines. This is not a reason to avoid slow steaming, which does reduce real emissions, but it means AER can be gamed by behavior that is carbon-efficient but commercially inefficient from the cargo owner’s perspective.

Cargo-mix invisibility. A bulk carrier running high-density iron ore cargoes at lower load factor by weight may carry far more actual cargo value than one running light-density grain at nominal full load by weight. Both ship types use the same deadweight denominator regardless of cargo density. AER treats a tonne of iron ore and a tonne of grain as identical, which they aren’t from a transport-work standpoint.

Vessel-type divergence. For the ship types where CII uses GT rather than DWT, any comparison of AER between those vessel types and standard cargo ships is structurally misleading. A cruise ship’s AER computed on a deadweight basis (as AER is defined) would look terrible compared to a bulk carrier, because deadweight grossly understates what a cruise ship actually does for its passengers. The comparison is only valid within type-and-size bands.

Proxy, not true efficiency. AER is a capacity-utilization proxy, not a direct measure of energy efficiency. A genuinely efficient old ship that runs at 90% load factor will often post a better AER than a modern efficient ship running at 60% load factor, not because the modern ship is worse, but because the denominator rewards high utilization. Speed and load-factor decisions that commercial operators make for business reasons can move AER more than any technical improvement to the hull or machinery.

The methane blind spot. AER, like CII, is a tank-to-wake metric for CO2 only. It doesn’t count methane slip from low-pressure dual-fuel engines, where unburned methane vents from the exhaust or through the scavenging cycle during low-load operation. Methane has a global-warming potential roughly 80 times higher than CO2 over a 20-year horizon. An LNG-burning ship that posts a strong AER on the 2.750 CO2 factor may carry a larger real climate footprint than its AER suggests if methane slip is significant. The metric that captures this is the well-to-wake intensity measure, covered in the well-to-wake intensity article, which the FuelEU Maritime regulation incorporates but the CII and AER frameworks do not.

Reference-line recalibration risk. The reference lines in MEPC.337(76) are calibrated to 2019 DCS baseline data. If that baseline is later found to be systematically biased (for instance if fuel-consumption under-reporting was prevalent in early DCS years, which some class societies have flagged as a concern), the entire AER reference architecture would need revision. The Poseidon Principles and Sea Cargo Charter trajectories would need to be restated against a corrected baseline, which would change the reported climate-alignment scores of every bank and charterer that has ever disclosed under those frameworks.

Practical AER improvement measures

Reducing AER in practice means attacking the ratio from both ends: cutting the numerator (CO2 output) or growing the denominator (DWT-distance), or doing both simultaneously. The measures available to operators split along two lines: those the shipowner controls and those the charterer controls. That distinction has become legally significant as charterparty clauses that allocate CII/AER responsibility between parties proliferate.

Owner-controlled measures that directly cut the numerator include hull cleaning and anti-fouling coating upgrades (which cut frictional resistance and fuel consumption), main engine overhauls and injection timing optimization, waste heat recovery installation (which reduces auxiliary boiler fuel demand), and propeller polishing or replacement to improve open-water efficiency. A hull cleaning campaign returning a ship from 5% to 1% fouling resistance typically improves fuel consumption by 3 to 4%, directly cutting AER by the same proportion without touching the denominator.

Speed reduction is the fastest lever and the most commercially complicated. Cutting speed from 12.5 knots to 11.5 knots on a laden Supramax reduces fuel consumption by roughly $(11.5/12.5)^3 = 0.78$, a 22% cut. AER drops by 22% on that leg, all else equal. But the ship also completes fewer miles in the year unless voyage distances are also extended, which isn’t always commercially available. The charterer who orders lower speed to protect a fleet AER target is making a commercial decision that affects cargo delivery schedules, and the BIMCO CII clauses that are now appearing in time-charterparties are an attempt to make that decision-making explicit and compensable.

Voyage adjustments that increase the denominator without proportionally increasing the numerator can also improve AER. A ship routed via a longer great-circle track burns modestly more fuel but sails more miles; the ratio can improve slightly. Port waiting time spent at anchor rather than drifting under engine reduces fuel burn while distance doesn’t change. These are edge cases, not primary levers.

The most debated lever is load factor. Loading the ship more fully doesn’t change AER’s denominator at all (it uses DWT, not cargo carried), but it generally increases fuel consumption slightly because a deeper-draught vessel has more wetted surface. The paradox is that the most commercially efficient operation (running full) does not improve AER relative to running half-empty, and in some vessel types it makes AER marginally worse. An operator who is AER-focused but not cargo-market-focused might rationally choose not to take additional cargo if accepting it would increase fuel burn without improving the metric. This is one of the behaviorally perverse outcomes that EEOI-advocates point to.

AER in SEEMP and fleet management

While AER is primarily known as a financial-sector and vetting metric, it also appears in ship-level energy management under the Ship Energy Efficiency Management Plan framework. SEEMP Part III, mandatory from 1 January 2023 for CII-scope ships, requires the operator to set out the operational measures it will take to meet the required CII over the next three years. Because the attained CII for most cargo ships is numerically identical to AER, the AER calculated from DCS data at year-end is also the number that feeds the SEEMP Part III assessment and any corrective action plan triggered by a D or E rating.

Fleet managers who track AER on a rolling basis through the year, rather than waiting for the annual DCS submission, can identify ships that are trending toward a D or E and intervene before year-end. Intervention options include route optimization to increase distance without proportional fuel increase, speed reduction on remaining voyages, hull cleaning to cut frictional resistance, and, where contracts allow, priority loading to raise cargo carried (which helps EEOI but not AER). The BIMCO CII clauses article covers the emerging charterparty language that allocates responsibility for CII/AER performance between shipowners and charterers.

The tension between the AER-driven CII obligation and the commercial management of the ship is where many disputes are developing. A charterer who orders slow steaming to reduce their Sea Cargo Charter footprint improves the ship’s AER. A charterer who orders speed to meet a tight schedule worsens it. The shipowner’s SEEMP Part III assessment and the charterer’s Sea Cargo Charter disclosure are driven by the same number but often managed by different parties with different priorities.

AER for specific ship types

Bulk carriers

Bulk carriers are the largest segment by number of ships in the AER-using world. The 2019 reference line from MEPC.337(76) puts a 180,000-dwt Capesize at a reference CII of approximately 3.0 gCO2/dwt-nm, while a 58,000-dwt Supramax sits near 6.0 to 7.0. The spread is wide because the cubic-law relationship between hull resistance and speed means larger, slower-steaming vessels are intrinsically more efficient per tonne-mile. The coal and iron-ore trades that dominate Capesize utilization also run high load factors in one direction (laden) and ballast in the other, and the ballast-penalty limitation of AER hits this segment particularly hard.

Tankers

Tankers share the DWT-based denominator with bulk carriers, and the same ballast-penalty applies: a crude tanker running from a discharge port in Europe to a loading port in the Gulf empties. Product tankers on shorter routes have proportionally more ballast time. VLCC reference lines sit in the 4 to 6 gCO2/dwt-nm range under the 2019 calibration. The slow steaming and CII article covers how tanker operators have used speed management to hit AER targets while managing utilization.

Container ships

Container ships present an interesting case because their commercial capacity is measured in TEU (twenty-foot equivalent units) rather than deadweight, and the relationship between TEU capacity and deadweight varies by design. AER uses deadweight, which the regulation specifies as the scantling design displacement minus lightship, and for container ships this understates the transport-work intensity of high-cube box ships carrying dense cargo. Container operators track AER per deadweight and AER per TEU-nm independently, with the TEU-based measure more meaningful for commercial benchmarking even though it isn’t the regulatory metric.

Gas carriers

LNG carriers post favorable AER numbers partly because their fuel (LNG or boil-off gas burned in the main engine) carries a CF of 2.750, and partly because they often run at near-full load factor on dedicated point-to-point trades with minimal ballast legs. The tank-to-wake LNG advantage does not account for upstream methane emissions or for the methane that slips unburned through the engine cycle, but it does produce better headline AER values than equivalent-sized tankers burning HFO.

IMO review and the post-2026 trajectory

The IMO 2023 GHG Strategy, MEPC.377(80), set a framework with explicit checkpoints at 2030 and 2040 on the path to net-zero GHG by or around 2050. The indicative checkpoints specify at least a 20% reduction in total GHG from shipping by 2030 against a 2008 baseline, and at least 70% by 2040. CII reduction factors for 2027 onward were still under negotiation at MEPC 81 in April 2024 and had not been finalized at the time of writing.

The trajectory revision process matters for AER because Poseidon Principles and Sea Cargo Charter trajectories are derived from IMO strategy alignment. Each time the IMO adopts a new GHG Strategy or revises the CII reduction schedule, the commercial frameworks need to update their trajectory tables, and every bank and charterer disclosure moves against the new baseline. The 2023 strategy revision required Poseidon Principles signatories to restate their 2022 alignment scores against the steeper new trajectory, and several banks saw their scores worsen materially without changing a single vessel in their portfolio.

Proposals for alternative metrics circulate at MEPC intersessional working groups, including cargo-based efficiency indicators that would require actual cargo quantities in the DCS, and well-to-wake indicators that would bring methane and upstream emissions into the calculation. Neither has the votes to replace AER/CII in the near term, but the technical groundwork being laid at the IMO’s expert group level suggests the post-2030 regulatory framework may include a metric with a richer denominator than deadweight times distance.

See also

• What is CII?
• What is EEDI?
• What is EEXI?
• Poseidon Principles
• Sea Cargo Charter
• RightShip GHG Rating
• IMO Data Collection System
• IMO DCS vs EU MRV
• IMO GHG Strategy
• Well-to-Wake Intensity
• SEEMP Parts I, II, and III
• CII Corrective Action Plan
• Slow Steaming and CII
• BIMCO CII Clauses
• Lightweight vs Deadweight

Additional calculators:

• AER Annual Efficiency Ratio Calculator
• AER Attained vs Required
• EEOI Energy Efficiency Operational Indicator
• Sea Cargo Charter Alignment Calculator
• Poseidon Principles Climate Alignment Calculator