Background
AER differs from CII in the denominator: AER uses deadweight tonnes × distance while CII uses gross tonnage × distance × a ship-type capacity coefficient. For most ship types AER and CII produce broadly similar relative rankings, but for ships with substantial accommodation or cargo handling tonnage (cruise ships, ro-ro vessels, container ships at light load), the metrics diverge. AER’s commercial popularity rests on its simplicity (deadweight × distance is intuitive cargo-carrying capacity) and its widespread adoption by financial institutions and cargo owners well before the IMO formalised CII.
Formula
The AER calculation is:
$$AER = \frac{\text{Annual CO}_2 \text{ emissions (g)}}{\text{Deadweight (t)} \times \text{Distance sailed (nm)}}$$Annual CO₂ emissions are calculated from fuel consumption using fuel-specific emission factors (CF). For a vessel burning HFO (CF = 3.114), an annual fuel consumption of 10,000 tonnes produces 31,140 tonnes (3.114 × 10⁴) of CO₂.
For a ship of 100,000 dwt sailing 50,000 nautical miles per year burning 10,000 tonnes of HFO:
$$AER = \frac{31,140,000,000 \text{ g}}{100,000 \text{ t} \times 50,000 \text{ nm}} = 6.23 \text{ gCO}_2/\text{dwt-nm}$$This figure (6.23) would then be compared to the AER reference line for the ship’s type and size to determine its rating.
AER vs CII
The two metrics differ in capacity denominator:
| Metric | Capacity term | Issuing body | Status |
|---|---|---|---|
| AER | Deadweight (t) | Industry consensus | Voluntary, commercial |
| CII | Gross tonnage × ship-type capacity coefficient | IMO MEPC.336(76) | Mandatory regulatory reporting |
For dry bulk carriers, tankers, and gas carriers (where deadweight closely matches cargo capacity), the two metrics produce similar rankings. For cruise ships, ro-ro vessels, container ships, and specialist vessels (where gross tonnage and deadweight diverge substantially), AER and CII can produce different relative rankings.
Adoption and Use
Poseidon Principles is a framework signed by major ship-financing banks (representing roughly 60% of global ship finance by lending volume as of 2024) that requires signatories to assess and disclose the climate alignment of their ship-finance portfolios against a decarbonisation trajectory. The principal metric is the Portfolio Climate Alignment Score, calculated from the AER of each financed vessel against decarbonisation trajectories aligned with IMO ambition. Banks under Poseidon Principles use AER to inform lending decisions, with poorly-aligned portfolios facing reputational and increasingly commercial pressure.
Sea Cargo Charter is the parallel framework for cargo owners (charterers), signed by major commodity traders and end-users (steel mills, oil majors, agribusinesses, mining companies) committing to assess and disclose the climate alignment of their chartered fleets. The metric is again AER against decarbonisation trajectories, with year-on-year reporting.
Rightship is the world’s largest ship-vetting service. Its GHG Rating (A through G) is calculated from AER against ship-type and size benchmarks, with most recent vintage ships in the A-D range and older vessels typically in E-G. Rightship ratings affect chartering decisions for many major cargo owners; ships with poor ratings (E-G) may be excluded from certain charterers’ approved lists.
IMO Data Collection System (DCS) collects fuel-consumption and operational data that feeds AER (and CII) calculations. DCS data is reported annually to IMO via the flag state, with aggregated data publicly available.
Reference Lines and Trajectories
AER decarbonisation trajectories define how AER must decline over time to align with IMO climate ambition.
IMO 2030 ambition targets at least 40% reduction in carbon intensity by 2030 versus 2008 baseline. Translated into AER terms, this means the 2030 fleet AER reference line is approximately 60% of the 2008 reference line.
IMO 2050 ambition targets net-zero GHG emissions from international shipping by or around 2050, with checkpoints in 2030 and 2040. AER trajectories reflect this with steep decline through 2040-2050.
Poseidon Principles trajectories start from individual ship type baselines and decline along the IMO ambition curve. Each vessel is assessed against the trajectory for its ship type and size band.
Sea Cargo Charter trajectories mirror the Poseidon Principles approach for cargo-owner reporting.
Limitations and Criticism
AER has limitations that are increasingly debated.
Deadweight is not utilization, a fully-laden ship and an empty ship have the same deadweight but very different cargo-carrying. AER on a vessel ballasting around for orders shows poor performance even when the vessel itself is efficient.
Slow steaming bias, slow-steaming a ship reduces fuel consumption per mile sailed, improving AER, but the actual transport work (cargo × distance) is unaffected by speed. Slow-steaming improves AER without improving real-world cargo efficiency.
Empty backhaul penalty, a tanker delivering cargo loaded one way and returning empty the other way has the same AER as the cargo-carrying leg only, but the empty leg is wasted transport work.
Alternative metrics including EEOI (Energy Efficiency Operational Indicator, gCO₂/cargo-tonne-nm using actual cargo) and Annual Transport Work (cargo × distance, with actual cargo) address some of these issues but are less widely adopted.
The IMO’s switch to CII for regulatory reporting reflects partial resolution of some concerns (CII uses ship-type capacity rather than deadweight, partially addressing utilization), but AER remains dominant for financial and commercial reporting due to its data simplicity and embedded position in Poseidon Principles, Sea Cargo Charter, and Rightship.
See also
- What is CII?
- What is EEDI?
- What is EEXI?
- Poseidon Principles
- Sea Cargo Charter
- Rightship GHG Rating
- IMO DCS vs EU MRV
- IMO GHG Strategy
- Specific Fuel Oil Consumption
References
- IMO Data Collection System (DCS), MARPOL Annex VI Regulation 22A
- Poseidon Principles, A Global Framework for Assessing Climate Alignment of Ship Finance Portfolios
- Sea Cargo Charter, A Framework for Assessing and Disclosing the Climate Alignment of Ship Chartering Activities
- IMO Resolution MEPC.336(76), Carbon Intensity Indicator (CII)
- IMO 2023 GHG Strategy (MEPC.377(80))