Trading System (EU ETS), whose prices have fallen sharply due to the COVID-19
crisis (European Commission 2020b).
Since November 2014, rules related to the Effort Sharing Decision are being
implemented by the Union, building up binding annual GHG emission targets for
Member States for the period 2013–2020. The Effort Sharing Decision concerns
emissions from non-included EU ETS sectors, such as transport, buildings, agriculture, and waste. In detail, the transport sector, as described in the Effort Sharing
Decision, does not include aviation and international maritime shipping, which are
large and growing sources of GHG emissions, due to their energy intensity and
market share in global trade. This need is also emphasized by Directive (EU) 2018/
410 of the European Parliament and of the Council, which highlights the need for EU
ETS to act on shipping emissions as well as all other sectors of the economy.
10.4.6 Market-Based Mechanisms for GHG Mitigation
Several market-based mechanism proposals have been submitted to the Maritime
Environment Protection Committee (MEPC). A sector-wide cap on net emissions
from international shipping and a trading system alongside this was recommended
by Norway. A similar proposal was suggested by France but also included an auction
design. An Emissions Trading System was proposed by the UK with an initial phase
including offsets for emissions. The US Ship Efficiency and Credit Trading preferred
a mandatory energy efficiency standard enforced via an efficiency credit trading
program. Importantly, in February 2017 the EU parliament voted to include shipping
into the EU-ETS as of 2023 if there is an absence of action from the IMO by 2021.
This causes concern among industry stakeholders that such a regional MBM would
create distortions and may not lead to reduced CO 2 emissions, though the intent is to
catalyze global action (Balcombe et al. 2019).
Broadly speaking market-based approaches can be divided into three categories:
environmental price control approach, environmental quantity control approach, and
subsidies. The environmental price approach can involve emissions charges or
charges on fuels. The latter means that some opportunities for decoupling are lost,
e.g., carbon capture, but may be easier to enforce. Kosmas and Acciaro (2017)
consider bunker levy schemes for GHG emission reductions in the form of a unit-tax
per ton of fuel and an ad valorem tax. While recognizing that MBMs do not seem to
be up for discussion in the foreseeable future, Psaraftis (2019) sees the idea of a
significant bunker levy at a global level worth pursuing. He points to how higher fuel
prices in Europe and Japan have had a significant impact on the fuel efficiency of
their cars relative to the USA. Importantly a levy (or any charge resulting from tax or
permits) should not be confined to marine transport as this could lead to a modal shift
to land-based modes that are generally greater emitters of GHG.
The emission quantity control approach includes credit programs that provide
operators with credits to if they undertake or support activities that reduce emissions.
Benchmarking trading programs sets an average emissions level that should not be
10 Sustainable Shipping: Levers of Change
165
crisis (European Commission 2020b).
Since November 2014, rules related to the Effort Sharing Decision are being
implemented by the Union, building up binding annual GHG emission targets for
Member States for the period 2013–2020. The Effort Sharing Decision concerns
emissions from non-included EU ETS sectors, such as transport, buildings, agriculture, and waste. In detail, the transport sector, as described in the Effort Sharing
Decision, does not include aviation and international maritime shipping, which are
large and growing sources of GHG emissions, due to their energy intensity and
market share in global trade. This need is also emphasized by Directive (EU) 2018/
410 of the European Parliament and of the Council, which highlights the need for EU
ETS to act on shipping emissions as well as all other sectors of the economy.
10.4.6 Market-Based Mechanisms for GHG Mitigation
Several market-based mechanism proposals have been submitted to the Maritime
Environment Protection Committee (MEPC). A sector-wide cap on net emissions
from international shipping and a trading system alongside this was recommended
by Norway. A similar proposal was suggested by France but also included an auction
design. An Emissions Trading System was proposed by the UK with an initial phase
including offsets for emissions. The US Ship Efficiency and Credit Trading preferred
a mandatory energy efficiency standard enforced via an efficiency credit trading
program. Importantly, in February 2017 the EU parliament voted to include shipping
into the EU-ETS as of 2023 if there is an absence of action from the IMO by 2021.
This causes concern among industry stakeholders that such a regional MBM would
create distortions and may not lead to reduced CO 2 emissions, though the intent is to
catalyze global action (Balcombe et al. 2019).
Broadly speaking market-based approaches can be divided into three categories:
environmental price control approach, environmental quantity control approach, and
subsidies. The environmental price approach can involve emissions charges or
charges on fuels. The latter means that some opportunities for decoupling are lost,
e.g., carbon capture, but may be easier to enforce. Kosmas and Acciaro (2017)
consider bunker levy schemes for GHG emission reductions in the form of a unit-tax
per ton of fuel and an ad valorem tax. While recognizing that MBMs do not seem to
be up for discussion in the foreseeable future, Psaraftis (2019) sees the idea of a
significant bunker levy at a global level worth pursuing. He points to how higher fuel
prices in Europe and Japan have had a significant impact on the fuel efficiency of
their cars relative to the USA. Importantly a levy (or any charge resulting from tax or
permits) should not be confined to marine transport as this could lead to a modal shift
to land-based modes that are generally greater emitters of GHG.
The emission quantity control approach includes credit programs that provide
operators with credits to if they undertake or support activities that reduce emissions.
Benchmarking trading programs sets an average emissions level that should not be
10 Sustainable Shipping: Levers of Change
165