MARKET-BASED MECHANISMS FOR GHG REDUCTION IN INTERNATIONAL SHIPPING

Abstract

This study aims to investigate: which MBI is suitable to mitigate GHG emissions for international shipping? First, we observe from case studies that MBI reduces emissions when high Technology Readiness Level (TRL) low-carbon alternatives are available and adopted. Financial resources from a MBI can stimulate R&D to develop high TRL technologies. Next, we consolidate observations from territorial-based and maritime specific literature. Multi-dimensional criteria are converted into single-dimensional metrics to compare MBIs. Finally, variants of bunker levy and Emissions Trading System (ETS) are defined and evaluated. It is found that bunker levy is more suitable due to a more stable carbon price and greater certainty of funds collected. ETS is less easy to operationalize as high variability in ship’s fuel consumption makes it difficult to allocate credits to ships. The large number of ships could require significant number of man-hours to set up, operate and review the system.