A Literature Survey on Market-Based Measures for the Decarbonization of Shipping

Abstract

This paper aims to conduct an updated literature survey on the Market-Based Measures (MBMs) currently being proposed by various member states and organizations at the International Maritime Organization (IMO) or by the scientific and grey literature as a cost-effective solution to reduce greenhouse gas (GHG) emissions from ships. Τhe paper collects, summarizes, and categorizes the different proposals to provide a clear understanding of the existing discussions on the field and also identifies the areas of prior investigation in order to prevent duplication and to avoid the future discussion at the IMO to start from scratch. Relevant European Union (EU) action on MBMs is also described. Furthermore, the study identifies inconsistencies, gaps in research, conflicting studies, or unanswered questions that form challenges for the implementation of any environmental policy at a global level for shipping. Finally, by providing foundational knowledge on the topic of MBMs for shipping and by exploring inadequately investigated areas, the study addresses concrete research questions that can be investigated and resolved by the scientific and shipping community.

The Influence of Economic Barriers and Drivers on Energy Efficiency Investments in Maritime Shipping, from the Perspective of the Principal-Agent Problem

“…This was carried out under the auspices of the IMO Marine Environment Protection Committee (MEPC) 62nd session (July 2011) with the adoption of amendments to Marine Pollution (MARPOL) Annex VI [98], hereafter referred to as the IMO guidelines. Despite the significant contribution by shipping to climate change, for the sector, this was the first legally binding climate change treaty adopted since the Kyoto Protocol; it came into force as of 1 January 2013 [98,99] and the EEDI and SEEMP were the first mandatory measures that took into consideration the implementation of energy-efficient equipment in vessels, along with the utilization of operational advances. These guidelines are an incentive for EE investment as a result of their mandatory compliance.…”

“…In addition to being regulatory or political factors, these would give rise to the generation of funds for the adaptation and transfer of technologies. They are flexible measures that use prices or other economic variables to provide monetary incentives for polluters to reduce emissions [99] or have a political-regulatory nature, as indirect, market-based regulations. Some examples are environmental taxes, the provision of subsidies, various offsetting mechanisms and Emissions Trading System (ETS) usually applied in transport sector.…”

“…The carbon emission trading mechanism includes a cap and trade system in which firms or national governments can trade emission allowances under an overall cap (or limit) set by a governmental authority, based on the total amount of carbon emissions [107]. These mechanisms internalize the negative external environmental cost of the emissions by forcing the polluter to compensate for that cost [99]. The cap buyer will pay a charge for emissions, whereas the seller will be rewarded for emissions reductions.…”

“…Carbon emissions would begin to decrease only when the price of carbon exceeds a certain threshold, and the variations in the total costs depend on the carbon cap, as concluded in a road transport study by Li et al [107]. The European Commission considers the European Union ETS (EU ETS) as an essential regulatory tool for reducing emissions; nevertheless, the shipping industry opposes their inclusion in the system, as previous experience from the aviation industry revealed that regional rules cannot adequately regulate international sectors [99]. Various stakeholders are also concerned that the EU ETS will distort competition and will result in carbon leakage, as well as create a high administrative burden for the industry.…”

“…Various stakeholders are also concerned that the EU ETS will distort competition and will result in carbon leakage, as well as create a high administrative burden for the industry. ETS in shipping is experiencing growing interest, focusing on investigating the establishment of a global Maritime Emissions Trading Scheme (METS) which could be useful to reduce emissions [99,108,109]. Nevertheless, a global METS without certainty in terms of the price of allowances will result in companies simply offsetting emissions rather than reducing them [99].…”