Can Market-based Measures Stimulate Investments in Green Technologies for the Abatement of GHG Emissions from Shipping? A Review of Proposed Market-based Measures

Abstract

In order for the maritime sector to align itself with the targets set by the Paris Agreement, it should reduce its GHG emissions by at least 50% by 2050 compared to 2008 with the ultimate aim to phase them out entirely. It is along these lines that in April 2018 the International Maritime Organisation (IMO) developed a strategy, consisting of a range of potential technical and operational measures to reduce GHG emissions from international shipping, ranking from improvements on ship design to the employment of alternative fuels. In order to stimulate the adoption of these policies, the IMO also considers the implementation of market-based measures (MBM) that will provide additional incentives to shipowners to invest in new technologies and uptake of cleaner fuels. The MBMs analysed in this paper include two different policies proposed by different countries and associations for the abatement of GHG emissions from shipping: a) the International Fund for GHG emissions from ships that includes the imposition of a global levy on marine bunker fuel for all vessels and b) the Maritime Emission Trading System (METS) that requires all maritime companies to buy/sell emission allowances to meet their annual emission reductions targets, setting a cap on global shipping emissions. This paper presents and analyses these two diverse MBMs, highlighting their main advantages and drawbacks. The scope of this paper is to investigate the potential of these MBMs to incentivise investments in new technologies and alternative fuels, both essential for the decarbonisation of the maritime sector.