Linking emissions trading schemes for international aviation and shipping emissions

Abstract

International aviation and shipping emissions are large and growing rapidly. They may be regulated by domestic emissions trading schemes or by trading schemes established by the relevant international organizations. Under a domestic trading scheme, the international aviation/shipping sector would be linked to the other sectors covered by the scheme. If separate trading schemes are established for international aviation and/or shipping emissions, the administrator of each scheme could establish a unilateral or bilateral link with another scheme. The best candidate for a unilateral link would be the Clean Development Mechanism (CDM). A bilateral link would be much more difficult to implement because the schemes must be ‘compatible’ and an international treaty would probably be needed for legal and political reasons. The best candidates for a bilateral link would be the domestic emissions trading schemes in the EU and the USA. If international aviation and shipping are net buyers of allowances as expected, a unilateral link may be sufficient.