This paper proposes an architecture to address emissions from international maritime transport and potentially from aviation in the post-2012 international climate regime.
Shipping emissions are large – more than double the emissions from aviation. Together they currently constitute about 5-6% of global greenhouse gas emissions from fossil fuels, and are growing fast. These emissions are not covered by the Kyoto Protocol and attempts to define a global policy to address them have so far failed.
Current financial mechanisms for adaptation to climate change aimed at helping the world’s poor deal with the consequences of global warming are inadequate, in both design and scale. The adaptation needs of developing countries are estimated at tens of $billions per annum – the funding gap is currently about 100 times higher than all anticipated contributions.
The main challenges for the architecture are identified. Most importantly: how to provide global uniform rules and policies for international transport while delivering on the differentiated approach embodied in the UNFCCC and the Kyoto Protocol.
To resolve the deadlock the proposed architecture links together adaptation, mitigation, technology and financing in one single scheme. Six architectural principles form the foundation of the scheme and are proposed to ensure equity. The first principle is: Mitigation and adaptation will be treated as equally important, and therefore funds aggregated through an economic instrument will be split between the two. The remaining principles cover mitigation, adaptation, longer-term transformational changes, a long-term emission goal, and a supra-national approach. The impact of the architecture on the developing and developed countries is quantified based on import freight costs. Developed countries will bear most of the costs with little direct benefits. Conversely, developing countries will gain twice of what they put in – a benefit factor of 2. The Least Developed Countries will gain most, in total 15% of monies raised. The resulting distribution of costs is shown to fulfil the principle of common but differentiated responsibilities and respective capabilities.
A new cap-and-charge instrument is introduced to deliver the proposed architecture. It is based on a flat emission charge which is driven by a quantitative emission goal for the entire maritime sector. The International Maritime Emission Reduction Scheme based on the cap-and-charge, simultaneously eliminates the methodological barriers of emission allocations and cap-and-trade, provides incentives to secure global participation, and is easy to implement within existing maritime legal frameworks. It is also flexible enough to differentiate between emission costs for importing subsistence versus merchant goods, bringing equity differentiation at the individual level. The cost impact for different stakeholders is provided with the end user impact estimated at 0.1% on prices of imported goods. The cost of inaction for the developing countries is quantified as $4bn annually of adaptation financing not made available to the most vulnerable countries.
The paper highlights that a precedent for supra-national charges already exists (IOPC Funds) and the existing MARPOL convention can provide a platform for early action. It also suggests ways in which similar approach could be applied to international aviation.
The paper concludes that the deadlock to address emissions from international maritime transport can be unlocked through the proposed architecture, balancing the interests of all parties.

Even though the proposed basic architecture provides significant direct benefits and several differentiation mechanisms it may be seen by some as not fully delivering on differentiated responsibilities.
Providing a flexible instrument is deployed, additional differentiation could be added at the collection point. IMERS additional differentiation could be as follows, in a given period of time:

• Ships transporting goods only to Annex I countries pay 100% of emission charges;
  
• Ships transporting goods only to non-Annex I countries pay zero (0);
  
• Ships transporting goods to both types of countries pay a variable charge based on relevant mix of transport work (world average just under 60%).

Global but Differentiated Principle and Policy have been developed accordingly (It's new, and is seen as a breakthrough approach).

A narrower scope could reduce the environmental effectiveness and amount of funding aggregated. This would depend on the stringency of the goal applied. For the goal staying the same, the total benefits would be around 60% of the numbers provided earlier. For instance the amount of adaptation funding would be $2.4bn rather than $4bn annually (a very good result, and much better than the current 0 resulting from the existing deadlock).
A binary differentiation may even be replaced with country-specific obligation factors. These are typically defined in relation to responsibilities and capabilities, but so far have been only proposed to address equity of emission allocations (see for instance: the Greenhouse Development Rights Framework).

In conclusion, the deadlock to address emissions from international maritime transport can be resolved through the proposed architecture, balancing the interests of all parties.
The cap-and-charge instrument has been shown to be flexible, efficient and effective. Importantly, it has already gained support from several states.
The legal precedence for supra-national charges already exists in shipping through the IOPC Funds. The process to implement amendments to existing maritime environmental regimes can be as quick as 16 months.
The proposed architecture can be used to hammer out the maritime deal on the right political level - and in time for the key Copenhagen Climate Change Talks in 2009. Otherwise, the risk of inaction is twofold: repeat Kyoto’s failure to address international transport emissions, and fail to provide financing for adaptation to climate change crucially needed for the most vulnerable.