The scheme complies with calls from China, India, Least Developed Countries (LDCs), and other countries. The concept has received political support in the IMO from around three dozen states, and led to various other proposals.
It will deliver the 4 major blocks from the Bali Roadmap in the following way:
Importantly, the scheme is based on solid foundation that include:
Design of IMERS has been strongly influenced by strategy and management best practices as well as lessons learned from development of large scale market-places.
The transaction costs are minimized by applying centralized solutions and eliminating intermediaries that do not add value.
Unnecessary or low-quality data are eliminated, cost of compliance and effort of end user are limited to minimum. Elements that add value are raised. Adaptation funding and Technology Fund are created as new features within the overall low cost.
This is shown in outline below using the framework from the Blue Ocean Strategy.
For more details see Value Innovation section.
Rapid progress in tackling climate change requires innovation both in solutions and diplomacy.
See our case study on innovation in Climate Change Diplomacy (0.5MB), as presented in Malta.
IMERS innovation case study (0.5MB presentation)
IMERS uses a novel hybrid economic instrument that we call cap-and-levy
(it was presented by Norway and others as a hybrid scheme, and was also called cap-and-charge; some people use the name charge-cap-and-trade to signify the trading aspect of the instrument).
A levy (emission charge) is established in such a way that an agreed emission target (cap) will be delivered for international shipping by purchasing emission credits if required.
Cap-and-levy is an example of GHG policy that has the highest theoretical cost-effectiveness. The different GHG policy options are shown below, ordered from the highest to the lowest cost effectiveness.
The ethical arguments for polluters to pay for emissions are well established.
The most recent negotiations in Bali during the UNFCCC COP 13 have also shown the acceptance that developed countries should compensate the developing countries for the harm done. The current increased level of CO2 in the atmosphere is due to the growth and decades of prosperity of developed countries.
The starting point for IMERS was the recognition that mitigation and adaptation are both important, and that the UNFCCC principle of 'common but differentiated responsibilities' can be delivered in a novel way for international shipping.
IMERS has therefore been designed to fulfil on the following five principles:
Note: There is a growing literature on the ethical aspects of climate change, including on the responsibility of governments to tackle the threats and impacts of climate change. One of the web-sites dedicated to the topic is: climateethics.org.
Legal basis for IMERS, including the proposed differentiation, comprise:
The United Nations Convention on the Law of the Sea (UNCLOS) defines the rights and responsibilities of nations in their use of the world's oceans
. It codifies the principle of international customary law.
UNCLOS aims to balance interests of international community and global commons, and therefore codifies the dominance of international law over national law in respect to the high seas.
The following articles are most relevant: 89 (invalidity of claims of sovereignty over the high seas) , 136 (common heritage of mankind), 137 (legal status of the area).
Regarding air pollution the following articles are most relevant: 212, 222.
Although, UNCLOS does not explicitly regulate equitable division of revenues raised from international emission charges proposed it provides a very relevant analogy. The analogy are minerals discovered in the sea bed under the high seas, which are outside the sovereignty of any country. The revenue from exploitation of these minerals should be distributed equitably (article 140: Benefit of mankind).
UNCLOS provides a firm legal framework for a supra-national approach proposed.
Within maritime industry there is already a legal precedent for a supra-national fund organization. The International Oil Pollution Compensation Funds (IOPC Funds) are three intergovernmental organisations which provide compensation for oil pollution damage resulting from spills of persistent oil from tankers. The organisations are: the 1971 Fund, 1992 Fund and the Supplementary Fund.
The importance of the precedent is that the contributions to the funds are direct, bypassing the national systems, thereby avoiding the so-called "domestic revenue problem".
World Trade Organization (WTO) and the UNFCCC have sustainable development as one of their objectives:
“Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to […] allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with [members’] respective needs and concerns at different levels of economic development”
UNFCCC, art. 3(5):
“The Parties should cooperate to promote a supportive and open international economic system that would lead to sustainable economic growth and development in all Parties, particularly developing country Parties, thus enabling them better to address the problems of climate change. Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.”
A good source for materials and/or advice on the WTO aspect, if one still has doubts about the legality of harmonized charge as proposed, is the Centre for International Sustainable Development Law in Montreal, Canada.
General Agreement on Tariffs and Trade(GATT) prohibits differentiated treatments of goods based on their country of origin. As the proposed emission charges are not linked to the country of origin and to any specific goods directly, they conform with the GATT rules.
The conformity is achieved without the need to refer to the article XX that allows exemptions on the grounds of environmental protection.
The International Maritime Organization (IMO) develops and promulgates international regulation on air emissions from shipping.
The most straightforward approach to implement technical parts of legislation on the GHGs from shipping would therefore be to extend Annex VI for CO2, as the major GHG emitted by shipping. Time to enter into force of such amendment is likely to be 16 months. A route through a new convention would take many years.
Including CO2 or selected GHGs within Annex VI has the additional advantage of reuse of other regulations, notably the regulation 18 on BDNs.