Why cap-and-charge for shipping?The proposed differentiated levy on fuel for international shipping seems to be the least controversial way to raise significant financing for climate change. It complies with international laws and with principles of both the IMO and the UNFCCC, and it addresses international activity. IMERS and the novel cap-and-charge approach have been created to address major challenges of traditional market-based schemes for international shipping.
For more than a decade numerous unsuccessful attempts have been made to create a market-based scheme to address growing greenhouse gas (GHG) emissions from transport sources, especially from international aviation and maritime transport. Emissions trading, mainly the cap-and-trade schemes have been widely suggested but have proved so far unsuited, especially for international transport.
Furthermore, in our humble view, the cap-and-charge is best suited to deliver on the Global but Differentiated principle & policy for shipping and climate change.

Six challenges of GHG cap-and-trade for transport

  1. Lack of reliable emission data: quality emission data that is needed to start a traditional market-based emission reduction scheme is not available for transport while acquiring such data is very costly and time consuming;
  2. Methodological obstacles: significant difficulties to allocate emission fairly and high operational costs are the major issues;
  3. Inadequate consideration of long-term actions and benefits: near-term actions are not expected to dramatically reduce transport emissions. Thus far the proposed approaches have failed to incorporate sustained long-term investments in low-emission technology R&D;
  4. Differentiated priorities of developing countries not reflected: all attempts to reduce emissions from international transport have considered some participation of developing countries in emission mitigation but none considered their acute needs to adapt to climate change. These two agendas were seen, discussed and treated separately;
  5. Non-GHG impacts of transport emissions ignored: all attempts to create market-based schemes have focused so far on the CO2 impacts, even though the non-GHG effects are of the same order of magnitude as CO2 for aviation and shipping;
  6. Lack of novel integrated approaches to eliminate existing issues of cap-and-trade while simultaneously bringing additional value to secure global participation. The emerging markets for emission credits are not seen as an enabler for new schemes but rather as a goal in themselves.
Further details on the cap-and-trade challenges addressed by IMERS are provided.