Options Paper on Market-Based Measures

Published — November 30, 2021

To stop global warming, shipping needs to contribute. To reach global zero carbon shipping by 2050, public and private stakeholders need to commit. This commitment needs to be supported by global regulation creating a clear framework for the decarbonization of the sector. Regulation can come in various forms: non financial measures, as well as financial measures.

In this paper we look at how ambitious climate goals in the shipping sector could be supported by global financial regulation with a focus on two carbon levy models. The analysis is based on the Center’s techno economic model with industry and academic input from stakeholders along the entire value chain.

The paper comes with five key messages:

  1. A carbon levy can support a fair and equitable global green transition by generating global financing and creating a buffer to support developing countries and address disproportionally negative impacts.
  2. A carbon levy can accelerate the green transformation of the shipping sector towards zero by 2050 by closing the cost gap between fossil fuels and alternative fuels, especially if some revenues are strategically recycled to the sector.
  3. A strategic build up of a carbon levy could start at a modest level and then see 1 2 price level increases , becoming more responsive to the real needs to support a green transition of the maritime sector.
  4. A carbon levy cannot stand alone it needs to be supported by other elements , e.g. ambitious absolute reduction targets in form of a total decarbonization by 2050, clearly defined milestones, as well as concrete demands concerning the CO 2 intensity of fuels.
  5. An ETS can be an effective Market Based Measure as well . Political and economic aspects of a carbon levy and ETS need to be considered carefully in discussions at global level. Neither an ETS nor levy can stand alone to efficiently reach net zero the y need to be accompanied by other measures.