This PhD thesis examines the role of market-based measures (MBMs) in incentivizing international shipping greenhouse gas (GHG) emissions reductions to leverage the decarbonization efforts of the International Maritime Organization (IMO). The research motivation sprang from the Initial IMO Strategy, which, among other climate ambitions, envisages at least a 50% curb of GHG emissions until 2050 vis-a-vis 2008 levels. The regulatory framework involves several candidate measures, including MBMs, i.e., environmental policies like carbon taxes and emissions trading systems (ETS) that enforce the "polluter-pays" principle, and thus provide fiscal incentives to stakeholders to eliminate their carbon footprint.
The assessment of MBMs as means of decarbonizing shipping is based on three main pillars: their economic efficiency, their environmental effectiveness, and their climate policy design. Compliance with carbon pricing regimes can entail the adoption of both operational measures, such as speed reduction, route reconfiguration, or voyage optimization techniques, and technological measures like the uptake of zero-carbon technologies and alternative marine fuels. Due to this wide range of conformity practices, this thesis assesses several short- and long-term responses to MBMs in order to encapsulate their cost effectiveness in relation to their carbon abatement potential.
From a climate policy design perspective, the two most prominent types of MBMs are the carbon taxes, a fixed-price approach that provides carbon price certainty, and the ETSs, a fixedquantity system that secures that GHG emissions levels are met. At first, the study evaluates the prospects of a carbon levy to achieve GHG emissions reductions by analyzing the macroeconomic effects of freight rates and fuel prices in inducing slow steaming as an operational response to the MBM. The results show that market conditions influence the overall effectiveness of a tax and that the attained reductions, although significant, are insufficient to reach the 50% decarbonization targets. Moreover, considering the imminent inclusion of the maritime sector into the EU ETS, the thesis examines the scenario of liner shipping operators opting for route reconfigurations as an operational response to a regional ETS. The outputs reveal that replacing EU ports with nearby non-EU competitor ports becomes cost-effective for minimal EU carbon prices. The action would result in carbon leakage, EU ETS evasion, loss of EU ETS revenue, and penalization of the EU ports.
To the extent that MBMs induce technological changes, this thesis evaluates the level of carbon pricing needed to close the price gap between alternative and conventional marine fuels. The analysis considers the capital and operational costs for implementing and utilizing alternative marine fuels onboard and develops their marginal abatement cost curves (MACCs) to evaluate their cost-competitiveness and carbon abatement spectrum. The analysis indicates that to reach full maritime decarbonization, fuels such as green liquid hydrogen and their supporting technology, as of today’s cost estimations, would require a carbon price of up to 700 USD/MT CO2e to become cost-competitive.
The thesis concludes that accounting for a well-to-wake scope of emissions will create the right
incentives for developing sustainable alternative marine fuel production pathways to facilitate
shipping’s future energy demand. Revenues from MBMs will be substantial and can accelerate
R&D, scale-up the availability of alternative fuels, subsidize "fist-movers" and green ships and
reverse possible detrimental effects of carbon pricing to developing countries such as the Least
Developed Countries (LDCs) and the Small Island Developing States (SIDS).
The paper focuses on the impacts of the inclusion of the maritime sector in the EU Emissions Trading System (ETS). The enforcement of a regional Market-Based Measure (MBM) such as the EU ETS may provide financial incentives to shipping operators to reconfigure their networks and avoid voyages inside the European Economic Area (EEA). This paper investigates the risk of container vessels engaging in evasive port calls by replacing EEA transshipment hubs with nearby non-EEA competitors. We perform a cost-benefit analysis that calculates the cost of EU Allowances (EUAs) for several international services and compares it with a relocation scenario. Our case studies focus on the Piraeus-Izmir and the Algeciras-Tanger Med scenarios and identify the EU carbon price turning point that will render the switch of the transshipment hubs a cost-effective choice for the operator. The results show that the preference of a non-EEA hub will become attractive for carbon prices well below 25 EUR per metric ton of CO2. Further, in all cases, the hub switch results in a rise in the overall carbon emissions attributed to the service which amplifies the risk of carbon leakage. Our results show that the relocation would lead to revenue loss for the EU ETS and penalization of the EEA transshipment hubs in close proximity with hubs outside the EEA, thus posing a threat to their economic activity and development.
The pressure on shipping to reduce its carbon footprint is increasing. Various measures are being proposed at the International Maritime Organization (IMO), including MarketBased Measures (MBMs). This paper investigates the potential of a bunker levy in achieving short-term CO2 emissions reductions. The analysis focuses on the tanker market and uses data from the latest IMO GHG studies and a variety of other sources. The connection between fuel prices and freight rates on the one hand and vessel speeds on the other is investigated for the period 2010-2018. A model to find a tanker’s optimal laden and ballast speeds is also developed and applied to a variety of scenarios. Results show that a bunker levy, depending on the scenario, can lead to short-term CO2 emissions reductions of up to 43%. Policy implications are also discussed, particularly vis-à-vis recent IMO and European Union (EU) action on MBMs.
The purpose of this paper is to provide an overview and discussion of potential Market Based Measures (MBMs) under the Initial IMO Strategy for the reduction of greenhouse gas (GHG) emissions from ships. In this context, some related developments are also seen as directly relevant, mainly in the context of the possible inclusion of shipping into the EU Emissions Trading System (ETS). A comparative evaluation of maritime MBMs is made using the following criteria: GHG reduction effectiveness, compatibility with existing legal framework, potential implementation timeline, potential impacts on States, administrative burden, practical feasibility, avoidance of split incentives between ship-owner and charterer, and commercial impacts. The paper breaks down potential MBMs into the following classes: Bunker levy/carbon levy MBMs, ETS (global and/or EU ETS) MBMs and other MBM proposals.
This paper aims to conduct an updated literature survey on the Market-Based Measures (MBMs) currently being proposed by various member states and organizations at the International Maritime Organization (IMO) or by the scientific and grey literature as a cost-effective solution to reduce greenhouse gas (GHG) emissions from ships. Τhe paper collects, summarizes, and categorizes the different proposals to provide a clear understanding of the existing discussions on the field and also identifies the areas of prior investigation in order to prevent duplication and to avoid the future discussion at the IMO to start from scratch. Relevant European Union (EU) action on MBMs is also described. Furthermore, the study identifies inconsistencies, gaps in research, conflicting studies, or unanswered questions that form challenges for the implementation of any environmental policy at a global level for shipping. Finally, by providing foundational knowledge on the topic of MBMs for shipping and by exploring inadequately investigated areas, the study addresses concrete research questions that can be investigated and resolved by the scientific and shipping community
This paper aims to conduct an updated literature survey on the Market-Based Measures (MBMs) currently being proposed by various member states and organizations at the International Maritime Organization (IMO) or by the scientific and grey literature as a cost-effective solution to reduce greenhouse gas (GHG) emissions from ships. The paper collects, summarizes, and categorizes the different proposals to provide a clear understanding of the existing discussions on the field and also identifies the areas of prior investigation in order to prevent duplication and to avoid the future discussion at the IMO to start from scratch. Relevant European Union (EU) action on MBMs is also described. Furthermore, the study identifies inconsistencies, gaps in research, conflicting studies, or unanswered questions that form challenges for the implementation of any environmental policy at a global level for shipping. Finally, by providing foundational knowledge on the topic of MBMs for shipping and by exploring inadequately investigated areas, the study addresses concrete research questions that can be investigated and resolved by the scientific and shipping community.
The purpose of this chapter is to introduce the concept of Market Based Measures (MBMs) to reduce Green House Gas (GHG) emissions from ships, and review several distinct MBM proposals that were under consideration by the International Maritime Organization (IMO). The chapter then moves on to discuss the concept of Monitoring, Reporting and Verification (MRV) of CO2 emissions and the distinct mechanisms set up the European Union (EU) and the IMO for MRV. The reason the MBM and MRV subjects are treated in the same chapter is twofold: (a) the MRV discussion essentially started when the MBM discussion was suspended in 2013, and (b) MRV is a critical step for any eventual MBM implementation in the future.
The International Maritime Organization (IMO) is a specialized United Nations (UN) agency regulating maritime transport. One of the very hot topics currently on the IMO agenda is decarbonization. In that regard, the IMO decided in 2018 to achieve by 2050 a reduction of at least 50% in maritime green house gas (GHG) emissions vis-à-vis 2008 levels. The purpose of this paper is to discuss the possible role of Market Based Measures (MBMs) so as to achieve the above target. To that effect, a brief discussion of MBMs at the IMO and the EU is presented, and a possible way forward is proposed, focusing on a bunker levy.
A fuel levy is one of the market-based measures (MBMs) currently under consideration at the International Maritime Organization. MBMs have been proposed to improve the energy efficiency of the shipping sector and reduce its emissions. This paper analyses the economic and environmental implications of two types of levy on shipping bunker fuels by means of an analytical model built on the cobweb theorem. A unit-tax per ton of fuel and an ad-valorem tax, enforced as a percentage of fuel prices, are examined. In both cases, a speed and fuel-consumption reduction equivalent to an improvement in the energy efficiency of the sector would be expected as a result of the regulation enforcement. The speed reduction in the unit-tax case depends on fuel prices and the tax amount, whereas in the ad-valorem case it relies upon the enforced tax percentage.
Both schemes lead to industry profit decline, the extent of which depend on the structure of the levy and market conditions. Since there is concern that the costs resulting from the policy will be passed from shipping companies to their customers along the supply chain, the paper dwells on how the costs arising from the enforcement of the levy will be actually allocated between ship-owners and operators, and cargo-owners. In a market characterised by high freight rates and with no or limited excess capacity, a higher percentage of the total tax amount is transferred from ship-owners to shippers. In case of a recession the opposite happens.