Comparison of GHG contribution for a climate fund and an Emissions Trading Scheme in the shipping sector

Several options for market-based mechanisms were proposed to reduce emissions from international shipping. Two of them are presented and compared in this paper: an Emissions Trading Scheme (ETS) and a GHG fund generated by a GHG contribution on bunker fuels. The authors find that both proposals are similar in many aspects, such as coverage, equal treatment of all ships, eligibility to receive funding from the revenues generated only to Parties of the scheme, administrative efforts and the need to define quality requirements for offset credits. A major difference, though, is the amount of revenues generated and their envisaged uses. The amount of revenues generated by the GHG contribution is substantially lower than the revenues generated by the ETS. As long as the funding of offset projects is the predominant use of the GHG fund, the principle of “common but differentiated responsibilities” (CBDR) cannot be addressed. Furthermore the incentives to reduce emissions in the international shipping sector itself are higher in the ETS case.