Publication: Carbon Revenues From International Shipping: Enabling an Effective and Equitable Energy Transition - Technical Paper
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2022-04-01
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2022-03-30
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The International Maritime Organization (IMO) is currently considering developing market-based measures to meet the objectives of its Initial Strategy on the Reduction of Greenhouse Gas (GHG) Emissions from Ships (Initial IMO GHG Strategy). While market-based measures are to reduce GHG emissions from international shipping as a matter of priority, some types of market-based measures, e.g. carbon levies or a cap-and-trade scheme without free distribution of emissions allowances, can raise significant revenues—thereby enabling an additional set of actions. Strategically using these revenues also appears more favorable than applying exemptions to address important equity considerations. Hence, the study investigates the unique potential of revenue-raising market-based measures to enable an effective and equitable energy transition and explores three questions: What could carbon revenues from international shipping be used for, who could be the recipients of such revenues, and how can adequate management of carbon revenues from international shipping be imagined? The study considers seven main revenue use options, of which some revenue uses appear more aligned with guiding principles of the Initial IMO GHG Strategy and other key desirable features (e.g., ability to deliver greater climate and development outcomes) than others. The analysis also suggests that splitting carbon revenues between the shipping sector and the use outside the sector could be a viable way forward. As primary recipients of carbon revenues, governments appear to be most suitable given the often blurred links between companies and countries in international shipping. However, to maximize climate and development outcomes, a share of carbon revenues may also be channeled to the private sector, including the shipping industry. The report stresses that expertise and experience from existing climate finance funds and international development organizations offering trustee services could be leveraged to inform and operationalize the management of carbon revenues from international shipping and to minimize transaction costs.
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“Dominioni, Goran; Englert, Dominik. 2022. Carbon Revenues From International Shipping: Enabling an Effective and Equitable Energy Transition - Technical Paper. © World Bank. http://hdl.handle.net/10986/37240 License: CC BY 3.0 IGO.”
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Publication Carbon Revenues From International Shipping(Washington, DC: World Bank, 2022-04-01)The International Maritime Organization (IMO) is currently considering developing market-based measures to meet the objectives of its Initial Strategy on the Reduction of Greenhouse Gas (GHG) Emissions from Ships (Initial IMO GHG Strategy). While market-based measures are to reduce GHG emissions from international shipping as a matter of priority, some types of market-based measures, e.g. carbon levies or a cap-and-trade scheme without free distribution of emissions allowances, can raise significant revenues—thereby enabling an additional set of actions. Strategically using these revenues also appears more favorable than applying exemptions to address important equity considerations. Hence, the study investigates the unique potential of revenue-raising market-based measures to enable an effective and equitable energy transition and explores three questions: What could carbon revenues from international shipping be used for, who could be the recipients of such revenues, and how can adequate management of carbon revenues from international shipping be imagined? The study considers seven main revenue use options, of which some revenue uses appear more aligned with guiding principles of the Initial IMO GHG Strategy and other key desirable features (e.g., ability to deliver greater climate and development outcomes) than others. The analysis also suggests that splitting carbon revenues between the shipping sector and the use outside the sector could be a viable way forward. As primary recipients of carbon revenues, governments appear to be most suitable given the often blurred links between companies and countries in international shipping. However, to maximize climate and development outcomes, a share of carbon revenues may also be channeled to the private sector, including the shipping industry. The report stresses that expertise and experience from existing climate finance funds and international development organizations offering trustee services could be leveraged to inform and operationalize the management of carbon revenues from international shipping and to minimize transaction costs.Publication Distributing Carbon Revenues from Shipping(Washington, DC: World Bank, 2023-06-14)International shipping accounts for nearly three percent of global greenhouse gas emissions. If no further action is taken, these emissions are set to grow significantly. Apart from reducing emissions, there is a strong call for shipping’s decarbonization to be equitable. In this light, the International Maritime Organization is considering a price on carbon. This could raise $40 to $60 billion annually in revenues between 2025 and 2050. The report discusses which countries could access carbon revenues, for what purposes, and on what terms. It argues that revenues should be used to decarbonize shipping, enhance maritime infrastructure, and support broader climate aims. This (mix of options to use carbon revenues) would speed up shipping’s transition to zero-carbon energy, help build the necessary infrastructure, lower maritime transport costs, and result in climate benefits beyond maritime transport. It would also ensure that all countries, including those with no shipping industry or ports, could access carbon revenues. By developing a smart and flexible framework, the report shows how carbon revenues could be distributed to maximize climate benefits and support an equitable transition.Publication The Role of LNG in the Transition Toward Low- and Zero-Carbon Shipping(World Bank, Washington, DC, 2021-04-15)Due to its much lower air pollution and potential greenhouse gas (GHG) emissions benefits, liquefied natural gas (LNG) is frequently discussed as a fuel pathway towards greener maritime transport. While LNG’s air quality improvements are undeniable, there is debate within the sector as to what extent LNG may be able to contribute to decarbonizing shipping. 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The research further suggests that new public policy in support of LNG as a bunker fuel should be avoided, existing policy support should be reconsidered, and methane emissions should be regulated.Publication Understanding the Economic Impacts of Greenhouse Gas Mitigation Policies on Shipping(World Bank, Washington, DC, 2019-01)The International Maritime Organization's initial strategy on reduction of greenhouse gas emissions from ships stipulates that the international shipping sector should assess the impacts on states prior to adoption of the mitigation measures included in the strategy. This assessment should be undertaken as a matter of urgency, and disproportionately negative impacts should be assessed and addressed as appropriate. This paper aims to contribute to this discussion by reviewing the state-of-the-art research on the economic impacts of greenhouse gas mitigation measures on states, using model-based analysis. Specifically, the paper: (i) identifies four areas of economic impacts and their relationships, (ii) compiles the latest findings on the estimated magnitudes of these impacts, and (iii) presents relevant modeling approaches along with best practices for selecting and applying these approaches in impact assessments. The paper concludes that introducing greenhouse gas mitigation measures, such as carbon prices applied to bunker fuels in the range of 10 to 50 USD/ton of carbon dioxide, might increase maritime transport costs by 0.4 percent to 16 percent. However, this would only marginally increase the import prices of goods (by less than 1 percent). For transport choices, the increased cost of maritime transport induced by greenhouse gas mitigation measures might only slightly reduce the share of maritime transport, by 0.16 percent globally. Furthermore, a global carbon tax applied to all transport modes might stimulate a shift toward maritime transport from all other modes. The impacts of a carbon price in the range of 10 to 90 USD/ton of carbon dioxide on national economies are expected to be modest (-0.002 percent to -1 percent of GDP).Publication Charting a Course for Decarbonizing Maritime Transport(World Bank, Washington, DC, 2021-04-15)As the backbone of global trade, international maritime transport connects the world and facilitates economic growth and development, especially in developing countries. However, producing around three percent of global greenhouse gas (GHG) emissions and emitting around 15 percent of some of the world’s major air pollutants, shipping is a major contributor to climate change and air pollution. To mitigate its negative environmental impact, shipping needs to abandon fossil-based bunker fuels and turn to zero-carbon alternatives. This report, the “Summary for Policymakers and Industry,” summarizes recent World Bank research on decarbonizing the maritime sector. The analysis identifies green ammonia and hydrogen as the most promising zero-carbon bunker fuels within the maritime industry at present. These fuels strike the most advantageous balance of favorable features relating to their lifecycle GHG emissions, broader environmental factors, scalability, economics, and technical and safety implications. The analysis also identifies that LNG will likely only play a limited role in shipping’s energy transition due to concerns over methane slip and stranded assets. Crucially, the research reveals that decarbonizing maritime transport offers unique business and development opportunities for developing countries. Developing countries with large renewable energy resources could take advantage of the new and emerging future zero-carbon bunker fuel market, estimated at over $1 trillion, to establish new export markets while also modernizing their own domestic energy and industrial infrastructure. However, strategic policy interventions are needed to hasten the sector’s energy transition.
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