The Ghg Regulating Framework In Shipping

Published Date: 02 Nov 2017

The development of a global Framework for regulating GHG emissions from shipping is one of the most intensively discussed environmental topics in last decade. While ships are universally recognized as the most energy-efficient mode of bulk transportation, the Second IMO GHG Study, in 2009, identified a significant potential for further improvements in energy efficiency, mainly through the use of already existing technologies such as more efficient engines and propulsion systems, improved hull designs and larger ships. A first step was completed in July 2011 with the breakthrough adoption of technical measures for new ships and operational reduction measures for all ships, which are, consequently, the first ever mandatory global GHG reduction regime for an entire industry sector. However, according to some studies, the technical and operational measures may not be sufficient to satisfactorily reduce the amount of GHG emissions from international shipping in view of the growth projections of human population and world trade. Therefore, several market-based mechanisms have also been considered in order to provide a fiscal incentive for the maritime industry to invest in more energy efficient manner and off-setting of growing ship emissions. Currently, studies point out that globally applied market-based measures may regulate GHG emissions from international shipping in a cost effective and non-discriminatory way while achieving environmental targets and enhancing the sector’s ability to invest in technological improvements. However, stakeholders participating in these regulating efforts have serious disagreement about the necessity, the criteria and the nature of the mechanisms, which seem to bring discussions to a deadlock.

Aim of this paper is to provide an intersubjective view of the current status, based on cause and effect analysis on the conflict areas, in order to have a wider image of stakeholders’ interests regarding the development of shipping GHG Framework.

Keywords: Shipping GHG emissions; Shipping regulating framework; energy efficiency; Market Based Measures; environmental policy instruments

Introduction

Mitigating Shipping Green House Gas emissions is considered to be one of the most intensively discussed policy issue in past decades. According to IMO studies, shipping accounts for 2–3% of global emissions of CO2, which is the dominant Greenhouse Gas (GHG), and is expected to grow in next decades. Under these circumstances significant reductions are becoming increasingly challenging. Key issues that are under discussion are how the maritime industry should reduce its emissions, as well as which are the most appropriate mechanism to achieve these reductions. As part of the mitigating process the UNFCCC and its Kyoto Protocol were established to coordinate and regulate global action, jointly across all sectors of the society and the global economic system, recognizing the differences in the contributions of developing and developed countries in addressing global climate change (Depledge 2005). The maritime industry was excluded from decarbonise procedure due to its complicated nature and it was decided to carry out studies about these issues. In this context it should be taken into account that notwithstanding being the largest transport provider of global trade, shipping is estimated to be responsible for about the 3% of the CO2 emit at global level (IMO 2009) .

It should also be recalled that the Council of the EU urged the global maritime sector to join the decarbonise efforts and reduce CO2 emissions by 20% by 2020 compared to 2005 through global action. This created some perplexity about how the measures would be established, given that Shipping is a global industry and regional measures could not fully address GHG emissions. In this regard, in 1997, the United Nations Framework Convention on Climate Change (UNFCCC) mandated the IMO, through the Kyoto protocol, to work towards limiting or reducing the GHG emissions from shipping.

In this point it should be mentioned that the IMO is the main regulatory body for Shipping and its member represent almost 99% of the world tonnage. Once a convention is agreed, the member states are asked to ratify and implement it as part of their national legislation. Consequently, countries that have ratified it, can apply it to all ships landing in their ports regardless of their flag. By giving enforcement power to both the flag-states and the port-states, IMO ensures that all ships, regardless of their flags, will have to abide by its convention. This is one of IMO’s major principles and is commonly referred to as ‘‘no more favorable treatment’’. Under this scope, the IMO was considered as the most suitable body to ensure a global solution in mitigating GHG from the shipping sector.

During these years, a number of options for regulating CO2 emissions in shipping are being considered. As part of this process the IMO established the Marine Environmental Protection Committee, to lead the discussions about the development of the appropriate measures. For a rather long period, no consensus has been reached regarding the Market Based Measures since the members participating in the MEPC have significantly different opinions.

A major issue of conflict between Member States in the MEPC is the nature of the measures that should be implemented in order to mitigate GHG emissions. The main measures that are considered under this scope can be divided in Technical, Operational and Market Based mechanisms. The Energy Efficiency Design Index and the Ship Energy Efficiency Management Plan are technical and operational measures that have been circulated for voluntary use by IMO in the 59th MEPC session. After further discussions the MEPC in the 62nd session decided to make their implementation mandatory for all ships under the MARPOL international shipping convention.

In simple words, EEDI is an index, therefore a number, which express the amount of CO2 generated per tonne-mile of cargo carried. A higher EEDI indicates a less energy efficient ship (by design). The SEEMP, is a live document containing a ship-specific plan of actions, targets and responsibilities for managing and improving the operational energy efficiency of the ship. Measures that can be included in the implementation are: voyage optimization, energy conservation projects, trim optimization, hull/propeller maintenance schedules and performance monitoring.

In general the adoption of the EEDI and SEEMP in IMO is considered to be an important step forward as this is a direct and practical measure reducing energy consumption and CO2 emissions (ECSA 2012). Some studies revealed that when these measures are taken together, the industry as a whole can deliver more than a 20% reduction in emissions per ton of cargo moved per kilometer by 2020. The 64th MEPC welcome the implementation of EEDI and SEEMP as a first step to reduce air pollution from shipping and is now working on Promotion of Technical Co-operation and Transfer of Technology between member states.

This progress has raised some concerns about whether MBM are really necessary to be implemented in the shipping industry. Once again some member states believe that shipping is the most environmental friendly mean of transport and should not be further urged to implement more measures. There are also concerns that the inclusion of the shipping industry in an emission trading mechanism would only offer more profits at the atmosphere business (Bohm et al. 2012), without taking into account the special nature of shipping and its role in world trade.

Aim of this policy paper is to analyze the core of these instruments in order to provide a more clear understanding of their principles and their underlying scopes. Current discussions at MEPC and under the UNFCCC process show that no consensus could be reached on the underlying principles as countries prefer to apply different principles. So far analysis of Market Based Measures demonstrates a wide diversity of core norms and underlying principles which are related to each member-states specific interest. Considering the fact that discussions under both UN bodies still continue it is more than obvious that more research is necessary

Under this scope, the paper reviews the literature on the debates over the conflict areas and especially in regard of the stakeholders’ views. It also reviews the economic analysis of maritime transportation emission regulations, and provides an insight into such analysis. Understanding countries' positions and resolving this puzzle are necessary to advance the negotiations. This paper can contribute to this conversation by bringing into light aspects that were not considered before.

2. Review of the proposals

In the 63rd MEPC meetings, eight different proposals for market-based instruments to regulate GHG emissions from international shipping have been discussed. Some of these market-based measures acknowledge differences between developing and industrialized countries and include design elements that enable financial compensation of possible adverse effects of these instruments. A group of experts has evaluated the proposals with the aim of assessing the extent to which they could effectively regulate GHG emission from international shipping (IMO, 2011).

GHG Fund (MEPC 60/4/8). This proposal aims at the establishment of a global reduction target for international shipping. To meet the target a levy would be paid by ships on every tonne of bunker fuel purchased (collected through bunker fuel suppliers or via direct payment from ships). The revenues of the Fund will be controlled by a new body, under the IMO auspices in order to buy credits to offset emissions.

Efficiency Incentive Scheme (GHG WG 3/3/2). This proposal aims to achieve in-sector carbon reductions. This system would establish mandatory efficiency standards for both new and existing ships and trigger the adoption of energy efficient marine technologies

Port State arrangements (60/4/40). Under this scheme a Port State Levy would be posed to achieve the global reduction targets for GHGs specified by IMO. Revenues raised will be used for climate finance purposes.

Ship Efficiency and Credit Trading SECT (MEPC 60/4/12). According to this proposal, new and existing ships would be subject to respective energy efficiency standards. Ships that fall short of the standard will have to purchase credits from others that are able to go beyond the standard.

Global ETS with full auctioning (MEPC 61/4/22). This instrument is a global cap-and-trade system to control maritime emissions with allowances sold in a global auction. The revenues will be used for R&D into clean technologies within the maritime sector (as well as climate finance).

The Bahamas Proposal (MEPC 60/4/10). It suggests technical and operational measures as the only direct and effective means to deliver cuts in CO2 emissions.

Rebate Mechanism (RM) proposal by IUCN (MEPC 60/4/55). Through the mechanism developing countries can be rebated the cost or impact of a maritime MBM on their development. The rebate mechanism can apply, in principle, to any maritime MBM, which generates revenue, such as a contribution/levy on fuel or an emission trading scheme. (IMF 2011)

3. Analysis of the conflict areas

Analyzing the proposals that address GHG emissions from international shipping according to its stakeholders’ constellations reveals a complex situation. In general, countries seem to agree to regulate GHG emissions from international shipping, but views are fundamentally divergent on the principles and conditions of any such regulation. The establishment of EEDI and SEEMP gave more space for conflicts about the necessity and the principles of the upcoming measures. According to Hackmann (2012) current discussions at IMO and under the UNFCCC as well as the long history of this issue in international negotiations indicate a deadlocked situation. Both developing and developed countries state that socio- economic disadvantages of each approach are considered as the major reason for this situation. In this regard, an analysis on the conflict areas that occurred during the debates will be attempted, so that the reader has a more in-depth understanding of the scenery.

3.1 Discussion about the necessity of MBM Measures

The adoption of the EEDI and SEEMP generated a debate on the need and purpose of a MBM for international shipping. Specifically, several countries supported the view that an MBM could negatively impact world trade and development as it could disadvantage consumers and industries in developing countries (MEPC 62/5/1). In addition to this, there are some concerns about the compatibility with the UNFCCC principle of common but differentiated responsibilities (CBDR). In this regard the Bahamas proposal which suggests that MBMs, in contrast to technical and operational measures, could not achieve direct reductions of emissions came again to the forefront.

Indeed, the IMO Study indicates that the range of the maximum abatement of measures at negative cost is 135 to 365 Mt of CO2. According to the work carried out by CE Delft for the Commission in 2009, it can be assumed that the CO2 emissions of shipping can be reduced by 27% to 47% by 2030 relative to a frozen technology scenario by implementing technical and operational measure (Faber et al. 2009). A major share of these emissions reductions, 23 to 45 percentage points, can be achieved at negative marginal abatement costs (Faber et al. 2009). This is because technical options aims at either reduce the power requirement to the engines or improving the effect return on the fuel used. Generally, these options have a substantial investment cost, moderate operating costs, and potentially very significant fuel consumption and emission reduction effects (Eide and Endresen, 2010). However some technical options are limited to application on new ships while the implementation of operational measures requires substantial changes in management and training.

In contrast, MBMs seems to increase the cost of operating ships. This cost would be absorbed, in varying degree, within ship operating costs and freight costs depending on market condition impact on developing countries. In this regard, developing countries' would bear a disproportionate burden of the environmental and social-economic cost of the high GHG emitting which was actually caused by developed countries.

Despite these concerns, the majority of countries in the IMO believe that an MBM would be necessary as it could serve two main purposes: the provision of incentives for the maritime industry and the possibility to offset growing ship emissions. Specifically IMO experts state that an MBM would deliver the most cost effective solution to reduce emissions and encourage investment in low-carbon technologies (MEPC 62/5/1). Moreover, implementing an MBM involves the ‘polluter pays’ principle as a ship owner pays for his ship’s CO2 emissions (Psaraftis 2012).

3.2 Discussion about the underlying principles of the MBM Measures

It is widely accepted that, the maritime sector should contribute to the global effort of mitigating GHG emissions. However, most parties in the IMO believe that the maritime transportation should not be treated like other industries under the Kyoto protocol due to the complexity of this industry and its special role in world trade. This is the point that the perplexity begins, as each member propose or advocates measures that their principles falls under the general scope of their interests. In the shipping industry, there is general consensus that the IMO is the body best suited to ensure that shipping’s contribution to emission reductions is managed effectively and in a way that does not distort the playing field for different actors. However a substantial issue to be resolved, is whether the measures will be implemented under the IMO principle of equal treatment of ships or with the UNFCCC principle of ‘‘common but differentiated responsibilities’’ that governs climate negotiations and ensures differentiation between contributions of developed and developing countries (Heitmann and Khalilian, 2011). These principles are a matter of continued disagreement at climate conferences.

Countries supporting IMO principles stress that international shipping is a complex sector and GHG emissions from this sector are of a specific kind, in the sense that they cannot be attributed to a particular country or territory. For these reasons, proposals for sub- global measures (Gilbert and Bows, 2012) were not evaluated, despite the pressure from European Union. If emissions are not addressed on the basis of ‘‘equal or non-discriminatory treatment of all ships,’’ loopholes for vessels to circumvent the compliance with any regulation could be created. In a highly globalized and mobile sector like international shipping such an approach could undermine effective actions to limit and regulate global climate change and could further lead to competitive distortion (Endresen et al. 2003).

Countries that support the UNFCCC principle of ‘‘common but differentiated responsibilities’’ and highlight the importance of recognizing the differences in the contributions of developing and developed countries when addressing global climate change are of the view that these principles reflect a consensus of the international community when addressing global climate change. Regulating GHG emissions from international shipping forms one part of this global approach and should therefore be addressed under the UNFCCC. This is especially the case with developing countries who they stress out that the CO2 emissions from their ships are of less importance regarding their population needs and they economic growth. However, about three quarters of all merchant vessels, in deadweight terms, engaged in international shipping are registered in countries who have not validated Kyoto Protocol (Heitmann and Khalilian, 2011). For this reason developed countries argue that ships can easily shift their flags to non-Annex I countries if they feel that the current host country's regulations harm their interests.

Due to their regulatory scope, mandates and mission statements, both IMO and the UNFCCC could set up regulations to address GHG emissions from international shipping. Whereas the IMO is the UN specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships, the UNFCCC has been adopted to establish an international legal and institutional framework that initiates, coordinates, and regulates global action to mitigate climate change and adapt to its effects across state borders and economic sectors (Hackmann 2012). Although both institutions were set up with different objectives, they might be complementary and mutually enhancing when addressing GHG emissions from international shipping. However in IMO committees countries states that although, maritime economics and marine environmental protection often evoke conflicts of interests, it is IMO’s objective to treat both issues in the same manner.

Another concern is that regulating GHG emissions from international shipping can result in an increase in the price of transport which will consequently cause reduced imports and exports (ICTSD 2010). Without recognizing the specific needs and special circumstances of developing countries, such policy could impose an additional burden on the latter’s developing path toward sustainable economic growth and might lead to economic and social disadvantages. In this regard, further scientific studies that analyze and assess the socio-economic consequences (e.g., impact on trade patterns; the exclusion of certain countries/regions from any such regulation) of GHG regulations for international shipping with a specific focus on developing and least developed countries, as well as small island development states, could provide further clarity.

3.3 Discussion about the criteria of evaluating MBM Measures

After several meetings and discussions at MEPC, it was agreed that the proposed MBM should address nine criteria. These criteria concerns the environmental effectiveness, the cost-effectiveness and the potential impact on trade and sustainable development, the incentives to technological change and the need for technology transfer to developing countries (MEPC 61/INF.2). Other criteria concern the relation with other relevant convention as well as with the existing provisions under the IMO legal framework. Finally the examined criteria include the practical feasibility and the potential additional administrative burden and workload (MEPC 61/INF.2). Obviously, these criteria have caused several debates and have revealed many conflict areas, as they are connected with the necessity and the principles of a MBM. In this part the analysis will focus on the aspects of cost-effectiveness versus environmental effectiveness that are addressed under different MBM.

In general estimating the direct cost for reducing GHG from a measure is a challenging task. Apparently, the cost is driven by the amount of GHG that is targeted and because of this context cost and environmental effect is highly related. In this point it should be mentioned that the cost of implementing a measure for a company includes initial costs, such as installation and design cost, as well as operational costs, such as maintenance, training of personnel and lost revenue. However, there might also be some benefit from the measure, such as fuel cost savings and increased revenue (Eide et al. 2011). In economic literature technical and operational measures have been examined extensively. The cost of abatement of CO2 is mainly expressed through the Marginal Abatement Cost (Corbett et al. 2009).

The necessity of a MBM for international shipping as analyzed before is connected with a high degree of certainty which will allow business to invest with confidence. Regarding this, in recent meetings some countries indicated a preference for certainty in emission reductions whilst other opted for certainty in price (future cost to the shipping industry). Although some countries considered certainty in emission reductions and certainty in price to be equally important it seems rather difficult for an MBM to achieve equilibrium in both fields.

In environmental economics measures are broadly divided into two categories, the ‘Command and Control’ (CAC) and the ‘economic means’. The mechanisms of an environmental CAC measure are generally more practical to implement as they include the establishment of law, regulations or some other kind of institutional framework. Moreover they usually include wide implementation and well-designed control mechanisms. Their purpose is to have directly applicable environmental results and attaining high environmental effectiveness.

On the other hand, environmental economists have also express strong preference to economic instruments based in what can be summarized as ‘marginal law’. According to Wang et al. (2009) in such circumstances, the marginal benefit (MB) of cutting certain emissions should be equal to the marginal damage (MD) of these emissions. Specifically if the MB is larger than the MD, further emissions should be reduced to take advantage of the marginal benefit; if the MB is less than the MD, the air might be so clean that more pollutant should be allowed. Based on this standard, there is a general consensus among economists that market-based instruments and more specific programs which are based on open markets (like Emission Trading), outperform command- and-control measures in terms of cost-effectiveness for pollution control (Wang et al. 2009). In addition they can act as strong incentives for the industry, as they reward firms for being environmental conscious.

Currently the literature concerning shipping GHG emissions focus on allocation issues and on the marginal cost of implementing technical and operational measures. Eide et al. (2011) examined a total of 25 measures and found that 19% of the baseline emissions in 2010 can be reduced in a cost effective manner. For 2020 and 2030, the corresponding numbers are 24% and 33%. Increasing the marginal costs level to 100 USD/t gives a reduction potential of 27% in 2010, 35% in 2020 and 49% in 2030. In previous study, Buhaug et al. (2009) provided a basic MAC curve with 25 measures grouped into 10 groups, indicating a cost effective reduction potential of 20% in 2020, using a fuel price of 500 USD/t and an interest rate of 4%. However it seems that measures with cost over 100 USD/t yields very little in terms of further emission reductions. In other words, much of the abatement potential is achievable at low or moderate cost. The results also indicate that stabilizing fleet emissions at current levels is obtainable at moderate costs. However, significant reductions beyond current levels are rather difficult to achieve.

For further information, IMO asked the Expert Group to evaluate the proposals that have been submitted to MEPC under specific scenarios, set by the IPCC. According to their report all of the proposals directed at establishing a MBM to reduce GHG emissions bring forward concepts that have merit for achieving cost-effective reductions in GHG emissions. Most of scenarios predict a serious decrease in emissions (10 – 20 % of Business As Usual) and a significant potential for cost effective CO2 emission reduction for the shipping industry, both in the current fleet, and towards 2030. The scenario A1B is presented in table 1 for four of the proposed MBM, since the others proposals did not provide enough evidence. Box 1 refers to MAC curves for A1B and B2 growth scenarios with reference fuel price, 80% uptake of possible measures and mandatory EEDI applied with medium stringency for new ships. The cost-effective potential ranges between 269 and 664 million tones, as presented in table 2.

MBM

Cost of MBM based on A1B [1] , 2030 Scenario ($/tonne)

Funds collected/ generated by the MBM

Maximum Cost Effectiveness [2] ($/tonne)

GHG Fund (Denmark)

50

-

39

PSL (Jamaica)

770

49

38

ETS (Norway)

96

31

38

RM (IUCN)

121

21

53

Table 1: The cost of implementing MBM, based on A1 Scenario

Source: IMO 2011

Box 1: MAC curves for A1B and B2 growth scenarios with reference fuel price, 80% uptake of possible measures and mandatory EEDI applied with medium stringency for new ships.

Source: IMO 2011

Target year

Scenario

Baseline

Reduction

Cost effective reduction

2020

A1B

1134

330

315

2030

A1B

1506

685

664

2020

B2

1016

280

269

2030

B2

1205

515

500

Table 2: Total reductions and their Cost Effectiveness according to A1B and B2 scenarios.

Source: IMO 2011

Table 2 indicates the reductions that can be achieved in a cost effective manner under A1B and B2 scenarios. What should be noticed is that there are significant differences under these two scenarios which can easily be explained by the differences in world growth. However a major concern is that these scenarios have slip up regarding world growth and CO2 emissions. In this point studies demonstrates ambiguous results.

On the one side Anderson and Bows demonstrates that a shipping industry is constantly growing and must deliver an approximately 80% reduction in absolute emissions by 2050 under the "no treatment" regime. Even with "common but differentiated responsibility", non-Annex 1 shipping emissions must soon peak and reduce at 6–8% per annum thereafter; Annex 1 shipping requires an immediate reduction in emissions of 12% per annum * (Anderson and Bows, 2012)

On the other hand developed countries which currently have negative growth rates, states that shipping emissions might have been overestimated as the crisis in developed countries had serious impact on seaborne trade. For this reason, MEPC has asked experts to carry out an updated study which will also take into account the implementation of technical and operational measures.

Finally effectiveness in contributing to the reduction of total global GHG emissions is also essential. In this regard, some studies reveal that a GHG Fund would reduce more CO2 emissions than an ETS mechanism in the same permit price (Psaraftis 2012). Finally some countries suggest that a MBM for shipping can have a dual purpose involving both mitigation and climate change finance.

3.4 Discussion about the impacts on developing countries and consumers

Apparently the impacts of an increase in bunker fuel prices and freight costs will affect some countries and products more than others. The analyses provided by the literature shows that impacts will vary by country, independent of level of economic development. Under this scope IMO proposes that developing countries, especially SIDS and LDCs, should not be treated as a collective bloc in assessing impacts. Specifically the main channel of impact on developing countries from a charge on international maritime fuels will likely be through freight costs (IMF 2011). In this regard, the low elasticity of demand for freight services suggests a high degree of pass-through to purchasers of freight services—and little impact on profitability (IMF 2011). The impact on food prices is a particular concern, but seems likely to be fairly small and range from about 0.2 to 1.0 percent for a $25 per tonne CO2 price.

One proposal that has attracted attention is the development of a rebate mechanism based on shares of global import value. Stochniol (2011) envisages allocating the revenue raised by some maritime MBI to countries according to their share in the value of world imports, these values being adjusted by (1) including only imports from non-adjacent countries (2) further adjustment to reflect the extensive trade between close but non-adjacent countries in Europe, as most of this trade is presumed to be road- and rail-based. These imply that according to 2007 shares, about 40 percent of proceeds would have been allocated to non-Annex I countries

Finally regarding the impacts on consumers, studies have revealed that, there will be a pass-through of costs to end consumers. Specifically everything else equal, the pass-through is expected to rise with i) the greater the elasticity of consumer prices to freight rate increases, ii) the greater the elasticity of freight rates to bunker fuel prices, iii) the smaller the market share of domestic producers of the good (less competition).

3.5 Discussion about the instruments and the stakeholders' interests

The calculation of an emission reduction potential will always be relative to a given emission baseline. The baseline describes the emission level for the fleet in the absence of introducing abatement measures (Longva et al. 2010). A major issue arising here is whether a cap or a target will be posed on emissions. By referring to the targeted amount, the measure deals with how much GHG shall be paid for by the industry. Such mechanisms recognize the need to mitigate GHG in general, and propose actions that could act as an incentive. As it was previously mentioned proposals which set a target on emissions (without a specific cap) are PSL and RM. The cap amount deals with how much GHG shall be mitigated by the industry. Some of the proposals refer to it in terms of a specific emission reduction per ship (ETS) and others in relative terms. It should be mentioned that there are proposals which have the same target and cap (GHG Fund) and proposals with different target and cap (ETS).

Another issue of concern is whether the measure should be implemented only to in-sector actors, (shipping companies or ships) or it will also include other, out of sector industries. Generally, sector-specific approaches may have the disadvantage of not being cost-effective as there may be measures in other sectors (Longva 2010). However most of the mechanisms focus in achieving in sector reductions as shipping is considered to be a rather complex industry to be integrated in a wider mechanism. This mainly concerns the global ETS system as it is currently implemented in land- based industries. Broadly speaking the basic in sector mechanisms are I) the establishment of a mandatory EEDI for all ships, ii) the development of an efficiency trading scheme, iii) the development of a combination of existing ship standard with a fuel based charge, iv) the creation of a broad-based price incentive on fuel use, and v) the creation of a refund incentive.

However some countries expressed the opinion that in case of implementing an ETS, it would be beneficial for the maritime industry to take advantage of some cost -effective measures such as the Clean Development Mechanisms (Kageson, 2008). Apart from those who support purchase out-of-sector credits, some countries believe that shipping should be able to sell emission reductions to other sectors. They argue that shipping is by far the most energy -efficient mean of transport and if it was included in the existing ETS programs it could raise enough funds for GHG mitigating purposes.

Finally another out-of-sector mechanism which is under consideration is the implementation of supplementary reductions from use of "remaining proceeds". According to the Experts Report (MEPC 61/INF.2) the majority of the proposed MBMs currently under review have the potential to generate funds. If so decided by IMO Members, these could be used to co-finance mitigation and adaptation actions and could, amongst others, be one potential source for the Green Climate Fund to address the needs for climate change actions in developing countries.

4. Conclusions

This paper examined the instruments and the conflict areas as were formed in recent debates of the IMO. Firstly, regarding the necessity of an MBM, it is widely accepted that the maritime industry has a relatively small contribution when compared to other transport modes and the potential to provide significant emission reductions is relatively low. In this regard, there should be extra care in introducing a charge as sea transport is one of the least carbon-intensive modes of transport.

The debate shows several groups of opinion regarding the need for an MBM. The final decision is a matter of political strength that each country poses in the IMO. As it was mentioned before developing countries own a great proportion of the world fleet and consequently they have strong voice. What should be considered is that cost effective operational and technical emission reduction measures are available to the shipping sector, although there might be some barriers in the uptake of many of these measures.