In this report, sponsored by the European Commission's DG Environment, a NERA team led by Senior Vice President and Environment Group Head Dr. David Harrison analyzes four “economic instrument” approaches to reducing emissions from maritime sources in European sea areas. The four approaches include credit-based emissions trading, benchmark-based emissions trading involving consortia of vessels, voluntary port dues differentiation based on environmental factors, and subsidies to promote clean shipping.

Building upon earlier work undertaken by NERA on behalf of DG Environment to evaluate the feasibility of various economic instruments for reducing shipping emissions, the team considers the further developments that would be involved to adopt each of these promising approaches. The report provides recommendations for the development of each approach, dividing the recommendations into two major categories: design elements, which are features that are specified initially and not expected to require additional review over time; and implementation elements, which are features that require implementation on an ongoing basis. In developing these recommendations, the authors draw upon the experience of a variety of existing programs for both stationary and mobile marine sources. The report also considers implications for links with land-based emissions trading schemes and discusses issues relevant to the inclusion of mobile sources (in both the shipping and aviation sectors) in greenhouse gas emissions trading schemes.