connecting you to the future




The economics of managing damaging
   pollutants from marine sources
 Terry Barker
 Unive...
Context: aviation and shipping

• International transportation
   – Global and growing
   – Size and effects uncertain and...
International policy coordination

• Current policies are ripe for reform
   – Systemic: pollution, congestion, noise
   –...
A Global Emissions Trading Scheme
   (GETS) for international transport
• GETS is based on the design of the EU ETS for
  ...
Outcomes

• Management of GHGs, NOx, SO2, PM
• Inducing technological change and more
  investment (through carbon price a...
Sketch of a GETS for International
                        Transport: Low growth scenario
GtCO2
          2.500




      ...
Sketch of a GETS for International
         Transport: Low growth scenario 10%
       auction revenues returned to the ind...
Sketch of a GETS for International
       Transport: Risks and opportunities
• International aviation and shipping togethe...
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Civic Exchange - 2009 The Air We Breathe Conference - The Economics of Managing Damaging Pollutants from Marine Sources

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Civic Exchange 2009 The Air We Breathe Conference - Experts Symposium 9 January 2009

The Economics of Managing Damaging Pollutants from Marine Sources
presented by Terry Barket (University of Cambridge and Cambridge Econometrics)

http://air.dialogue.org.hk

Published in: Health & Medicine, Business
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Civic Exchange - 2009 The Air We Breathe Conference - The Economics of Managing Damaging Pollutants from Marine Sources

  1. 1. connecting you to the future The economics of managing damaging pollutants from marine sources Terry Barker University of Cambridge and Cambridge Econometrics Overheads for Expert Symposium on Air Quality, Hong Kong, 9 January 2009
  2. 2. Context: aviation and shipping • International transportation – Global and growing – Size and effects uncertain and risks asymmetric – Aviation is different from shipping • Place of emissions: high versus low • Light versus heavy loads • Passengers versus freight • Regulation and safety: risk to life/oil pollution • Why air and ship including other polluting emissions (i.e. GHGs) in GETS? – Both are intrinsic to globalisation & trade-based growth – Both face local congestion and pollution – Both also pollute outside border controls, in what would otherwise be pristine environments – Most intractable of broad sectors (data, law, behaviour) – CRITICAL: • likely substantial reductions in costs if altogether in an extended GETS: “flexibility” (time, multi-gas, and technological-option-choice) 2 of 25
  3. 3. International policy coordination • Current policies are ripe for reform – Systemic: pollution, congestion, noise – Many damaging emissions are outside national borders – National caps for GHG, SO2, NOx, not for international emissions – Not in Kyoto, Article 2.2 – Consensus and action difficult to achieve – Classic example of externalities, but no taxation • GETS – Cap-and-trade can limit emissions equitably across operators and countries – Auctions yield revenues (otherwise huge profits) – Carbon and other pollutant prices can be managed • Post-2012 (Copenhagen COP15) – Need to start with a global scheme, GETS is logical – Will reveal market carbon price for decarbonisation 3 of 25
  4. 4. A Global Emissions Trading Scheme (GETS) for international transport • GETS is based on the design of the EU ETS for GHGs and can be extended to include other pollutants. • Each phase will run for 8 years – 5 consequent phases from 2013 to 2052 • Cap at the average level of 2004-2006 emissions in 2013, phasing out by 2052 i.e. no allocation in 2052 (net zero emissions) • 100% auctioning & 100% revenue recycling • Usage of credits from CDM projects: 10% of allocation in 2013 decreasing linearly to 5% in 2052 • CDM credits are supplementary to the allocation 4 of 25
  5. 5. Outcomes • Management of GHGs, NOx, SO2, PM • Inducing technological change and more investment (through carbon price and R&D investments) – Higher prices will not necessarily stop growth of the sector – New planes and ships likely to be more generally productive and better quality – Growth less polluting • Funding flows from air passengers and importers to development 5 of 25
  6. 6. Sketch of a GETS for International Transport: Low growth scenario GtCO2 2.500 2.000 1.500 Gt CO2 1.000 0.500 0.000 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 year bau emissions credits auctioning 6 of 25
  7. 7. Sketch of a GETS for International Transport: Low growth scenario 10% auction revenues returned to the industry $bn(2000) 50.00 45.00 billion USD (2000) 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 year Low growth revenues recycled to the industry - High price Low growth revenues recycled to the industry - Medium price Low growth revenues recycled to the industry - Low price 7 of 25
  8. 8. Sketch of a GETS for International Transport: Risks and opportunities • International aviation and shipping together: lowest and highest emissions per tonne of freight carried • Regulatory capture – Annex I versus Non – Annex I countries – ICAO and IMO versus UNFCCC – Provides opportunities for collusion and monopolistic pricing • Institutional feasibility: will IMO, ICAO ever agree to a scheme? National governments? (IATA supports including aviation into an open GETS) • Technologies may not emerge – But wind, heat-pump, new PV materials – a technological revolution appears to be starting • Convenience-flag countries in shipping. 8 of 25

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