Economic costs of CO2 emissions reduction for non-Annex I countries in international shipping

The differences between the Common but Differentiated Responsibility (CBDR) principle and the Equal Treatment for All Ships principle create a stalemate for future policy progress in vessel-based CO2 emissions reduction negotiations. This paper investigates the economic costs of CO2 emissions reduction with and without considering the CBDR under two separate regulatory scenarios, evaluates the impact on trade cost, and discusses the real policy concerns of developing countries insisting that the CBDR be applied by the International Maritime Organization (IMO). This paper shows that the cost increases to large developing countries are small even using a very stringent estimate. However, a policy that requires all ships to reduce CO2 emissions increases international trade costs for small-island nations significantly, presenting an equity issue to be resolved. The current proposal to rebate money to developing countries has merit, especially for small countries. It does not address some fundamental concerns of major developing countries, however. To engage these countries, their interests have to be secured and some new policies should be created. This paper proposes some policy options that may involve these countries and consolidate an international effort in the IMO to reach binding agreements to reduce ship-based CO2 in the future. (C) 2010 International Energy Initiative. Published by Elsevier Inc. All rights reserved.