Environmental Engineering Reference
In-Depth Information
Emission reduction, however, generates cost.
CO
2
elimination cost from the international ship-
ping industry will ultimately be transformed to
the exporters and/or importers (Corbett and Wang
2009). There have been many discussions on
how transport cost influences international trade
(Limao and Venables, 2001; Martinez-Zarzoso,
2003; Anderson & Eric, 2004; Clark,
et al
., 2004).
Most papers have reported that a 100% increase
of transport cost reduces trade by 10% to 20%
(Hummels, 1999; Kumar & Hoffmann, 2002).
It is unavoidable that CO
2
reduction cost inflates
transport cost and decrease international trade. In
such case, shipping emission reduction is not only
a policy issue in the global maritime industry, but
also a topic in international trade and even about
the whole national economy, especially for those
countries that are export-oriented. Therefore, the
GHG emission reduction cost to the maritime
transportation and international trade is especially
important.
The marginal abatement cost has been the key to
selecting appropriate policy instruments to reduce
CO
2
emissions. The marginal abatement cost is
defined as the derivative of total abatement costs
with respect to the level of output (McConnell &
Campbell, 2004). IMO indicates that the marginal
abatement cost curve always considers the cost
of reducing the emissions by the next ton of CO
2,
given the reduction that has been achieved by the
options that have already been implemented (Bu-
haug
et al
., 2009). Some literature has calculated
the marginal abatement cost with and without
considerations of operational cost, capital cost,
and service cost from ship emission reduction
(Buhaug
et al
., 2009; Corbett
et al
., 2009; Eide
et al
., 2009; Kat
et al
., 2009).
In this chapter, the impact of the marginal
abatement cost on the transportation cost and the
international trade will be investigated. The use of
fund raised by such regulations will be discussed.
The remainder of this article is divided as follows.
Section 3 uses the 2005 trade data and STTEM
trade due to the global vessel-based GHG reduc-
tion regulations. Section 4 presents the debate
as to how to collect the GHG fund and proposes
the way to use and distribute the fund. Section 5
provides some concluding remarks.
THE IMPACT OF GHG REDUCTION
COST ON TRANSPORATION COST
AND INTERNATIONAL TRADE
Market Based Instruments
to Reduce Air Pollution
Policy instruments to reducing air pollutions
can be categorized into command-and-control
approaches and market-based instruments (eco-
nomic incentive) (Kolstad, 2000). One objective
in choosing different emission reduction policies
is to find the most cost-effective way. Therefore,
the IMO is moving to adopt market-based instru-
ment to reduce vessel-based GHG emission from
the MEPC60 meeting.
Market-based approaches are policy instru-
ments that use price or other economic tools to
provide incentives for polluters to reduce harmful
emissions (Starvins, 1998). These tools include
green taxes, subsidies, tradable permits, and others
including deposit/refund systems, eco-labeling,
licenses, and property rights. These instruments
encourage behavioral changes through market
signals (Helfand, 1998).
Requiring all manufacturers or even all
industries to the same reduction target can be
very costly. This is one of the reasons why the
commend-and-control measure is not welcome
and economists generally favor the market based
measures (Helfand, 1998). In theory, if properly
designed and implemented, market-based instru-
ments allow any desired level of pollution cleanup
to be realized at the lowest total cost to society.
Market-based instruments enable manufactures or
all industries equalize the marginal abatement cost
