How to implement the 2023 IMO GHG strategy? Insights on the importance of combining policy instruments and on the role of uncertainty

Comment mettre en œuvre la stratégie GES 2023 de l'OMI ? Perspectives sur l'importance de combiner les instruments politiques et sur le rôle de l'incertitude

Laurence Cret, Marc Baudry and Frédéric Lantz
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Laurence Cret: UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Frédéric Lantz: IFPEN - IFP Energies nouvelles

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Abstract: In its 2023 strategy for reducing GHG emissions from ships, the International Maritime Organization aims for the uptake of zero or near-zero GHG emissions technologies, fuels or energy to represent at least 5 %, striving for 10 %, of the energy used by 2030. Measures proposed to reach this target combine two kinds of policy instruments: an emission intensity standard and GHG emissions pricing. Proposals vary in terms of the design of the pricing scheme and the subsequent uncertainty that would affect the price signal. This paper assesses the extent to which emissions pricing effectively complements a more restrictive standard on the intensity of GHG emissions to boost transition to low-carbon vessels. Attention is paid to the role of the volatility of the price signal of GHG emissions and fuels prices. For this purpose, the paper applies a multiple real options model to the decision to renew a ship under various sources of uncertainty. Simulations carried out based on a case study show that the price signal effectively complements the more restrictive standard but that the decarbonization objectives are only achieved with a quite ambitious level of pricing. The role of the volatility of the price signal of GHG emissions appears negligible compared to other sources of volatility.

Keywords: Emission fuels; Emission intensity standard; Carbon pricing; Real option (search for similar items in EconPapers)
Date: 2024-11
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Published in Marine Policy, 2024, 169, pp.106332. ⟨10.1016/j.marpol.2024.106332⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04677483

DOI: 10.1016/j.marpol.2024.106332

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