Raising Climate Finance from International Transport Sectors

The report argues that a universally applied market-based instrument (MBI), specifically a cap-and-trade scheme, is the most effective and politically feasible way to address emissions from international transport. To comply with the principle of common but differentiated responsibilities (CBDR), the report proposes a governance structure where revenues or allowances are selectively disbursed to ensure no net incidence on developing countries. The remaining value would be transferred to the Green Climate Fund and used for fuel-efficiency improvements. The author concludes that an emissions trading system (ETS) is superior to levy-based systems because it avoids being classified as an international tax and does not require the direct funding of an international organisation or the hypothecation of national fiscal revenues.

• To prevent carbon leakage and avoidance through 'flag-hopping', climate policy instruments for international shipping must be implemented in a flag-neutral way, applying to all ships regardless of registry or ownership.
• A universally applied MBI can satisfy the principle of common but differentiated responsibilities (CBDR) if a share of the revenues is used to ensure there is no net incidence on developing countries.
• Estimates for the amount of revenue needed to compensate developing countries for the net incidence of an MBI vary, with some studies suggesting between 30% and 67% of total revenues.
• An Emissions Trading Scheme (ETS) is more politically acceptable than a levy or tax because it does not entail an obligatory payment to a fiscal authority and involves tradable assets.
• To avoid objections regarding the direct funding of international organisations, the governing body of an ETS should not auction allowances itself but instead transfer them to beneficiaries like developing countries and the Green Climate Fund.
• Projected gross costs to the shipping industry for a carbon price in 2030 are estimated between USD 40 and 49 billion, though the actual revenue available for climate finance depends on the specific MBI proposal.
• Revenues from international transport MBIs can be used to overcome barriers to fuel-efficiency improvements, such as subsidising standardisation for port-ship communications or funding air traffic management in developing countries.

APA

Faber, J., Pahuja, N., & Garg, A. (2012). Raising Climate Finance from International Transport Sectors. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/raising-climate-finance-final.pdf

Chicago

Faber, Jasper, Neha Pahuja, and Ankur Garg. Raising Climate Finance from International Transport Sectors. Climate Strategies, 2012. https://climatestrategies.org/wp-content/uploads/2014/11/raising-climate-finance-final.pdf.

Wikipedia

{{cite report |last1=Faber |first1=Jasper |last2=Pahuja |first2=Neha |last3=Garg |first3=Ankur |title=Raising Climate Finance from International Transport Sectors |publisher=Climate Strategies |date=March 2012 |url=https://climatestrategies.org/wp-content/uploads/2014/11/raising-climate-finance-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{faber2012raising, author = {Faber, Jasper and Pahuja, Neha and Garg, Ankur}, title = {{Raising Climate Finance from International Transport Sectors}}, institution = {Climate Strategies}, year = {2012}, month = mar, url = {https://climatestrategies.org/wp-content/uploads/2014/11/raising-climate-finance-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }