Integration conditions

In principle the proposed rebate mechanism could apply to any MBM, providing it generates enough gross revenue to cover the rebate needs. Given that developing countries import approximately 30% of goods worldwide, the gross revenue of an MBM that can provide rebates for developing countries must be greater than 30% of the instrument’s global cost burden (assuming a uniform application; before any benefits are taken into account).

Any MBM based on a levy or a GHG contribution can directly use the proposed rebate mechanism, as its cost burden equals the gross revenue raised.

For an MBM based on emissions trading, such as cap-and-trade, the integration depends on its design. For instance, the total economic cost of cap-and-trade is the sum of (1) the cost of emission allowances distributed to the maritime sector and (2) the cost of emission allowances and credits purchased from other sectors. As the revenue in cap-and-trade is typically raised through emission allowance auctioning, only schemes that auction at least 30% of the emission allowances could apply the proposed rebate mechanism.

For any scheme that assumes non-uniform application, for instance applying different charges based on the efficiency of ships, integration of the rebate mechanism would be more difficult. The cost burden on a given country would for such schemes depend on efficiency of ships serving the country, and thus its rebate cannot be calculated easily.