Making international transport pay its climate bill

The idea behind market-based policy instruments is to make companies and citizens respond by choosing the least costly measures. What is most cost-efficient may vary over time as a result of changing price elasticities of demand and technological innovation. There is no way for national governments or international bodies to know with enough certainty what the future might bring. A technological breakthrough in shipping or aviation might, in combination with increasing marginal abatement costs in other sectors, change relative prices enough to make new abatement strategies economically viable. It is therefore essential that maritime shipping and aviation face the same marginal incentive to reduce CO2 emissions as other modes of transport and land-based installations. This paper will discuss how to bring this about.