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Charging the Useof Global CommonsCharging the Useof Global Commons

German Advisory Council on Global Change

(WBGU)

Special Report

H. Graßl

J. Kokott

M. Kulessa

J. Luther

F. Nuscheler

R. Sauerborn

H.-J. Schellnhuber

R. Schubert

E.-D. Schulze

WBGU

Members of the German Advisory Council on Global Change(as on 18. January 2002)

Prof Dr Hartmut Graßl (chair)Director of the Max Planck Institute for Meteorology, Hamburg

Prof Dr Dr Juliane Kokott (vice chair)Director of the Institute of European and International Business Law at the University of St. Gallen, Switzerland

Dr Margareta KulessaAssistant Professor for Economics at the Faculty of Law and Economics, University of Mainz

Prof Dr Joachim LutherDirector of the Fraunhofer Institute for Solar Energy Systems, Freiburg

Prof Dr Franz NuschelerDirector of the Institute for Development and Peace, Duisburg

Prof Dr Dr. Rainer SauerbornMedical Director of the Department of Tropical Hygiene and Public Health at the University of Heidelberg

Prof Dr Hans-Joachim SchellnhuberDirector of the Potsdam Institute for Climate Impact Research (PIK) and Research Directorof the Tyndall Centre for Climate Change Research in Norwich, United Kingdom

Prof Dr Renate SchubertDirector of the Center for Economic Research at the ETH Zurich, Switzerland

Prof Dr Ernst-Detlef SchulzeDirector at the Max Planck Institute of Biogeochemistry in Jena

German Advisory Council on Global Change (WBGU)

Charging the Use of Global Commons

Special Report

Berlin 2002

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GERMAN ADVISORY COUNCIL ON GLOBAL CHANGE (WBGU)Secretariat Reichpietschufer 60–62, 8th floorD-10785 Berlin, Germany

Phone +49 (0) 30 263948 0Fax +49 (0) 30 263948 50E-Mail [email protected] http://www.wbgu.de

Translation: Christopher Hay, Darmstadt

Cover: Container ship (photo courtesy Hapag-Lloyd Container Line), airplane (photo courtesy Airbus S.A.S.), water-lily andbromeliad (photos courtesy Meinhard Schulz-Baldes)

Copy deadline: 18.01.2002

This special report is available through the Internet in German and English.

© 2002, WBGU

ISBN 3-9807589-8-2

This policy paper would not have been possible with-out the committed and untiring effort of the staff ofthe Council Members and the Council’s Secretariatin Berlin. The Council wishes to express its fullestgratitude for their major input to the research ana-lysts Dr Thilo Pahl (WBGU Secretariat, Berlin),Assessor-jur Tim Bäuerle (Heidelberg), cand oecpubl Markus Dolder (ETH Zürich), cand oec publStephanie Fankhauser (ETH Zürich) and Dipl-Volksw Marc Ringel (University of Mainz).

The scientific team participating in the work of theCouncil when this report was written furtherincluded:

Prof Dr Meinhard Schulz-Baldes (WBGU Secre-tary-General), Dr Carsten Loose (WBGU DeputySecretary-General), Dr Martin Cassel-Gintz(WBGU Secretariat, Berlin), Dr Ursula FuentesHutfilter (WBGU Secretariat, Berlin), Dr ThomasFues (INEF – Institute for Development and Peace,Duisburg), Dr Jürgen Kropp (Potsdam Institute forClimate Impact Research), Dr Jacques Léonardi(Max Planck Institute for Meteorology, Hamburg),Dr Franziska Matthies (University of Heidelberg),Dr Tim Meyer (Fraunhofer Institute for SolarEnergy Systems ISE, Freiburg/Br.), Dr Angela Oels(WBGU Secretariat, Berlin), Dr Benno Pilardeaux(WBGU Secretariat, Berlin) and Dipl-Biol AngelikaThuille (Max Planck Institute for Biogeochemistry,Jena).

The Council also owes its gratitude to the impor-tant contributions and support by other members ofthe research community. This policy paper builds onthe following reports:

Institute of Shipping Economics and Logistics(ISL): Nutzung der Hohen See als Transportweg –Möglichkeiten zur Erhebung von Entgelten. Bre-men: ISL.

Prof Dr Paul Klemmer and PD Dr Rüdiger Wink,Ruhr-Forschungsinstitut für Innovations- und Struk-turpolitik e.V. (RUFIS): Nutzungsentgelte alsBestandteil der Finanzierung globaler Umweltpoli-tik. Das Fallbeispiel Meeresschutzpolitik. Bochum:RUFIS.

Acknowledgements

1

22.12.2

33.13.23.3

3.3.13.3.23.3.33.3.4

3.43.5

3.5.13.5.2

3.63.7

44.14.2

4.2.14.2.2

4.34.4

4.4.14.4.24.4.34.4.44.4.5

4.54.6

Acknowledgements V

Contents VII

Tables VIII

Acronyms IX

Introduction: User charges to promote global sustainability 1

Fundamentals of the concept of user charges 3The basic idea of user charges 3User charges as a financing instrument for sustainable development 4

Charging the use of airspace by aviation 6Environmental impacts of aviation 6The role of ICAO 8Possible forms of a user charge on aviation 8User charges which directly increase ticket prices (ticket levy) 8User charges based on the consumption of kerosene 9User charges based on emissions 12Tradable emissions certificates 14Undesired side-effects 16Use of funds 17Purposes 17Institutional arrangements 17Political enforceability 18Conclusion on user charges on aviation 18

Charging the use of the oceans by shipping 20Marine pollution 20Environmental impacts of ocean transport 21Discharges and inputs to the oceans 21Emissions to the atmosphere 21The structure of the ocean shipping sector 22Designing a charge on the use of the oceans by shipping 23General principles 23Legal considerations 24Determining the participants in a system of user charges 25Possible models for levying charges 25The Council´s preferred model for the levying of user charges 26Undesired side-effects 29Use of funds 30

Contents

VII

Use of funds to provide financial support for the application of more environ-mentally sound technologies? 30Use of funds to remedy damage to the marine environment 31Political enforceability 32Conclusion on charging the use of the oceans by shipping 32

Non utilization obligation payments (NUOPs) 33Introduction 33The concept 33Existing similar mechanisms 36Preconditions for the application of NUOPs 37Aspects of operationalization 38Modalities 38Financing sources 38Level of payments (financing requirement) 39Recipients of payment and use of funds 39Conclusion 40Undesired side-effects 40Political enforceability 41Conclusion on non utilization obligation payments (NUOPs) 41

Recommendations for action and research 42

References 45

4.6.1

4.6.24.74.8

55.15.25.35.45.5

5.5.15.5.25.5.35.5.45.5.5

5.65.75.8

6

7

Tab. 3.3-1Tab. 4.2-1Tab. 4.3-1Tab. 4.3-2Tab. 4.3-3Tab. 4.4-1Tab. 4.4-2

Some examples of charges for selected flight distances and aircraft types 13Examples of oil discharges to the oceans due to shipping 21Leading export and import regions for crude oil in 1999 22The leading flags of the world as at 1 January 2001 23World trading fleet according to type of vessel as at 1 January 2001 24Quality Shipping criteria and records 27Examples of annual user charges for different types of ships 29

Tables

ANCATASACAEP CBDChA CDMCO2

CTO ECACECMTGATSGATTGAUSS

GDPGEFGESAMP

GPGsGTHAMHCIATAICAOIMOkWLDCLMISLNGLPGLTOLRTAPMARPOLMEPCMWMWhNAFTANASANGONOX

NUCCNUOPOBO

Expert Group on abatement of Noise Caused by Air Transportation (ECAC)Aviation Service AgreementsCommittee on Aviation Environmental Protection (ICAO)Convention on Biological Diversity (UNCED)Chicago Convention on International Civil AviationClean Development Mechanism (UNFCCC)carbon dioxideCertified Tradable Emission OffsetsEuropean Civil Aviation ConferenceEuropean Conference of Ministers of TransportGeneral Agreement on Trade in Services (WTO)General Agreement on Tariffs and TradeGesellschaft für Angewandten Umweltschutz und Sicherheit im Seeverkehr,Bremen[German Institute for Environmental Protection and Safety in Shipping]gross domestic productGlobal Environment Facility (UN)Joint Group of Experts on the Scientific Aspects of Marine Environmental Pro-tectionGlobal Public Goodsgross tonnage (of ships)Humid Air MotorhydrocarbonsInternational Air Transport AssociationInternational Civil Aviation Organisation (UN)International Maritime Organisation (UN)kilowattLeast Developed CountriesLloyd’s Maritime Information ServicesLiquefied natural gasLiquefied petrol gas(emissions during) Landing and Take-Off cycle of an aircraftGeneva Convention on Long-range Transboundary Air Pollution (UN)International Convention for the Prevention of Pollution from ShipsMarine Environment Protection Committee (IMO)megawattmegawatt-hourNorth American Free Trade AgreementNational Aeronautics and Space Administration, USANon-governmental Organizations nitrogen oxidesNon-Use Commitment CertificateNon-Use Obligation PaymentOre/Bulk/Oil ship

Acronyms

X

Official Development AssistancePort State ControlQuality Shipping (GAUSS)Roll on/Roll off shipSubsidiary Body on Scientific Technical and Technological advice (CBD)sulphur dioxidetributyl tinTradable Conservation Creditstons dead weightTwenty Feet Equivalent Unit (shipping container)United NationsUnited Nations Convention on the Law of the Sea (UN)United Nations Framework Convention on Climate ChangeInternational Conference on Financing for Development (UN)volatile organic compoundsWorld Summit on Sustainable DevelopmentWorld Trade Organization (UN)

‘Billion’ is used in this report to signify one thousand million.

ODAPSCQSRoRoSBSTTASO2

TBTTCCtdwTEUUNUNCLOSUNFCCCUNFfD VOCsWSSDWTO

1Introduction: User charges to promote global sustainability

In the run-up to the United Nations InternationalConference on Financing for Development(UNFfD) due in March 2002 and the World Summiton Sustainable Development (WSSD) due in Sep-tember 2002, the question of how to finance globalenvironment and development policy is moving tothe centre of attention. The problems of globalchange are mounting (WBGU, 2000), and the inter-national community is increasingly pronouncing itswillingness to tackle these problems in a cooperativefashion. However, the question of how to raise thenecessary financial resources has not yet beenresolved satisfactorily.

The unresolved financing questions affect, amongother things, the ambitious development goals set bythe United Nations at the Millennium Summit inSeptember 2000. These include, above all, halving by2015 the proportion of the world’s people living inextreme poverty, but also improving access topotable water and basic health services, achievinguniversal primary education and preventing a furtherspread of HIV/AIDS. Whether these and other sus-tainability goals can be achieved is called into ques-tion not least by stagnating official developmentassistance (ODA).

This issue is the focus of the UNFfD meeting dueto take place in Monterrey, Mexico. The developingcountries expect substantial commitments by theindustrialized countries to increase resource trans-fers and to implement promptly the goal of transfer-ring 0.7% of gross domestic product as ODA todeveloping countries. If no agreement to increasefinancial transfers from North to South can be found,the success of the WSSD appears endangered. How-ever, the agenda of the UNFfD also includes, in addi-tion to official development finance, other topicssuch as mobilizing domestic financial resources, pri-vate capital flows, international trade, mitigating theindebtedness of developing countries and reformingthe international financial system. The question ofdevelopment financing thus needs to be examinedwithin the context of this comprehensive agenda.Besides increasing ODA this is also a matter of cre-ating appropriate institutional framework conditions

at national and international levels so that privateand public sources of finance can be harnessedincreasingly for concerns of international environ-ment and development policy.

The German Advisory Council on Global Change(WBGU) wishes to contribute to the debate in thisarea. The Council has already addressed these ques-tions in its 2000 annual report “World in Transition:New Structures for Global Environmental Policy”,proposing, among other things, the levying of chargesfor the use of certain global common goods (‘globalcommons’) such as international airspace and thehigh seas (WBGU, 2001b). In the view of the Coun-cil, the concept of user charges should be furtherdeveloped to form a significant pillar of global sus-tainability policy.

This special report examines in greater depth theconcept of user charges as an innovative instrumentfor raising financial resources and generating incen-tive effects, discussing in particular its operationaliz-ability for specific areas of concern. The report firstexplains the basic ideas of the instrument of usercharges and distinguishes it from other instruments(Section 2). It goes on to explore the extent to whichthe concept can be transferred to user charges atglobal level, specifically for the use of internationalairspace (Section 3) and the use of the oceans byshipping (Section 4).

International airspace and the high seas are nat-ural global common goods for which property rightsare insufficiently defined. The international commu-nity of states is therefore responsible for their con-servation. Due to prevailing gaps in internationalregulatory regimes, they are overexploited and use-related environmental damage occurs. For instance,the CO2 emissions of international aviation andocean shipping are not included in national emissionsinventories and thus are not subject to the quantita-tive commitments of the Kyoto Protocol.This regula-tory gap could be closed by levying user charges. Auser charge creates an incentive to reduce the envi-ronmental impact, known in economics as the ‘alloca-tive effect’ and termed ‘incentive effect’ in the fol-lowing. In addition to the behaviour-modifying effect

2 1 Introduction

the anticipated revenue can be channelled to con-tribute to conserving these common goods.

The report subsequently presents and discussesthe concept of non utilization obligation payments(NUOPs; Section 5). In contrast to global usercharges, international payments for non utilizationobligations are debated not so much for global com-mon goods. Instead, their potential sphere of applica-tion is essentially limited to land and freshwaterareas situated within the sphere of sovereignty ofindividual states, but whose conservation generatessignificant global benefit. Such payments couldtherefore play a role particularly in tropical forestand biodiversity conservation. However, it needs tobe noted that the implementation of a worldwide sys-tem of non utilization obligation payments – again incontrast to charges upon the use of international air-space or the high seas – is a ‘vision’, the operational-ization of which will require further research anddebate. Accordingly, such payments are given lessspace in this special report than the user chargeswhich can be operationalized over the short tomedium term.

The special report closes with recommendationsfor action and research for a politically viable opera-tionalization of the concept of user charges for globalcommon goods and argues the case for intensifyingthe debate on a global system of payments for nonutilization obligations (Section 6).

The Council is aware that the implementation ofthe innovative instruments discussed here willrequire a major effort to convince the relevant actors.The recommendation to impose burdens on interna-tional aviation may appear politically sensitive inview of the economic problems currently experi-enced by the aviation sector, due in part to the ter-rorist attacks of 11 September 2001. However, anassessment of any price increases caused by the intro-duction of user charges must take into considerationthat the liberalization of aviation has led to consider-able reductions in air fares in recent years, a develop-ment which has further removed air travel from aninternalization of environmental costs. A similarlong-term perspective needs to be applied to themaritime sector. Following a period of high growthrates and corresponding capacity expansion in recentyears, this sector is currently in a critical phase of con-solidation due to the global economic downturn.Here, too, policy formulation needs to raise its gazeacross a short-term dip in a long-term growth trend;measures which are purposeful in terms of regulatorypolicy, such as levying user charges, should not beexcluded from the outset.

By presenting recommendations for a politicallyviable implementation of the concept of global usercharges, the Council aims to stimulate the German

federal government to look beyond day-to-day poli-tics and to address the prevailing regulatory gaps atinternational level. The concept of user charges pre-sents an opportunity to take first pragmatic stepstowards an international charging system for the con-servation of global environmental goods and for thefinancing of global sustainability policy. On thatbasis, experience can be gathered and further optionsfor applying global user charges examined.

2Fundamentals of the concept of user charges

2.1The basic idea of user charges

In its reports, the Council has repeatedly stressed thepositive contribution that an allocation of propertyrights to environmental assets – in conjunction withliability law – can have for environmental protection(WBGU, 2001a). However, the global common goodsof international airspace and the high seas are ‘openaccess goods’ – for which property rights cannot eas-ily be allocated. Where jointly supported rules ofgood practice in the use of these common goods arenot agreed upon, there is a danger of overexploita-tion because the users of global common goods neednot bear the full social costs of their actions. Theseglobal common goods would thus need to be admin-istered in trust by the international community.

It is at this point that the concept of user chargescomes into play. The term ‘user charge’ is associatedin economics, specifically in public finance, with afinancing instrument that has the following charac-teristics (Tietzel, 1988; Birk and Eckhoff, 2000; Hans-jürgens, 2001):• The use of a certain asset or right is linked to the

payment of a sum of money.• The charge is a payment for the conferral of the

right.• In contrast to the complete transferral of a right,

use rights are viewed exclusively as a subset ofproperty rights, i.e. the property rights are retainedby the party that confers the right to use.

• Rights to use can be conferred to individuals, butalso to groups and states.

If this concept of user charges is transferred to globalenvironmental problems, it is expedient to raise acharge for the use of global common goods. Throughthe payment that has to be made, users can perceivethe scarcity of a good and the costs of its provision.User charges are to be understood as contributionsto financing the provision of global common goods. Itfollows that the charges should be lowered if pres-sures on the good decline or if the capacity of a goodis safeguarded by other measures. This close connec-

tion with environmental protection is pivotal to theconcept of user charges and has a certain proximityto the concept of ‘public charges’ used in publicfinance. The concept of user charges is thus distinctfrom taxation, which makes no direct connectionbetween the payment of a tax and the service to befinanced.

The special feature of the concept of global usercharges is that it can both induce incentive effects toreduce environmental pressure and mobilize addi-tional financial resources to promote environmentand development policy goals. The incentive effectsare achieved by charging the users of a global com-mon good for the use-related environmental costs.For instance, the assessment of charges for the use ofinternational airspace takes into consideration thecontribution to global greenhouse gas emissions andthe associated environmental damage. The require-ment to pay user charges provides economic incen-tives to reduce environmental damage by means ofimproved technologies and appropriate changes inbehaviour when using global common goods. In addi-tion to these incentive effects, revenue is generatedthat can be earmarked to finance global sustainabil-ity policy. Taking the example of climate policy, ear-marking means that the financial resources should beused for measures aiming to conserve and restore thequality of the public good ‘climate’ and measuresaiming to promote adaptation to climate-relateddamage.

The concept of user charges needs to be distin-guished clearly from approaches in welfare econom-ics to internalize external effects, for instancethrough a ‘Pigouvian tax’. Such internalizationapproaches seek – in highly simplified terms – toimpose a charge (e.g. by taxation) upon the produc-tion or use of these resources with the aim of inte-grating all social costs into the cost calculation of pro-ducers or users.The aim is thus to bring about a levelof use or pollution that is optimal in terms of welfareeconomics, the transgression of which would causesociety more damage (e.g. poorer air quality) thanbenefit (e.g. additional income). Internalization inthe narrower sense generates state revenue, but this

4 2 Fundamentals of the concept of user charges

is considered as no more than an unintended sideeffect by environmental economics and should ide-ally – in the view of economic allocation theory –even be returned to taxpayers on a per-capita basis.To sum up:The neoclassical internalization concept isall about creating an incentive effect, while the fiscaleffect is regarded unimportant if not undesired.

In contrast, within the concept of user charges forenvironmental assets or natural resources, the fiscaleffect is at least as important as the incentive pur-pose. The aim is not only to ensure via the economicincentive function that the production and consump-tion of environmentally harmful goods or services iskept to the societally desired level. Above andbeyond this, the concept of user charges envisagesthat the state or global institutions retain the revenuegenerated and earmark it for measures to conserveor restore the quality of public goods such as the cli-mate.

Ideally, the specific contributions to be paid wouldbe calculated so that the total contributions receivedmeet the costs of producing the public goods. How-ever, with respect to practical implementation it mustbe noted that determining these costs is non-trivial,certainly for the ‘climate’ good, and is generally onlyfeasible to a limited degree. For this reason, only par-tial internalization of the above-mentioned negativeexternal effects is to be expected. Nevertheless, itremains expedient to examine these costs as a roughtarget level.

The concept of user charges on the one hand andstrict internalization on the other also differs withrespect to the necessity of measures to mitigate envi-ronmental damage. The internalization concept aimsto reduce environmental impacts to a level optimal interms of welfare economics, and assumes that inter-nalization measures will suffice to achieve such an‘optimum’. In practice, however, it needs to be kept inmind that environmental damage has alreadyoccurred in the past which has reduced environmen-tal quality to a societally undesirable level. The con-cept of user charges does justice to this, assuming thatmeasures to improve quality or ‘repair’ (climate)damage which has already occurred or is anticipatedare appropriate.This is an advantage of user charges.

A further crucial advantage of user charges, ascompared to taxation approaches optimal underallocation theory, is that political resistance can beovercome more easily if the use of revenue is ear-marked clearly and can demonstrate a connectionwith the resource utilized. This advantage has partic-ular relevance when implementing the approach atinternational level. The approval by e.g. developingcountries of a global system of user charges willdepend critically upon the use of revenue and willdoubtlessly be gained more readily if disbursements

are earmarked for global sustainability policy mea-sures than if revenues are deployed without ear-marking.

Building upon this theoretical basis, the Councilexamines in the present special report a politicallyviable operationalization of global user charges forinternational airspace and the high seas and intro-duces the further concept of non utilization obliga-tion payments (NUOPs).

2.2User charges as a financing instrument forsustainable development

The concept of user charges has strong links to envi-ronmental policy. Thus the rate of the charge shoulddepend upon the use-related environmental damageand upon the financing required for its ‘repair’. Byearmarking revenue for global environment anddevelopment policy measures, user charges alsobecome a financing instrument for global sustainabil-ity.

The present proposal by the Council builds uponthe concepts previously recommended (WBGU,2001b). This proposal should not be confused withthe levying of a global tax on CO2 emissions, such ashas been proposed in the run-up to the UNFfD in theZedillo Report produced by the High-level Panel onFinancing for Development (High-level Panel onFinancing for Development, 2001).While the ZedilloReport proposal is certainly worthy of consideration,the concept of user charges differs in several respects.It is not based upon an international taxationapproach, but upon a narrower understanding ofcharges in conjunction with an earmarking of rev-enue – consequently, its prospects of political viabil-ity are substantially better than those of taxation.Furthermore, the Council is concerned with closingregulatory gaps in global environmental policy inconnection with international aviation and oceantransport. Such a perspective, restricted to certainglobal uses of environmental media, necessarilyimplies that the user charges proposed by the Coun-cil cannot cover the entire financing requirements ofglobal sustainability policy.

User charges are one instrument within a broadrange of possible financing instruments (Sagasti andBezanson, 2001). Consequently, meeting the financ-ing requirements of global sustainability policybeyond the areas discussed in the present reportmakes it necessary both to examine other novelfinancing instruments – including global taxes – andto strengthen existing sources of developmentfinance such as ODA. Beyond the public sector,approaches for involving the private sector more

5User charges as a financing instrument for sustainable development 2.2

closely in development financing through public-pri-vate partnerships also need to be intensified.

The concept of user charges and the issue of theadditionality of new financial resources are also to beseen in connection with the current debate on globalpublic goods (GPGs). The notion of GPGs hasaccompanied global environmental policy from thevery outset. At the international environmental con-ferences of the 1980s and 1990s a number of declara-tions made reference to the common, but nationallydifferentiated responsibility of the community ofstates to preserve global environmental goods. Sincethe publication of the much-discussed work byUNDP (Kaul et al., 1999), the concept of GPGs hasgained new impetus and is also playing an importantrole in the preparatory process for the UNFfD.

The UNDP study distinguishes between three cat-egories of GPGs:1. natural GPGs (e.g. the atmosphere),2. human-made GPGs (e.g. knowledge) and3. GPGs that are the outcome of political action (e.g.

the stability of international financial markets).The GPG concept is an interesting approach whichopens up new dimensions and highlights a need foraction in global sustainability policy. However, by nomeans all methodological issues are yet resolved.Thecurrent discussions of the concept illustrate, forinstance, how difficult it is to model all relevantaspects of a GPG, not to mention the interrelationswith other GPGs. It is thus not surprising that theconcept of GPGs is viewed with a degree of scepti-cism, particularly by the developing countries. Thereis some controversy over the extent to which thisconcept is suited in political practice to generateadditional financial resources for global sustainabil-ity policy.

The Council’s approach of levying user charges islimited to the natural global commons.The approachlargely tallies with the understanding of naturalGPGs developed in the UNDP study. The politicalchallenge in managing natural global commonresources is to agree rules at international level forpreventing the overexploitation of these resources.However, the concept of user charges makes noattempt to cover all categories of GPGs. It is rather acase of selecting a narrowly defined area of concernfrom the comprehensive debate on GPGs for whichit is comparatively simple to develop, in the shape ofuser charges, a politically viable scheme for financingcertain GPGs.

Charging the use of airspace by aviation3

3.1Environmental impacts of aviation

The principal emissions arising from aviation are car-bon dioxide (CO2), nitrogen oxides (NOX), carbonmonoxide (CO), hydrocarbons, water vapour, sul-phur oxides (SOX) and aerosol particles. Each com-bination of aircraft type and engine has its own emis-sions profile.The release of pollutants during landingand take-off (LTO) is not identical with the emissionsarising during the cruise phase. Hydrocarbons arereleased above all at low engine power, whereas NOX

are formed particularly during the take-off andascent phase, but also during the cruise phase, i.e. par-ticularly when thrust is high (at high engine temper-ature and pressure). CO2 and water vapour areformed in the combustion of kerosene in amountsproportional to the consumption of fuel.

Within the context of raising charges on the use ofinternational airspace, only radiative forcing (i.e. theimpact on climate) is to be taken into considerationas a global environmental impact, but not local airpollution and noise pollution, nor indirect impactssuch as energy consumption at airports. Not only theemissions of the greenhouse gases CO2 and watervapour are relevant in terms of climate impact, butalso the impacts of NOX, SOX and aerosol emissionsupon ozone (O3) and methane (CH4) concentrationsand upon condensation trail (contrail) formation. Afurther possible effect of aviation emissions is theformation of cirrus clouds (IPCC, 1999). While, dueto their long residence times in the atmosphere, theclimate impact of the CO2 emissions of aviation isindistinguishable from that of other CO2 sources, theimpact of other trace gases (water vapour, NOX, SOX,aerosols) can vary regionally; NOX emissions and theincreased ozone concentrations that these generatedepend greatly upon the altitude of emission. NOX

emissions lead on the one hand to a regional increaseof ozone concentrations (warming effect), but on theother hand to decrease in methane concentrations(cooling effect). Regional disparities notwithstand-ing, global climate impact can be estimated as the

contribution to the change in global radiative forcing(IPCC, 1999).The present contribution of contrails toradiative forcing corresponds roughly to the contri-bution of CO2 emissions from aviation; however, theestimation of the former is subject to far greateruncertainty than that of the latter. Next there are thetwo opposite effects of NOX emissions; these are inthe same order of magnitude, but do not cancel eachother out. The direct contributions of SOX (cooling)and soot (warming) and the still uncertain contribu-tion of water vapour are very much smaller.The con-tribution of potential additional cirrus cloud forma-tion (in addition to contrails) is still so uncertain thatit can not be included purposefully in an overall eval-uation.

The overall present radiative forcing from histori-cal and present-day aviation is about twice the radia-tive effect of CO2 emissions from aviation (IPCC,1999). Proceeding from various scenarios for growthin air travel demand and for developments in tech-nology, it is assumed that for the period until 2050 theradiative forcing from aviation will be two to fourtimes that of its carbon dioxide emissions (IPCC,1999). It is important to note that a reduction in cer-tain greenhouse gases from aviation may possiblyresult in an increase in other, equally radiativelyactive but also locally and regionally harmful emis-sions. For example, curbing fuel consumption reducesCO2 emissions but tends to promote the formation ofNOX (IPCC, 1999).

Aviation is the source of greenhouse gas emissionswith the strongest worldwide growth. The sharpgrowth in demand for air travel can be explained bythe rise in gross domestic product in various regionsof the world as well as by population growth, a sharprise in long-haul tourism and generally increasedmobility and longer distances travelled. Between1990 and 2050, the proportion of the total volume ofpassengers choosing to travel by air is expected toquadruple from 9% to 36% (IPCC, 1999; Lee et al.,2001).

However, owing to anticipated technologicalimprovements the contribution to climate changewill not rise to the same extent. Today, aviation is

7Environmental impacts of aviation 3.1

responsible for approx. 3.5% of the radiative forcingfrom anthropogenic greenhouse gas emissions(IPCC, 1999). The IPCC estimates in its referencescenario that the corresponding proportion in theyear 2050 will be approx. 5%; scenarios with otherrates of increase suggest a proportion of 3.5–15% bythat year. As a medium-term trend, i.e. despite theterrorist attacks of 11 September 2001, it is antici-pated that the emissions of CO2 from aviation willtreble between 1992 and 2025. Emissions from inter-national aviation do not fall under the reductioncommitments of the Kyoto Protocol. This is whythere is an increasing demand for measures to makeair transport more environmentally sound. In addi-tion to the more stringent regulation of NOX, a keyconcern is to reduce greenhouse gas emissions. Forinstance, the Committee on Aviation EnvironmentalProtection (CAEP) of ICAO, in cooperation withindustry, has proposed certain NOX limit values. Swe-den and Switzerland have already introduced emis-sions-based landing fees. Moreover, the EU Councilof Transport Ministers has announced the possibleunilateral introduction of an emissions-based EU enroute charge.

A major obstacle to reducing emissions consists inthe long service life of aircraft (usually more than 25years), in high capital costs and in protracted licens-ing procedures for new technologies (frequently,there are more than 10 years between developmentand going into service). Thus, it would be possible toachieve a significant reduction in emissions if olderaircraft were taken out of service, but there are fre-quently economic reasons for not decommissioningaircraft which are basically still in good workingorder (IPCC, 1999).

At present the consumption of kerosene per 100passenger-kilometres in Europe varies between 3and 10.5 litres (Lufthansa, 2002). However, it can beassumed that the technological and economic possi-bilities will not be sufficient to achieve a decisive cut-back in the consumption of kerosene. Thus, theenergy consumption of the fleets in service will fallannually by only 1–2% on account of technologicalimprovements, while demand for air transport willgrow by 4–6% per year (Lee et al., 2001). This willresult in a further increase in energy consumptionand environmental pollution caused by aviation. Allin all, it can be expected that worldwide radiativeforcing from aviation will in no more than 30 yearsexceed that of passenger car traffic (CST, 2000).

By the mid-1990s, around one quarter of CO2

emissions was attributable to transport and mobility.Of those emissions, approximately 12% were causedby aviation, corresponding to 2.4% of the total con-sumption of fossil fuels (Lee et al., 2001).Asia, in par-ticular, is expected to experience a significant growth

in demand. Similarly, the North American market,which is already at a high level, will further expand inthe long term.

The economic importance of aviation is apparent,among other things, from the high turnovers of theaviation industry and from the number of peopleemployed.Thus, it is estimated that, in 1992, the avia-tion market worldwide was worth some € 1,000 bil-lion (Michaelis, 1997), a part of that figure beingaccounted for by airlines, aircraft manufacturers andsuppliers, while the other part was accounted for byeconomic activities indirectly connected with avia-tion. According to estimates, the aviation industryemploys around 22 million employees worldwide,this figure includes those indirectly connected withaviation.

To date, the proposal of national levies on airtransport has been greeted with scepticism, not leastbecause there are fears of losses in competitivenessand rises in unemployment. Developing countries, inparticular, fear a weakening of their tourism indus-tries as well as an increase in transport costs forexporting agricultural produce and, consequently,worsening sales opportunities for that produce onthe world market which may lead to a fall in foreignexchange revenues.

Nevertheless, there is a growing demand for levieson aviation. The principal argument cited for thesedemands is the internalization of negative externaleffects in connection with climate change. Containingthe negative environmental impacts of aviation isregarded important for moving towards the goal ofsustainability.

In view of the relatively high levels of damage tothe environment associated with aviation, efforts toclose the above-described regulatory gap must con-centrate above all on a significant reduction not onlyin the volume of emissions and in the growth rate ofemissions but also in the harmful nature of thoseemissions. Levying user charges is a promisingoption. Such user charges could generate financialresources which could be earmarked for climate pol-icy measures.

All economic assessments conducted to date cal-culate the systemic damage caused by anthropogenicglobal climate change in the 21st century in the mon-etary order of 1–2% of gross world product. Thismeans that without adaptation measures, the annualcosts of the consequences of climate damage wouldamount to about € 300 billion (IPCC, 1996). Withactive adaptation, these costs could presumably bereduced significantly (IPCC, 2001). Nonetheless,even with a conservative assessment (including adap-tation costs), remaining damage in the order of € 100billion per year is to be expected over a very longperiod. To this the avoidance costs (e.g. emissions

8 3 Charging the use of airspace by aviation

abatement costs) must be added, which may be on asimilar scale (IPCC, 2001). Total costs amounting tosome € 100–200 billion per year can therefore beexpected.

Given an estimated share of aviation in radiativeforcing of 5% in the year 2050 (IPCC reference sce-nario; IPCC, 1999), costs in the order of € 5–10 billionper year can be attributed to the sector. Assuming ashare in radiative forcing of 3.5–15% as calculated byvarious IPCC scenarios for the year 2050 (IPCC,1999), a figure of € 3–30 billion per year results as arough estimate of the minimum global revenue thatwould need to be targeted over the medium to longterm.

The next section discusses the role of ICAO in theimplementation of a user charge on aviation (Section3.2). Then, there is an examination of how the con-cept of user charges on aviation can be operational-ized (Section 3.3) and which undesired side-effectsmay occur (Section 3.4). Additionally, there is a dis-cussion of the institutional aspects of disbursing thecorresponding revenues on environmental anddevelopment policy measures (Section 3.5) and ofthe political enforceability of a user charge on avia-tion (Section 3.6). Finally, there is a brief conclusion(Section 3.7).

3.2The role of ICAO

The International Civil Aviation Organization(ICAO) is a specialized agency of the United Nationswith 185 member states. In the climate policy, Art. 2para 2 of the Kyoto Protocol calls upon ICAO to reg-ulate the greenhouse gas emissions of internationalaviation.

Although it is also possible for individual nationsto act unilaterally and not all ICAO resolutions arelegally binding, ICAO plays an important role in theglobal implementation of taxes and charges on avia-tion. If the will exists to introduce an internationalenvironmental levy, ICAO, with its standing execu-tive committee, possesses the means for its speedyelaboration and implementation. In the process,attention must be paid to the different speeds ofimplementation of the various groups of countries.The role of ICAO as a facilitator of consensus deci-sions is made difficult by the diversity of interestsinvolved.

ICAO recommended in a Resolution adopted in1996 the following principles concerning the intro-duction of levies in the aviation sector:• User charges are to be given preference over gen-

eral taxes.• The revenues are to be used on

– reducing damage to the environment from air-craft emissions,

– on research into aircraft emissions and– on the development of environmentally-

friendly technologies.• At national government level it is imperative that

– no fiscal aims are pursued,– charges should be related to the costs of use

and– charges should not discriminate against other

modes of transport.Each of these recommendations will have to be con-sidered when assessing the political enforceability oflevies on aviation. However, given the substantialnegative external effects of air traffic and the gener-ous financial privileges enjoyed by aviation (exemp-tion from kerosene tax and exemption from valueadded tax on international flights), these recommen-dations, although still relevant to the current situa-tion, will have little effect. Therefore, voluntaryundertakings are an important instrument of ICAO.The International Air Transport Association (IATA),as a main stakeholder, proposes a CO2 emissionsreduction of 10% over the period from 2000–2010.Furthermore, ICAO has spoken out in favour ofintroducing an emissions trading system over thelong term, modelled on the flexible mechanisms ofthe Kyoto Protocol (ICAO, 2001b). As yet, however,ICAO has not presented any specific options fordesigning such a system.

Quite generally, ICAO has in recent times notespecially distinguished itself with regard to climateprotection. It appears to be concerned that green-house gas emissions from international air trafficshould continue to be excluded from the Kyoto Pro-tocol and that, in general, no targets and time sched-ule are set for the reduction of aviation emissions.

3.3Possible forms of a user charge on aviation

3.3.1User charges which directly increase ticket prices(ticket levy)

A ticket levy refers to imposing a surcharge on theprice of all (international) passenger/freight flights asa charge on the use of airspace.The surcharge may bein the form of a fixed nominal amount, a percentageincrease of the existing price or a percentage chargegraduated according to kilometres. With regard tobasing the assessment of the surcharge on use-related environmental costs, however, the onlyoption which appears compatible with the concept of

9Possible forms of a user charge on aviation 3.3

a user charge is a percentage charge graduatedaccording to kilometres.

The most important argument in favour of theintroduction of such a form of user charge is theexisting discrimination of other modes of transport incomparison with aviation. Currently, modes of trans-port other than aviation are burdened by valueadded tax and mineral oil tax.

Operational practicabilityA ticket levy would be relatively simple and quick tointroduce. The corresponding charge could be col-lected directly by airline companies when selling theticket.

Financing potentialThe turnover generated by worldwide civil aviationamounted to some € 328.7 billion in 2002 (ICAO,2000). In the case of a levy of around 5% on the priceof each ticket and allowing for adjustments indemand for flights in response to higher prices, thiswould generate an annual revenue of € 10–16 billion.

Environment-related incentive effectsThe environment-related incentive effects of a ticketlevy must be regarded as relatively minor. With sucha form of user charge, airline companies have noincentive to invest in technologies with lower emis-sions. Any improvement in the environmental situa-tion would be based exclusively on a decline indemand as a result of higher prices for flights. Giventhe estimated price elasticities, however, such adecline in demand would probably not be all thatgreat (Bleijenberg and Wit, 1998; Section 3.3.2).

Legal enforceabilityA ticket levy is not prohibited by international (avia-tion) law. Such levies have already been introducedin certain countries. For example, Norway hasapplied a ‘green’ levy on all national flights for whichthere is an alternative by rail, and on all internationalflights starting from Norway since 1 January 1995.However, the use of the resulting government rev-enues is not tied to a specific purpose (Bleijenbergand Wit, 1998).

ConclusionThe introduction of a ticket levy has the advantagethat the various competing modes of transport aretreated equally. The ease of implementation and lowdegree of distortion are further arguments in favourof the introduction of such a charge. In addition, theforeseeable revenues are not inconsiderable.

However, the incentive effects are insufficient andenvironmental and fiscal therefore represent a cru-cial weakness of a ticket levy.As will be shown below,

other forms of user charges on aviation are muchmore effective with regard to the objectives.

3.3.2User charges based on the consumption ofkerosene

Unlike other fuels, e.g. for passenger cars or roadfreight vehicles, aviation fuel has hitherto beenexempt from any form of tax in virtually all countries.On the one hand, user charges based on the con-sumption of kerosene could be introduced as an indi-vidual measure, with a certain charge being levied onevery litre of aviation fuel. On the other hand, itwould be possible to devise a package of measuresconsisting of a levy based on kerosene consumptionand additionally of an emissions-dependent landingand take-off fee (LTO fee) and possibly also of strictNOX standards.

Two aspects speak in favour of a charge based onthe consumption of aviation fuel. Firstly, greenhousegas emissions rise in step with the consumption offuel. Secondly, the present absence of taxes orcharges on aviation fuel represents an aviation sub-sidy, because other modes of transport are subject toa fuel tax or similar levies. Therefore, a charge basedon the consumption of aviation fuel is aimed at areduction of undesired emissions and lessens the dis-crimination against other modes of transport.

A combination of different measures is supportedby the fact that, during take-off and landing, aircraftemit especially large quantities of pollutants whichcould not be covered by a levy limited to kerosene. Inaddition to levies on take-offs and landings, stricterNOX standards, differentiated according to aircrafttype and engine type, could be used to counteract aone-sided reduction of CO2 at the expense of NOX.

Operational practicabilityThe introduction of a user charge on aviation basedon kerosene consumption can be accomplished bymeans of a percentage surcharge on the price of fuelor by means of a fixed amount per litre. One of theaspects speaking in favour of a fixed amount is thatthe revenue from the levy will still remain calculableeven in the case of fluctuations in the price of avia-tion fuel and that less distortion is caused. Addition-ally, a fixed amount is especially plausible with regardto the inclusion of use-related environmental costs.However, such a fixed amount would have to be var-ied over time in order to avoid a fall in real value andin order to be able to take account of changes in pricestructure. Furthermore, it would be necessary tomake allowance for changes in financing require-ments. With regard to financing requirements, the


specific goal is to finance the provision of the publicgood ‘international climate protection’ or, more pre-cisely, to finance measures to prevent or remediateclimate damage incurred as a consequence of the useof airspace by international aviation.

In the area of road transport, experience is alreadybeing gathered with a fuel levy which is imposed onsuppliers and is then passed on.As in the case of roadtransport, an aviation levy based on kerosene con-sumption could likewise be raised at the supply stage,with suppliers then passing on the levy to the airlinecompanies. The suppliers, i.e. the petroleum compa-nies, have the institutional capacity to collect akerosene levy.

As far as a graduated LTO fee is concerned, itwould be necessary to devise internationallyaccepted calculation formulas. Different rates of levywould be payable in this case depending on aircrafttype and on the type of take-off and landing.

A kerosene levy is already imposed in Japan, Nor-way, Canada and the USA (Brockhagen and Liene-meyer, 1999).With the exception of Norway, this levyapplies only to domestic airlines and domestic flights.In Norway, however, it has been demonstrated thatthe revenue from and the incentive effect of aregional levy on kerosene are rather small, not leaston account of possible evasion reactions.

Financing potentialAn aviation levy based on the consumption ofkerosene will result basically in certain rises in theprice of air transport. Fuel costs account for approxi-mately 10–25% of the operating costs of airlines.However, in view of the great intensity of competi-tion between airlines, higher kerosene prices will notnecessarily lead to appreciably higher ticket prices. Inaddition, it can be assumed that the demand forflights will respond to changes in the price of flights.Higher ticket prices typically lead to a reduction indemand. Holiday travel has a negative price elasticityof roughly 1.1–2.7, whereas business travel is lesselastic and falls by only roughly 0.4–1.2% in the caseof a 1% price rise. With estimated (negative) elastic-ity values of between 0.8 and 1.6, freight traffic liesbetween the other two categories. It should also benoted that the substitution elasticity is very low withregard to international aviation: In the case of anincrease in ticket prices, only a fraction of the trafficwould switch to other modes of transport (Bleijen-berg and Wit, 1998; Oum et al., 1990).

From the demand side, therefore, the revenue basefor a kerosene levy appears to be relatively stable.Given the growing overall demand for air trans-portation services assuming unaltered frameworkconditions, the revenue base can be expected toincrease even if air transport prices rise.

Conversely, the increase in the percentage of oper-ating costs accounted for by fuel costs, as a conse-quence of the introduction of a kerosene levy, can beexpected to lead to an intensification of research intoimproved engines and aircraft designs as well as toimproved operational efficiency of air traffic. Suchsupply-side responses would, in the longer term,reduce the revenue from an aviation levy based onkerosene consumption. When these supply-sideeffects are taken into consideration, an estimate ofthe long-term price elasticity of the demand forkerosene results in values of -0.4 to -0.5 (Bleijenbergand Wit, 1998). That is, assuming a doubling of theprice of fuel with demand remaining constant, areduction in kerosene consumption of between 40%and 50% could be expected in the long term. Thisreduction, however, would be more than made up forby a rise in demand.

An EU-wide levy of € 0.32 per litre of kerosenewith effect from 2005 is expected to generate a rev-enue of some € 14 billion annually (Brockhagen andLienemeyer, 1999). In this assessment, the levy rate isderived from an estimate of the external climate-related costs attributable to aviation (ECMT, 1998).It is important to be aware that estimates of exter-nalities are generally extremely difficult and can thusonly provide rough orientation. In order to enhancethe political enforceability of such a levy scheme andto mitigate undesirable side-effects, it appears expe-dient to introduce the levy gradually. The above sumwould then be the final level at the end of a shorteror lengthier introduction phase.

Various scenarios estimate the worldwide con-sumption of kerosene for civil aviation for 2015 at204–334 million tonnes, corresponding to around255–417 billion litres (Bleijenberg and Wit, 1998).European kerosene consumption accounts for justunder 15% of worldwide civil aviation consumption.However, worldwide introduction of a levy wouldnot result in a proportional increase in revenue com-pared to EU-wide introduction. On the one hand, itis to be expected that revenue under a worldwidescheme is larger. This is because if a kerosene levy isonly introduced EU-wide, evasion reactions in theform of ‘tankering’ will occur. Tankering means thetanking of extra fuel in countries which do not have akerosene levy. This effect diminishes the revenue ofsuch a levy, but does not arise if introduction is world-wide. On the other hand, it is to be expected that, ifthe levy was applied worldwide, research and devel-opment efforts would intensify, thus leading to a fallin the demand for fuel. Based upon the values for therevenue of an EU-wide levy and global keroseneconsumption, overall annual revenues in excess ofsome € 13-21 billion can be expected worldwide if thelevy rate is € 0.05 per litre. Such a sum would be in the


order of the climate costs attributable to aviation,which are assessed at € 3–30 billion annually (Section3.1). It needs to be noted yet again, however, that, dueto the necessary step-by-step introduction and due tolikely international coordination problems, the rev-enues that might realistically be expected over theshort and medium term will presumably be substan-tially lower.

Environment-related incentive effectsAssuming the introduction of an EU-wide kerosenelevy, in the case of extra-European flights terminat-ing or starting in Europe, approximately half of thekerosene would be subject to a levy (kerosenetanked at European airports). Assuming a charge of€ 0.20 per litre with a graduated LTO fee, there is anestimated greenhouse gas emissions reductionpotential of between 25% and 35% by 2025 (Bleijen-berg and Wit, 1998). Over the next 20–25 years, a levyof € 0.10–0.30 per litre kerosene would lead to animprovement in fuel efficiency by 20–40%, whiledemand would drop by 5–10%. The LTO fee alonehas the potential to reduce greenhouse gas emissionsby 5–10%.

According to estimates, about three-quarters ofthe reductions in emissions are attributable to tech-nological advances and one-quarter to the fall indemand. The problem with a regionally limited levyis the practice of tankering.This means that more fuelthan necessary is tanked in countries in which thereis no levy on kerosene, leading to a deterioration inthe environmental balance – owing to the increasedflying weight and detours flown. Such attempts atevasion could diminish the environmental benefit,expressed by the emissions savings potential, by35–70% (European Commission, 1999). Moreover, akerosene levy does not take into consideration theeffects of NOX emissions and contrail formation.Improved fuel efficiency can lead to increased NOX

emissions.The environmental incentive effects of a kerosene

levy, especially if embedded in a ‘package’, emanateessentially from the supply side, i.e. from technologi-cal improvements. Higher fuel costs can lead to sav-ings of kerosene through better route selection,changes to fleets, improved flight handling proce-dures or a minimization of congestion. Changes tofleets can be accomplished, firstly, through the use ofmore modern, more energy-efficient engines andoptimized cabin designs. Secondly, the consumptionof fuel per passenger-kilometre can also be loweredthrough the use of larger types of aircraft. It must,however, be stated that, despite considerable techno-logical potential, the consumption of kerosene can inthe long term only be kept constant or its growth

rates kept relatively low if the price of kerosene issignificantly and continuously increased.

Legal enforceabilityFrom the point of view of international law, Article15 and Article 24 of the Chicago Convention, whichdates back to the early days of commercial aviation,are of significance with regard to the imposition of alevy on the consumption of kerosene. Article 15 per-mits the raising of a fee for the use of airports andnavigation facilities. However, “fees, dues or othercharges” may not be imposed on the transit, entry orexit of an aircraft from a contracting state or of thepersons or property on board. In this context, theterm ‘charges’ can be construed either in the sense oflevies including taxes or, in a narrower sense, as a levyof a compensatory nature for the granting of privi-leges. By resolution of the ICAO Council the issuewas interpreted in the former sense (ICAO CouncilResolution of 14 December 1993). Even if one fol-lows this – legally non-binding – interpretation, thisdoes not constitute a ban on charging a levy on theconsumption of kerosene. Namely, Article 15 pro-hibits only those levies which are charged “solely onthe right of transit, entry or exit”. Charges which arelevied for other reasons, including, therefore, a levyon the consumption of kerosene, are not prohibitedby Article 15 (UBA, 2001).

The fuel still on board after an aircraft has landedis exempt from a kerosene levy. Under Article 24 ofthe Chicago Convention, fuels which, upon arrival inthe territory of one state, are on board an aircraftfrom another state may not be made subject to anational or local charge or levy if they have remainedon board when the aircraft leaves the territory(UBA, 2001).

Legal obstacles of a more serious nature may beseen in the 2,000–3,000 bilateral Aviation ServiceAgreements (ASAs), many of which prohibit theintroduction of a kerosene levy.Therefore, it could beexpedient for ICAO to provide a solution (in an uni-versal form by means of a convention or by introduc-ing a standard), but this does not seem to be sup-ported by the current political mood. Consequently,the international prospects of introducing a kerosenelevy are poor.

ConclusionThe introduction of an aviation levy based solely onkerosene consumption would remove the discrimina-tion against other modes of transport, which arealready subject to a fuel tax and other charges. If oneadopts a perspective which goes beyond the exclu-sive consideration of CO2 emissions, one of the fac-tors speaking against a kerosene levy is that it doesnot cover other emissions. A package consisting of


kerosene levy, graduated landing and take-off feesand possibly stricter NOX cruise standards mightremedy this deficiency, but would continue to neglectthe contribution of contrails. An LTO fee would pro-vide incentives for a reduction of CO,VOC and NOX

emissions at take-off and landing. Namely, the envi-ronmentally positive effect of more energy-efficientaircraft, with the associated reduction in CO2 emis-sions, could be diminished by increased NOX produc-tion. NOX standards graduated according to aircrafttype and engine could be used to counteract a one-sided reduction of CO2 at the expense of NOX.

One of the great advantages of an aviation levybased on kerosene consumption is the fact that theinfrastructure already exists for collecting the levyfrom fuel suppliers. Although there are legal prob-lems with regard to a kerosene levy or a kerosenelevy package, with it being necessary for bilateralAviation Service Agreements (ASAs) to be renego-tiated, it ought to be possible to resolve these.

If a kerosene levy is introduced on a regionalbasis, the environmental incentive effects and financ-ing potential will only be on a small scale owing totankering. Therefore, it is essential that any kerosenelevy be introduced at the global level. However, asthe global introduction of such a levy cannot beexpected for the time being, it is advisable to considerother forms of user charge capable of leading to sig-nificant environmental and fiscal effects, even ifintroduced on a regional basis only.

3.3.3User charges based on emissions

An emissions-based aviation levy could be imposed,for example graduated according to the quantity ofpollutants emitted. The advantage of an emissions-based levy is its well-targeted incentive effect. Ide-ally, there would be a charge for every pollutantaccording to the quantity released.The amount of thelevy should be based on the environmental harmful-ness of the substance in question.

Operational practicabilityAt first glance, it is more difficult to introduce anemissions-based levy than a levy based on keroseneconsumption, because there are no existing organiza-tional and institutional structures for collecting sucha levy. Furthermore, if the levy is based on emissions,complex measuring methods are required. Data isneeded not only for the emissions of various pollu-tants for various air movements. Rather, it is alsonecessary to have knowledge of the harmfulness ofthe various emissions if the aim is to achieve as greatan environment-related incentive effect and innova-

tion effect as possible. In order to measure the cli-mate impact with one single parameter, it is advisableto make the emissions comparable to each other interms of their harmfulness and their contribution toradiative forcing (IPCC, 1999; Brockhagen andLienemeyer, 1999).

It is unlikely that for the time being, the emittedpollutants and their harmfulness could be measureddirectly. Consequently, it will be necessary to draw onindicators, such as the types of aircraft or engine (onstandardized routes) or the actual consumption ofkerosene. Such indicators are regarded as relativelysimple to determine and very reliable. BothECAC/ANCAT (Expert Group on abatement ofNoise Caused by Air Transportation) and NASA(National Aeronautics and Space Administration)have already calculated NOX emissions indexes(Brockhagen and Lienemeyer, 1999). The develop-ment of a calculation model for appropriate rates oflevy is not trivial, but appears feasible. The followingspecific criteria are under consideration for decidingon the rate of levy: aircraft type, engine type, (aver-age) air route, distance, load or aviation fuel grade(Brockhagen and Lienemeyer, 1999). Moreover, itappears advisable for the levy not to be based simplyon average values for these variables, but on devia-tions from those values associated with the lowestpossible emissions. An emissions levy based on crite-ria such as those just named will be referred to in thefollowing as a ‘calculated emissions levy’.

A very simple form of determining a calculatedemissions levy could be to assess the volume of themain environmental impacts induced by aviation, fordifferent aircraft types, as a function of the number ofseats and capacity utilization (and thus weight) andas a function of distance (Brockhagen und Liene-meyer, 1999). This would include assessments of CO2

(burning 1 kg aviation kerosene forms about 3.2 kgCO2), of contrails (for these, approximate propor-tionality to aviation kerosene consumption can beassumed) and of NOX. For NOX emissions, the mainvariables are flight altitude, distance, aircraft typeand engine type. An NOX index can then be calcu-lated for different combinations of the four variables.Multiplying this index by fuel consumption delivers apurposeful assessment of NOX emissions.

Applying specific levy rates for the three abovetypes of emissions, an emissions-specific user chargecan be calculated as a function of aircraft type, air-craft weight and distance flown. Table 3.3-1 assumesmean levy rates of € 0.12 per litre kerosene for CO2,€ 0.14 per litre kerosene for water vapour and € 0.6per litre kerosene for NOX. Specific levy rates are ori-ented to an estimate of the external climate-relatedcosts attributable to aviation (ECMT, 1998), wherebyproportional consideration is given to the additional


effects of NOX and contrails. With an EU-wide intro-duction, the levies would result on average in anoverall charge of € 0.32 per litre kerosene, whichwould generate an annual revenue of € 14 billion(Brockhagen and Lienemeyer, 1999). These leviesare based on a rough estimate of externalities. Dif-ferent assumptions about damage caused by climatechange and their attribution to aviation can lead todifferent levy rates. Nevertheless, it is an illuminatingexercise to identify the scale of a calculated emissionslevy and the resulting revenue upon the basis of spe-cific levy rates.

The overall rate of such an emissions-based levyper aircraft type and aircraft weight and as a functionof flight distance can be determined on the basis ofemissions-specific charges.Table 3.3-1 aggregates theemissions-specific charges. Under the assumptionsset out above and with an average load factor of67%, the resulting emissions charges range between€ 3.9 and € 140.9 per passenger for domestic flightsand between € 1.9 and € 70.4 per passenger for inter-national flights.

More complex calculation formulas are also con-ceivable for an emissions-based levy; so, too, are sen-sitivity analyses of the underlying emissions-specificlevy rates. What is important in each case is that therelative contribution of specific emissions to radia-tive forcing is taken into consideration in accordancewith the state of scientific knowledge as summarized

by the IPCC in its assessment reports. The figures setout above provide a first impression of the approachand the orders of magnitude in connection with a cal-culated emissions levy.

A calculated emissions levy would need to beintroduced gradually in order to minimize undesiredside-effects. It would be conceivable to begin withrelatively low levy rates and, already at the time ofintroduction, to announce a gradual increase of thelevy over the following years. This would enable allconcerned to adapt to the new situation withoutincurring excessive costs.

Financing potentialIf introduced at the global level, the maximumfinancing potential of an emissions levy would basi-cally be similar to that of a kerosene levy. The rapidglobal introduction of a levy on kerosene or emis-sions is not to be expected, although the EU is indeedmoving in this direction. Therefore, when comparingthe financing potential of both measures, assumingintroduction on a regional basis, it must be borne inmind that, in the case of a kerosene levy, usually nomore than half of the kerosene consumed will be cov-ered by the levy. This is because airlines will attemptto tank as much fuel as possible at airports without akerosene levy and to fly as far as possible on the filledtanks (tankering). If an emissions levy is based on abundle of indicators, such as those mentioned above,

Table 3.3-1Some examples of charges for selected flight distances and aircraft types. The standard levy is the sum of the levies on CO2 andNOX emissions plus a levy on contrails, which have a particularly large radiative effect. 50% of the domestic levies are raised oninternational flights. An average aircraft load factor of 67% was assumed for all examples.Source: Selected examples from Brockhagen and Lienemeyer, 1999

Aircraft type Average Distance CO2 NOX Contrail Sum = Levy per Levy perseats class levy levy levy Standard passenger passenger

levy (domestic) (inter-national)

[km] [€] [€] [€] [€] [€] [€]

Boeing 737 123 200 152 77 168 397 4.8 2.4400 254 145 280 679 8.2 4.1500 269 151 297 717 8.7 4.3

1,000 476 238 524 1,239 15.0 7.52,000 900 415 991 2,305 28.0 14.0

Airbus A300 259 200 295 186 325 806 4.6 2.3400 501 355 552 1,408 8.1 4.0

1,000 922 550 1,016 2,488 14.3 7.22,000 1,710 891 1,882 4,483 25.8 12.94,000 3,342 1,613 3,679 8,634 49.8 24.98,000 6,930 3,338 7,630 17,898 103.1 51.6

Boeing 747 377 200 574 469 632 1,674 6.6 3.3400 1,030 1,046 1,134 3,210 12.7 6.4

1,000 1,765 1,518 1,943 5,225 20.7 10.32,000 3,225 2,381 3,550 9,156 36.2 18.14,000 6,237 4,297 6,867 17,400 68.9 34.58,000 12,793 8,714 14,085 35,593 140.9 70.4


it can be assumed that it will be possible to generatehigher revenues than in the case of a kerosene levy.Namely, it will then no longer be possible to evade anemissions levy by selecting the appropriate air routes.50% of the rate can be charged for internationalflights so that the emissions levy is not raised twice ifintroduced in different regions.

Over the short and medium term, the revenue tobe expected from a gradual introduction of an emis-sions levy would be smaller. Only over the long term,if at all, the maximum revenues set out above may beachieved. However, a calculated emissions levy has inprinciple the potential to generate revenue of thismagnitude – as a maximum sum at the end of a step-by-step introduction process and assuming world-wide introduction of the charging system.

Environment-related incentive effectsThe environmental incentive effect of a globallyintroduced emissions levy can be expected to bemuch stronger than that of a kerosene levy. A princi-pal advantage is the great flexibility in designing thesystem and in the consideration that such a schemegives to different types of emissions. Incentives fortechnological improvement would be significantlylarger because (possibly opposite) effects of differentemissions reduction measures would be taken intoconsideration. In contrast, at a comparable level ofstate revenue, demand-side incentives would be sim-ilar.

In the case of a regional introduction of an emis-sions levy of the above-described kind, it can beexpected that there will be no major evasion reac-tions. If an EU-wide kerosene levy of around € 0.2per litre is introduced with effect from 2005, thereduction in greenhouse gases from European airtraffic by 2025 is estimated at between 25% and 30%in comparison with the situation without a levy.Viewed in absolute terms, however, the passenger/freight kilometres travelled will continue to risesharply. Although technological improvements dueto changed cost structures ought to make the largestcontribution to a relative fall in the emissions fromair traffic, it is improbable that this will be able tocompensate for the quantitative effect of the increasein demand.

Legal enforceabilityFrom the legal viewpoint, there are no obstacleswhatsoever to the introduction of an emissions levyin consideration of the ban on discrimination embod-ied in Article 15 Sections 1 and 2 of the Chicago Con-vention, because neither the Chicago Conventionnor the ASAs would have to be amended (UBA,2001).

In the case of an emissions levy dependent essen-tially on the actual fuel consumption, however, itwould once again be necessary to amend many bilat-eral agreements, because this would be equivalent toa concealed kerosene levy.

ConclusionIf introduced at the global level, emissions leviesbased on a bundle of emissions-relevant indicatorsare comparable with a kerosene levy with regard tothe achievable revenues. The environmental incen-tive effect is greater, if introduced globally, becausedifferent types of emissions can be taken into consid-eration. In the event of the far more realistic case ofintroduction at the regional level, emissions leviesare significantly superior to a kerosene levy. Incen-tive effects and revenues will be greater, because, inthe case of a calculated emissions levy, the opportu-nities to evade the levy are considerably reduced incomparison with a kerosene levy. For this reason, theWBGU considers a calculated emissions levy to bean especially suitable form of user charge on avia-tion.

3.3.4Tradable emissions certificates

As an alternative to a calculated emissions levy, itwould also be possible to conceive of an aviationcharge whereby the use of airspace by aviation isconfined to those who are in possession of tradableemissions permits. The available maximum quantityof emissions permits would have to be a matter ofpolitical decision.

Trading in emissions permits is under discussionfor a number of different areas of application, but isas yet largely untested for the area of aviation (Euro-pean Commission, 1999). Once again, the principalobjective ought to be to specify the maximum per-missible total volume of emissions of a certain pollu-tant and to divide up that volume between individualcertificates (emissions permits) (ICAO, 2001a). Theindividual certificates would then entitle the holderto emit the stated quantity of pollutants and wouldhave to be tradable.

Theoretical considerations show that a system ofglobally tradable emissions certificates is capable offunctioning with comparable efficiency to an emis-sions levy. One of the advantages of tradable emis-sions certificates, however, lies in the higher degreeof environmental incentive provided: There is agreater probability than in the case of an emissionslevy that the tolerated total volume of emissions willnot be exceeded.


Operational practicabilityThe efficacy of an emissions trading system dependscrucially upon the specific design of the system. Themanner in which global emissions permits are ini-tially allocated is decisive with regard to the perfor-mance of the instrument (WBGU, 2001a). Basically,these permits can be issued free of charge in propor-tion to the existing emissions (grandfathering) or canbe sold or auctioned off by a governmental or inter-national institution.

Selling or auctioning offers the advantage of a(high) financial revenue for the issuing agency andcomes very close to the previously discussed usercharges. In addition, auctioning is considered moreefficient than grandfathering. However, it has the dis-advantage of probably being scarcely enforceablepolitically, not least on account of the liquidityrequired for auctioning. In this connection, leviesoffer the advantage that they make it easier for usercharges to be introduced gradually.

If it is assumed that the certificates are initiallyissued in the form of grandfathering, this wouldimply that the instrument is broadly focused on theenvironmental incentive function. The revenueeffects also desired from user charges would be miss-ing.

It is also necessary to ask at what level the tradingin emissions is to be carried out. It would be conceiv-able, for example, for trading to take place betweencountries or between international enterprises (air-lines) or between those airlines serving a certain air-port (European Commission, 1999). It also needs tobe clarified in this connection how to deal with thecircumstance that some airlines are based in devel-oping countries but operate fleets of global signifi-cance. It is also unclear whether the trade in emis-sions should be confined just to aviation or whether,where applicable, enterprises from other industriesmay take part. There appear to be no easy or unam-biguous answers to these questions. Especially wheretrading between countries is concerned, it must addi-tionally be borne in mind that the financial possibili-ties of developing countries are significantly and sys-tematically inferior to those of industrialized coun-tries, something which may possibly result in unin-tended restrictions on the economic activities ofdeveloping countries. Since they are unable to buy asmany emissions permits as industrialized countriesand frequently also lack the organizational ability toparticipate in the certificates market, all activitiesdirectly or indirectly connected with aviation arefrom the outset fixed at a rather low level.

In comparison with a levy based on emissions oron kerosene consumption, the use of tradable emis-sions permits also involves higher monitoring costs:In addition to the costs resulting from the monitoring

of emissions, further costs are incurred for overseeingand handling the trade in emissions (Horregaard andReppelin-Hill, 1999). For instance, the certificatesmust at regular intervals be reauctioned and admin-istered. Furthermore, it is necessary to operate a cen-tre at which the certificates can be traded.

Hitherto implemented schemes with tradable cer-tificates have shown considerable success: Mentionmay be made here of the EU system of tradable fish-ing quotas; the tradable emissions permits for SOX

and NOX in California or the (company-internal)CO2 trading system used by BP/Amoco (ICAO,1999). In addition, trading in CO2 certificates wascommenced in Denmark in 2000. Great Britain isplanning a similar pilot project for the spring of 2002.The resulting experience ought to provide importantinformation with regard to the feasibility of certifi-cate-based solutions in the field of climate protectionat international level. The same applies to the antici-pated start of emissions permit trading at Europeanlevel in 2005 (European Commission, 2001), whichexcludes the transport sector, and at global level in2008 under the Kyoto Protocol, which similarly doesnot yet cover the emissions of international aviation.

Financing potentialIf emissions permits are auctioned globally andannually (or at other intervals), the revenue gener-ated will be similar to that in the case of an emissionslevy.This will at least be the case if the minimum sell-ing price for the permits is approximately equivalentto the levy which would be charged per unit of green-house gases in the case of an emissions-based levy.Greatly reduced revenues can be expected in thecase of regional certificate-based systems. No rev-enues will be generated if the emissions permits areissued free of charge to the existing polluters (Horre-gaard and Reppelin-Hill, 1999). If, however, an emis-sions trading system is combined with emissions-related requirements, the possibility to generate rev-enue would arise, for instance by imposing fines inthe event of emissions targets being violated.

Environment-related incentive effectsIf global trading in emissions functions correctly, theresulting innovation incentive – for a roughly equiv-alent environmental incentive effect – will beapproximately the same as in the case of an emissionslevy. Also, there will be a similar fall in demand (foran equivalent level of levy). However, trading inemissions certificates can be regarded as more tar-geted in its environmental impact than the use ofemissions levies: The total quantity of emissions tol-erated can be fixed and, in principle, transgression ofthat quantity can be prevented, whereas, if use ismade of emissions levies, merely the rate of the levy


is fixed and the effect on the quantity of emissionsproduced is indirect. If demand is relatively price-inelastic, the emissions reduction produced by emis-sions levies may be very small. If trading in certifi-cates is introduced only at regional level, the envi-ronmental incentive effects will fall short of what canbe achieved if trading were introduced at a globallevel.

Legal enforceabilityFrom the legal viewpoint, there appears to be noobstacle to the idea of trading in emissions permits.As already mentioned, similar schemes have alreadybeen implemented in various countries in otherfields.Also, the Kyoto Protocol explicitly provides foremissions trading, at least between industrializedcountries, as a flexibility measure.

ConclusionIn principle, a system of tradable emissions certifi-cates represents an attractive method of ensuringthat the environmental impact of aviation is reducedin an economically efficient and environmentallypinpointed manner. The revenues generated – for acomparable environmental incentive effect – oughtto be similar to those achieved with a globally intro-duced levy on kerosene or emissions, if the emissionspermits are sold annually (or at other intervals).Realistically, however, a certificate-based system willprobably only be enforceable if the certificates areinitially issued free of charge, which means that norevenues would be generated. In addition, a decisivedisadvantage of a certificate-based solution as com-pared with an emissions-based user charge on avia-tion is its increased organizational complexity. Over-all, therefore, tradable emissions certificates do notappear for the time being to be a suitable means ofreaching the principal goals of user charges, namelyachieving incentive effects to the benefit of the envi-ronment and generating revenues earmarked forspecific purposes. Consequently, the Council con-cludes that a calculated emissions levy remains themost attractive form of user charge on aviation.

3.4Undesired side-effects

If an emissions-based user charge on aviation isintroduced at the regional level only, there is the riskthat competition may be distorted if passengersswitch to countries that do not impose such a levy.Such evasion reactions, however, will probably not beof great consequence, because they will only be pos-sible if neither the country of origin nor the countryof destination applies such a levy. If a calculated

emissions levy were introduced, say, in Europe, thescale of evasion reactions would probably be rathersmall, even in the case of international flights. More-over, it must be remembered that, already today,there are, in some cases, significant differencesbetween neighbouring airports with regard to airportcharges without this resulting in major shifts in pas-senger flows.

It is not probable that a calculated emissions levywould have a lasting and serious impact on jobs in theaviation sector or in other areas of industry. Despiteshort-term declines in demand for air transport as aconsequence of the terrorist attacks of 11 September2001, the long-term growth trend of the aviation mar-ket will be sustained. Therefore, an emissions levywill not result in any major negative impact on theeconomies of the various countries.

Structural shifts, however, can be expected. Forexample, it can be assumed that, if the costs of airtransport are increased as a consequence of an emis-sions levy, those products which are traded on worldmarkets and whose comparative advantage is dueabove all to the fact that the calculated transportcosts do not include all the actual costs impaired onsociety, will cease to be competitive. Here, one canthink of numerous products which are produced indeveloping countries and are carried by air to othercountries, particularly to industrialized countries,where they are sold, such as cut flowers, lobsters,shrimps, fruit, vegetables and also, to an increasingextent, leather goods and textiles. Since the internal-ization of external transport costs is indispensable forthe improved welfare of the world, correspondingstructural changes and adaptations must be accepted.It can be assumed that, in the medium and long term,new products, now with internalized transport costs,will again acquire comparative advantages. Theseadaptation problems will presumably not be sosevere if a user charge such as a calculated emissionslevy is introduced gradually.

With regard to the previously mentioned types ofproduct, it can be assumed that mainly those devel-oping countries integrated into such a charging sys-tem may experience temporary disadvantages intrading on world markets – and therefore problemswith unemployment – as a consequence of anincrease in the costs of air transport. It must furtherbe noted that, in developing countries, air transport isalso very important for national trade, because thedistances inside the countries or regions are oftengreat and overland transport is often difficult due toinadequate infrastructure.This appears to be the caseabove all in Africa and the Asia-Pacific region, butless so in Latin America.

Finally, developing countries will be particularlyaffected by an emissions levy on aviation because

17Use of funds 3.5

long-haul travel will become more expensive as aconsequence of such a levy and, therefore, there willbe a tendency for demand for such travel to fall. Heretoo, as in the case of trade in products, the objectivemust be, to ensure that supply and demand adjust tothe incentive effects through structural adaptations.It is difficult to forecast whether there will be a last-ing decline in tourism or whether that industry iscapable of suitably adapting. Basically, however, itmay once again be assumed that if user charges areintroduced gradually the adaptation problems willnot be very severe. Temporary assistance with struc-tural adaptation, of strictly limited duration, mayfacilitate the path towards successful structuralchange achieved in the medium to long term.

3.5Use of funds

3.5.1Purposes

The principal purpose in deploying the revenuesfrom charges on the use of airspace by aviation is torestore or maintain the quality of the global goodthat is to be protected, i.e. the climate. This wouldmainly entail the prevention of greenhouse gas emis-sions in sectors other than aviation. In concreteterms, these could be measures to improve energyefficiency or to intensify the use of renewable energysources. Furthermore, measures to adapt to or‘repair’ climate-related damage would need to befinanced. Here care needs to be taken that the con-nection between damage for which adaptation mea-sures are to be financed and the climate changescausing the damage is as close as possible. Coastalprotection measures such as dike construction inresponse to climate-related sea-level rise are anexample of measures closely connected to climaticchanges (‘first order’ connection; IPCC, 1994). Rev-enue loss suffered by countries whose touristicattractiveness declines due to climate-related dam-age (e.g. through the degradation of coral reefs) is anexample of damage further removed from the initialcause in the causal chain of climate impacts; evensocial disruption (e.g. rising levels of criminality) arepart of this chain.These are cases of ‘higher order’ cli-mate-related damage.Whether and with which prior-ity measures to repair higher order damage should befinanced from the revenue of user charges remainsopen to debate. To determine the scope of earmark-ing, there is a need for criteria.These must be formu-lated through intergovernmental negotiations, build-ing upon further research activities.

Financial resources should be deployed primarilyto countries that have explicit climate policies, expe-rience high levels of environmental damage attribut-able to aviation-related air pollution and have loweconomic capacity. It is appropriate to give consider-ation to the efficiency with which resources aredeployed. With this in mind, financing could bemainly programme- or project-focused in thosecountries that are fundamentally eligible for support.

3.5.2Institutional arrangements

International and national institutions enter intoconsideration as agencies for handling the technicalaspects of the disbursement of the revenues gener-ated by the user charges on aviation.

In national budgets, such revenues would be item-ized as transitory accounts forwarded directly to thecorresponding international organizations, in anal-ogy to the financing of the EU budget by its memberstates.

As far as international organizations are con-cerned, thought could be given above all to the threenew funds set up by the Marrakesh Accords, i.e. theSpecial Climate Change Fund, the adaptation Fundand the Least Developed Countries Fund. All threeare administered by the Global Environment Facility(GEF). Some of the financial resources might possi-bly be allocated directly to the climate window of theGEF, which is the financing mechanism of the Cli-mate Convention. Criteria for the scope of earmark-ing should be developed within the structures ofthese funds.At the same time, these financing institu-tions guarantee that the corresponding financialresources flow mainly to those regions which experi-ence particularly large environmental damage attrib-utable to aviation emissions. In addition, it must beensured that existing GEF funding is not reduced asa consequence of the new allocation of funds.

As far as national institutions are concerned, con-sideration can be given to all those institutionsengaged in tasks relating to environment and devel-opment policy.The specific allocation of roles should,for the most part, be left to the individual countries.

An important question is what percentages of therevenue from aviation levies should be allocated tointernational and national institutions. Especially inconnection with environmental or economic adapta-tion measures, disbursement at the national levelwould have the advantage that there would be moreaccurate knowledge of areas of concern and possiblesolutions, with the result that the available fundscould be put to especially efficient use.With regard togeneral policy on climate, it is advisable – in view of


the global nature of the climate problem – to opt for‘common’ disbursement at international level,notwithstanding the possibility to make use also ofspecific locally available knowledge.

With regard to political enforceability, it wouldpresumably only be possible to implement a modelwhich permits the revenue from the user charges tobe allocated to both national and international insti-tutions. What percentages of the revenues are to beallocated to the two categories of recipients wouldhave to be negotiated at the international level. Pos-sible criteria for deciding on the percentages mightbe, for example, the extent of national damage as aconsequence of climate change as well as the inde-pendent economic ability to pay of the various coun-tries. In principle, however, at least in the mediumand long term, the majority of the funds should go tointernational institutions. Institutions organizingsuch negotiations could be the conferences of theparties to the Climate Convention and Kyoto Proto-col. With regard to the political enforcement ofappropriate mechanisms for disbursement of the rev-enues from user charges, it appears indispensable toconduct a sensitive evaluation of previous experi-ences with international climate policy or environ-ment and development policy in general.

3.6Political enforceability

ICAO is the United Nations organization of initialcompetence for the introduction of a worldwideenvironmental levy on aviation. The global introduc-tion of such a levy will certainly not be accomplishedwithout a great struggle to arrive at a solution accept-able to all member states. Not only will this processbe time-consuming. There is also the risk that a con-sensus based on the smallest common denominatorwill not do justice to the importance of air trafficemissions with regard to climate protection.

The introduction of a regional environmental levyunder the regime of regional civil aviation associa-tions (such as the European Civil Aviation Confer-ence, ECAC) or international organizations such asthe EU, NAFTA or ECMT (European Conference ofMinisters of Transport) appears to be easier in thisregard.

Political enforceability, however, is problematicalso at the regional level. Particularly those countrieswith an economy heavily dependent on long-haul airtraffic could suffer a loss of competitiveness throughthe non-global introduction of a levy. Of importancein this context are increased product prices as a resultof rising air transport costs as well as concerns with

regard to a decline in tourism in traditional holidaycountries.

Consequently, it can be expected that there will beopposition to the introduction of an emissions levy.Such opposition, however, could possibly be over-come by financing temporary measures, of strictlylimited duration, to promote adaptation to structuraleconomic problems caused by the introduction of anemissions levy. Moreover, it is to be assumed that ifuser charges are introduced gradually this type ofadaptation problem will not be very severe.

It is further to be expected that developing coun-tries affected by economic structural adjustmentproblems as a consequence of the introduction ofuser charges will agree to such introduction if therevenue is deployed as a matter of principle only orpredominantly for such developing countries that –perhaps under less strict terms – have joined the usercharging system.

3.7Conclusion on user charges on aviation

The levying of user charges on airspace is advisable,because this is capable both of giving rise to emis-sions-reducing effects and also of generating rev-enues for climate protection measures and/or mea-sures for adapting to the climate change in which avi-ation plays a causal role. It appears advisable tointroduce such charges in a gradual process. The tar-get revenue should therefore not be very high overthe short and medium term. Over the long term, how-ever, the revenue from a worldwide charging systemcould correspond to the share of climate damageattributable to aviation.

It also appears advisable to earmark the revenuesgenerated – this being entirely consistent with theconcept of user charges. In this context, it must beensured that funding is concentrated on climate pro-tection measures and on first-order measures foradaptation to the climate change jointly caused byaviation. From the environmental point of view, it isimportant to fund measures particularly in thoseplaces in which the existing and predictable futureenvironmental damage is especially great. From thepoint of view of the ability-to-pay principle, itappears reasonable to fund measures above all inthose countries which have only a limited capacity toimplement such measures themselves, developingcountries being a particular case in point.

Of the various conceivable user charges on avia-tion, an especially attractive option appears to be acalculated emissions levy based on a variety of indi-cators, such as aircraft type, engine type, average airroute etc. The precise design of an ‘optimum’ charg-

19Conclusion on user charges on aviation 3.7

ing scheme should be determined by internationalinstitutions. Even if introduced solely at the regionallevel, such a user charge would allow only few eva-sion responses and is associated with considerableenvironment-related incentive effects and revenueeffects.

The introduction of a calculated emissions levymay cause a need for structural adjustment in a vari-ety of countries. If user charges are introduced in agradual process, these effects should not be verysevere. The temporary financing of correspondingnational adjustment measures in developing coun-tries, of strictly limited duration, from internationalfinancial resources could in fact rather have theeffect of promoting the political acceptance of acharging system. Acceptance could be further pro-moted by a conditionality of deployment.To this end,only those developing countries should profit fromthe earmarked use of the revenue that join such acharging system, i.e. also levy user charges nationally.One of the institutions which may, in principle, playan important role in connection with the levying of auser charge on emissions is ICAO. The greenhousegas emissions of the international aviation sector arenot yet subject to any reduction commitments.A usercharge such as an emissions-based levy could closethis regulatory gap in climate protection, and ICAOcould commit itself to playing a role in the collectionof the levy. Such a commitment could consist in nego-tiating emissions-specific levy rates, negotiating thecalculation formula for the overall levy or negotiat-ing the shares of revenue that are to flow to interna-tional organizations or national institutions. How-ever, ICAO can only exercise a purposeful functionin these areas if it is integrated more closely intoglobal environmental policy. Given the political will,environmental policy objectives could be attributedpriority in ICAO over particularistic and short-termeconomic interests of individual countries.

For instance, it would be conceivable that the par-ties to the Climate Convention and Kyoto Protocolrequest ICAO to define binding targets for the abate-ment of greenhouse gas emissions from aviation. If,after agreed deadlines have expired, no binding mea-sures are adopted by ICAO, the CO2 emissions of avi-ation could also be integrated into the Kyoto Proto-col. This could be done e.g. by introducing a usercharge within the framework of the climate regime,or including these emissions in the emissions inven-tories of the convention parties. As it is likely thatICAO has an interest in establishing a regime withinits own organizational structure. ICAO may perceivean incentive to give greater weight to concerns of cli-mate protection and start to elaborate an emissions-based user charge regime without delay.

Charging the use of the oceans by shipping4

4.1Marine pollution

Despite intensified efforts to protect the oceans inthe last few years at both international and nationallevel, their condition continues to deteriorate. Con-siderable progress may have been achieved in someregions but on the whole the marine environment iscoming under increasing pressure from the ongoingexpansion and intensification of various humanactivities. The ecosystems of the coastal regions arebeing subjected to the highest input levels of pollu-tants, nutrients and sediment particles. However,many exchange processes occur between the coastalwaters and the waters of the open ocean.The shallowcoastal waters with their high primary productionrates form the ‘nursery ground’ for the shoaling fishof the open ocean but they are also reliant on theintroduction of oxygen- and nutrient-rich watersfrom the open ocean. The ecosystems of the openocean may be largely intact. Nevertheless increasinglevels of damage are also becoming apparent here(GESAMP, 2001a).

According to the views of the Joint Group ofExperts on the Scientific Aspects of Marine Environ-mental Protection (GESAMP) – a joint committee ofexperts formed of representatives of various UNorganizations for the purpose of marine environmen-tal protection – the developments causing most con-cern, besides the risks associated with the anticipatedglobal warming, are as follows (GESAMP, 2001a):• The destruction and alteration of marine and

coastal habitats. These include particularly valu-able habitats such as coral reefs and mangroveforests, which are being degraded by pollution,inappropriate use of land, deforestation or otherharmful activities.

• Overfishing and effects of fishing on the environ-ment. The overexploitation of marine fish stocks isof particular concern if we consider that around3,500 million people are dependent on the oceansas a primary source of protein (Simonis, 1996).Furthermore, commercial fishing also leads to the

unintentional removal of fish, turtles, marinemammals and other animals (so-called by-catch)which has a negative impact on the biologicaldiversity of the oceans (WBGU, 2001a).

• The effect of untreated effluent and chemicals onthe health and environment of humans. Recentstudies have shown a closer connection than pre-viously believed between the emergence of cer-tain infectious diseases and the quality of theocean waters in coastal regions. Heavy metals andchemicals which disrupt hormonal systems, suchas tributyl tin (TBT), are harmful to numerousspecies. The environmental effects of many chem-icals discharged into the oceans are still largelyunknown.

• Increased eutrophication. The excessive growth ofmarine plants caused by nutrients introduced intothe oceans destroys the natural balance of themarine ecosystems and the resulting rapid breed-ing of toxic algae (red tides) can contaminate fish,shellfish and – through the food chain – humans.

• Alterations in hydrology and sediment transport.Dams, extensive irrigation programmes andchanges in land use may affect the sediment trans-ported by rivers leading to changes in the coastlineor – in the event of increased inputs of turbiditymatter and sediment particles from deforestationactivities – result in the destruction of wetlands,river deltas and coral reefs (GESAMP, 2001a, b).

These kinds of problems clearly illustrate the closecorrelation between land use and marine environ-mental protection. The rapid urbanization primarilyobserved in the coastal regions of developing coun-tries is a particular source of severe marine environ-mental pollution.The high rate of population growthand enduring poverty make it near impossible for theproblem to be dealt with in an appropriate mannerlocally (GESAMP, 2001a). The legally non-bindingGlobal Programme of Action for the Protection ofthe Marine Environment from Land-Based Activi-ties (GPA) was adopted in 1995 by UNEP with aview to combating the marine environmental dam-age stemming from land-based sources, which makesup 80% of overall damage. The programme under-

21Environmental impacts of ocean transport 4.2

scores the connection between the protection offreshwater, the coasts and the oceans and sees theconflicts of use being resolved by an integrated man-agement of resources and an environmentallyacceptable economic development. Even though thefirst regional successes may be noted, a global imple-mentation of the GPA is still long overdue. In partic-ular, the issue of financing the GPA is still unresolved(UNEP, 2001).

The present report is particularly concerned withthe types of marine pollution caused by shipping.TheCouncil believes that levying a user charge in thisarea would be particularly beneficial given thepotential to improve the environmental qualities ofships. However, the Council does not rule out thepossibility that user charges in other areas could alsocontribute to the protection of the oceans. Forinstance, it could also be examined whether usercharges may be useful to protect the endangered fishstocks of the high seas.

4.2Environmental impacts of ocean transport

Shipping is by far the most environmentally soundform of transportation. In particular, it is much moreenergy-efficient than aviation, which generates up to100 times higher CO2 emissions per tonne of freight.Nevertheless, the environmental impairmentsinduced by ocean shipping do cause severe damagein some areas that would often be avoidable consid-ering the available options to improve the environ-mental performance of ships.

4.2.1Discharges and inputs to the oceans

Shipping is still a major contributor to the degrada-tion of the marine environment although progresshas been made in the last few decades to reduce themarine pollution caused by shipping. Even thoughexperts consider oil discharges to be less threateningthan previously believed (GESAMP, 2001a), theystill cause considerable damage to the local ecosys-tems affected (Table 4.2-1).Tributyl tin (TBT), intro-

duced through toxic anti-fouling paint, which isintended to protect ships’ hulls from the growth ofmarine organisms, accumulates in the sediments ofthe seabed. It retains its toxicity and its hormonaleffects may, for example, lead to sex changes inmarine snails (ISL, 1999). Alien species are intro-duced to distant ecosystems by the uncontrolledexchange of ballast waters which under certain cir-cumstances may have a destructive impact on biolog-ical diversity in the new host ecosystems and lead toconsiderable economic losses (GESAMP, 2001a). Forexample, a type of jellyfish brought in from Americanwaters decimated the anchovy stocks in the BlackSea to such an extent that the annual fishing yield inthe Black Sea fell from 700,000t to 70,000t (ISL,2001).

4.2.2Emissions to the atmosphere

Shipping is responsible for around 7% of the CO2

emissions from the transport sector or for around 2%of global CO2 emissions. Furthermore, around 7% ofall SO2 and 11–12% of all NOX emissions may beattributed to shipping.

SO2 and NOX are responsible for acid rain whichcauses considerable pollution of land ecosystems.Moreover, more recent studies show that NOX emis-sions borne by the atmosphere also contribute toeutrophication in both coastal areas and the openocean. Particularly in those ocean areas where thelack of nitrogen limits biological production, theinflux of nitrogen oxides via the atmosphere maycause sustained damage to the balance of theregional ecosystems (GESAMP, 2001b).

If international shipping continues to be excludedfrom the efforts to reduce emissions, it is anticipatedthat the land-based efforts to reduce SO2 and NOx

emissions will lead to an increasing proportion ofthese becoming attributable to shipping. Reducingthe emissions from ships to comply with the require-ments of the Convention on Long-Range Trans-boundary Air Pollution (LRTAP) by 2010 will also beachievable at significantly lower costs than the reduc-tion of land emissions. Estimates for the costs ofabatement on ships are put at € 300 million per

Type of oil discharge [t per year] [%]

Oil, oily compounds 252,000 45.0Tankers – normal operation 158,000 28.4Tanker accidents 121,000 22.5Ship repairs 4,000 0.6Accidents excl. tankers 20,000 3.5

Total 555,000 100.0

Table 4.2-1 Examples of oil dischargesto the oceans due toshipping.Sources: GAUSS, 2000;OECD, 1997

22 4 Charging the use of the oceans by shipping

annum, while the same abatement effect would cost€ 2,400 million on land. In the European context, thiswould reduce total costs from € 7,000 million to€ 4,900 million (T&E, 1999).

Medium-sized and large tankers, bulk freight shipsand container ships are generally powered by slowspeed two-stroke diesel engines. These operate oncheap heavy oil which is extremely harmful to theenvironment compared to other fuels. Heavy oil hasa sulphur content of up to 5% depending on its ori-gin. The costs of reducing the sulphur level arearound € 20 per ton and percentage point. Using alow sulphur heavy oil requires no engine modifica-tions. Marine diesel, which contains only 0.2% sul-phur in accordance with an EU directive, has mostlybeen used by modern ferries and cruise ships to date(ISL, 2001; T&E, 1999).

A whole range of technical possibilities are avail-able to reduce NOX. A 90–95% drop in NOX emis-sions may be achieved by the addition of ureathrough a selective catalytic reduction process. Thecosts of this process amount to € 29,000–46,500 perMW and the use of this technology will increase cur-rent expenditure by around € 2 per MWh. Cheapermethods achieve smaller reductions in NOX emis-sions (HAM technology: 70–80%, exhaust gas recir-culation around 60%, direct water injection 20–50%,combustion optimization 25%, injection of a fuel-water emulsion 10%; ISL, 2001).

4.3The structure of the ocean shipping sector

The increasing economic globalization has ensuredhigh growth rates in the ocean shipping industry inthe past and average growth rates of 1–4% areexpected to continue during the coming years. Themajority of shipping activities take place within thegroup of developed and transition countries (thoseincluded in Annex I of the UN Framework Conven-tion on Climate Change). Only 16% of shippingbegins and ends in different countries and a largepart of the goods transported is concentrated on asmall number of routes. Container traffic is mainlyfocused on the east-west routes between Europe, theUSA and the Far East/Southeast Asia with the north-south services being of less importance and East andWest Africa playing hardly a role at all (ISL, 2001).Bulk cargo is primarily transported via the sea routesused for transporting mineral oil from the Near Eastand other raw materials from the southern conti-nents to the consumer centres in the north. The mostimportant routes for mineral oil are the routes fromthe Persian-Arabian Gulf to Southeast Asia and theFar East and those from the same starting point to

Europe around Africa or through the Suez Canal toSouthern Europe. Exports to the USA are also trans-ported around Africa and are also sourced from WestAfrica and Venezuela. Other regional routes includethose from North Africa to southern Europe, fromAlaska to California and also those between thecountries bordering the North Sea (Table 4.3-1).

Despite the fact that the majority of the world-wide shipping fleet is owned by companies and pri-vate individuals from OECD states, only 52% ofthese ships sailed under the flag of an OECD state in1999.All in all, more than two-thirds of all ships borethe flag of a developing or newly industrializingcountry (OECD, 1997 and 2001).The most importantcountries are listed in Table 4.3-2.

Registering a ship in a country subjects that ship tothe jurisdiction of the relevant country.The flag stateis therefore fundamentally responsible for monitor-ing compliance with international environmental andsafety standards. The flag state also determines theterms and conditions to be adhered to under labourregulations and is entitled to impose income taxes ona ship’s revenues. The possibility of choosing flagstates freely (with so-called ‘open’ shipping registers)often promotes inadequate compliance with interna-tional standards which often leads to considerablecompetitive advantages for the relevant shipowners.By means of a series of international agreements theport authorities are now empowered to checkwhether the ships berthed in their harbours complywith international standards and where necessarydetain these until the faults are rectified (OECD,2001).

At the beginning of 2001 the world trading fleetwas composed of around 41,000 freight and passen-ger ships (gross tonnage (GT) above 300), around10,000 of which were tankers, 6,000 ships for dry bulkcargo, 2,500 container vessels, 18,000 parcel and roll-on/roll-off (Ro/Ro) freight ships, 2,500 combinedfreight and passenger ships and ferries together with1,500 pure passenger boats. Tankers and bulk cargo

Table 4.3-1Leading export and import regions for crude oil in 1999.Source: ISL, 2001

Region Exports Region Imports[Mill. t] [Mill. t]

Near East 748 North America 456Caribbean 228 Asia excl. Japan 361West Africa 166 Mediterranean 236North Africa 90 Japan 209North Sea 78 North Western

Europe 157

23Designing a charge on the use of the oceans by shipping 4.4

ships head up the list in terms of tonnage (see Table4.3-3).

4.4Designing a charge on the use of the oceans byshipping

4.4.1General principles

The high seas are not subject to the legal sovereigntyof any state, and are thus a classic example of a globalopen-access good. Scientific findings to date do notlead us to believe that the high seas are being over-exploited to such an extent that considerable damageis being done, although there is growing concernabout the environmental pollution of coastal marinewaters.

Nonetheless, the Council considers it justified toclassify the oceans as such, including the territorialcoastal waters, as a scarce global common good –regardless of their legal allocation to the differentlevels of national sovereignties established in theUnited Nations Convention on the Law of the Sea(UNCLOS), and to consider the introduction of usercharges. The following reasons speak in favour ofthis: Even though UNCLOS attaches considerablesignificance to territorial sovereignty – also in theexclusive economic zone – the provisions regardingmarine environmental protection (Arts. 197ff UNC-LOS) oblige all contracting states to establish inter-national rules and standards at a global and regionallevel to protect the marine environment.With regardto ocean shipping, the classification of the oceans asa common good goes along with the right of the shipsof all states to peaceful transit through coastal waters

and the exclusive economic zone as stipulated inUNCLOS (Arts. 17ff UNCLOS; Ipsen, 1999).

Moreover, an inseparable ecological connectionexists between coastal waters and the open ocean.The worldwide degradation of the ecosystems ofcoastal waters is threatening to extend to the openocean and even to the deep sea. This is increasinglyjeopardizing marine biodiversity. As the conserva-tion of biodiversity is a matter recognized as a com-mon concern of humankind (Biodiversity Conven-tion), the oceans in their entirety should be regardedas a scarce common good – and one that is threat-ened with overexploitation. Current research more-over indicates that the biological diversity of thedeep sea is far greater than initially assumed(GESAMP, 2001a).

The use of the oceans by shipping leads to a rangeof negative effects on the marine environment which,in conjunction with the various land-based dis-charges, causes the progressive degradation ofcoastal waters in particular. Even though around80% of total marine pollution may be attributed toland-based discharges, the level of marine pollutionfrom shipping is so severe that the Council considersthe imposition of a charge as justifiable. The initialobjective of levying a charge is to achieve an incen-tive effect which will reduce marine pollution. Inview of the energy efficiency of ocean transportationand the significance of shipping for world trade, theCouncil is of the opinion that the aim of such a chargecan not be to reduce the volume of ocean transporta-tion.The aim is rather to create an incentive for mea-sures to be taken – particularly in the areas of tech-nology and environmental management – to reduceshipping-induced marine pollution.The Council con-siders it appropriate to pursue an integratedapproach and include environmental impacts which

Table 4.3-2The leading flags of the world as at 1 January 2001. NIS = Norwegian International Ship Register.Source: ISL, 2001

Controlled tonnage Number Gross Register flag Number Gross(according to registered office tonnage tonnageof controlling shipping companies) [millions] [millions]

Greece 3,484 85 Panama 5,538 113Japan 3,803 70 Liberia 1,529 51Norway 1,920 39 Bahamas 1,218 31USA 1,905 31 Malta 1,466 28China 3,054 27 Greece 1,175 26Germany 2,195 25 Cyprus 1,427 23Hong Kong 669 20 Norway/NIS 1,731 22South Korea 1,420 18 Singapore 1,112 21Great Britain 1,041 14Russia 3,672 14Denmark 853 14


are only indirectly related to marine pollution, in par-ticular CO2 and SO2 emissions caused by shipping.

4.4.2Legal considerations

A number of legally binding instruments have beendeveloped, under the auspices of the InternationalMaritime Organization (IMO) and also the OECD,to reduce the environmental damage caused by ship-ping. In this context Annex VI of the InternationalConvention for the Prevention of Pollution fromShips (MARPOL) was adopted in 1997 which setupper limits for the sulphur content of fuels (4.5% ingeneral, 1.5% for the Baltic and North Seas) and NOx

standards, but this has not yet come into force. How-ever these standards are not considered adequate forthe heavily polluted waters of the Baltic and NorthSeas in view of the technology available to reduceemissions. IMO is an important player in the climatepolicy arena because Art. 2 para 2 of the Kyoto Pro-tocol establishes that the industrialized countries ini-tiate measures to limit and reduce the greenhousegas emissions of international shipping under IMOauspices.Although this issue has already been on theagenda of the Marine Environment Protection Com-mittee (MEPC) of the IMO for several years,scarcely any progress in the decision-making process

is yet perceptible (UNFCCC/SBSTA, 2001). TheIMO adopted an agreement in its Autumn 2001 ses-sion prohibiting the application of ship paint con-taining TBT from the beginning of 2003 and stipulat-ing that the existing paint must be removed or sealedby 2008. This convention will come into force 12months after ratification in 25 states which togetherrepresent at least 25% of the world trading fleet. Itmust therefore be stated in summary that the envi-ronmental standards elaborated by the IMO haveremained fragmentary from an environmental policyperspective and that, as a result of the conflictinginterests of individual states, the final outcomes ofthese standards are frequently unsatisfactory.

The issue of whether IMO member states mayexercise more stringent standards than those of theIMO for ships calling at their ports raises a numberof difficult legal questions. However, in the finalanalysis there are no legal problems regarding thecompatibility with IMO standards of a user chargesystem which is differentiated in accordance with thelevel of environmental performance (BMT, 2000a).

The Council is of the opinion that levying a chargeon the use of the oceans by shipping is also consistentwith WTO rules. As the charge is not dependent onthe transportation capacity of a ship, it cannot beinterpreted as a tax or duty on the import of thegoods transported. GATT may therefore not beapplied in this instance. The charge could, however,

Table 4.3-3World trading fleet according to type of vessel as at 1 January 2001.Source: ISL, 2001

Type of vessel Number Tonnage Share of tonnage Average tonnageof vessels per vessel

[million GT] [%] [GT]

Oil and product tankers 7,473 169.8 31.2 22,722Chemical tankers 1,342 5.4 1.0 4,024Gas tankers (LNG, LPG) 1,101 19.6 3.6 17,802

Bulk carriers 5,835 149.6 27.5 25,638OBO carriers (ore/bulk/oil) 205 8.6 1.6 41,951Container ships 2,580 59.9 11.0 23,217Multi-purpose freighters 9,054 29.3 5.4 3,236Tween deckers 4,959 24.4 4.5 4,920Reefers 1,329 6.9 1.3 5,192Special ships 1,145 20.1 3.7 17,555Roll-on/Roll-off freighters 1,165 10.5 1.9 9,013

Passenger ships 1,532 9.1 1.7 5,940Ferries and combinedpassenger/freight ships 2,465 13.8 2.5 5,598

Fishing vessels 8,636 8.8 1.6 1,019

Other non-freight carryingvessels 6,412 8.5 1.5 1,326

Total 55,233 544.3 100.0 9,855


be seen as a tax or duty on a service, namely oceantransport, and would therefore fall in principle withinthe sphere of application of the General Agreementon Trade in Services (GATS). Only individual statesto date have entered into binding commitmentsunder GATS in the shipping sector but there is a pos-sibility that more commitments will be concluded inthe new round of negotiations. Even so it is not anti-cipated that GATS will oppose the introduction of areasonable, non-discriminatory system of levyinguser charges (BMT, 2000a).

4.4.3Determining the participants in a system of usercharges

From an environmental perspective the levying of auser charge on a global basis would be desirable.Experiences within the IMO indicate that an envi-ronmentally stringent system of levying chargeswould be near impossible to implement on the basisof global participation. There are fears that the envi-ronmental incentive would be lost in negotiationswith global participation, not only in respect of thelevying of the fee but also with regard to the use ofthe revenues. In addition there is also the question ofwhether the developing and newly industrializingcountries would be willing and able to summon upthe administrative resources required to implementan environmentally-differentiated system of charges.Lastly, global application would imply the develop-ment of a comprehensive control system. This sug-gests initially limiting the group of participatingstates to the industrialized countries. In any case, allships that call at ports in one or several of the partic-ipating states should be covered by the system –regardless of flag state and seat of the shipping com-pany.

The Council therefore takes the view that usercharges should initially only be levied for all shipsthat call at ports in the industrialized countries. Thefact that the majority of ocean transport ends orbegins in industrialized countries means that themain shipping parties would be included. In parallel,levying user charges may also serve as a clear signalof the willingness of the industrialized countries tocontribute to financing global sustainability if thefunds were deployed accordingly.

If a system of levying user charges was applied inindustrialized countries only, it seems reasonable thatsuch a system should be established within theframework of the OECD – in substantive coordina-tion with the IMO – without, however, limiting theparticipants to OECD members. In the past theOECD has developed a range of activities in the

shipping sector and has the competence and staff tomonitor the satisfactory implementation of such asystem. Other industrialized countries and interesteddeveloping and transition countries may possibly bemotivated to take part in such a system at a latertime. This applies particularly if a part of the chargeslevied is made available to finance the work ofnational shipping authorities (Section 4.6).

4.4.4Possible models for levying charges

A number of countries have already employed vari-ous instruments to control the adverse environmen-tal impacts of shipping. These instruments are pri-marily based on granting reductions in the chargeslevied with regard to shipping, whereby the level ofthe discount is dependent on compliance with certainenvironmental standards (BMT, 2000b). In addition,a levy on shipping fuel or CO2 emissions has alsobeen discussed in the past.

Fairway and harbour duesShips are obliged to pay various fees for the use ofthe fairways and docks. The fees take various formsand amounts and do not only differ between the indi-vidual states but also between the ports within states.The most important fees include the fairway dues,which are levied, inter alia, for the maintenance ofthe fairways, and the actual harbour dues to be paidfor the use of the docks. Harbour dues are imposedregularly by port authorities but fairway dues arealso collected by the customs authorities in somecountries. No fairway dues are imposed in Germanyat present and the funds necessary to maintain thefairways come from general tax revenues.

A number of incentive systems already existgranting ships which fulfil certain criteria discountsin harbour and/or fairway dues. Widespread dis-counts are available for tankers with segregated bal-last water tanks or double hulls. In Sweden dis-counted harbour and fairway dues are granted toships whose SO2 and NOx emissions do not exceedthe ceilings stipulated in Annex VI of the MARPOLConvention. The Green Award system certifies shipswhich satisfy special requirements with regard totechnical issues and also management and staffingmatters. Certified ships are granted discounts of vary-ing degrees in some ports in the Netherlands, Portu-gal, South Africa, Spain and Great Britain and alsomore recently in Hamburg. The certification systemhas hitherto only encompassed large tankers andother very large ships (BMT, 2000b).

The most far-reaching proposals for the introduc-tion of a penalty/bonus system have come from Nor-


way. Discounts based on indexing ships in relation tothe environment were proposed by Norway withinthe framework of the IMO. Under the proposal, apoints system could be used to assess, among otherthings, the levels of CO2, SO2 und NOx emissions, thedisposal of waste and effluent and the ballast watersystem. Discounts of up to 50% may then beachieved depending on the number of points. Nodecision has yet been made on the Norwegian pro-posal by the IMO. Critics regard the indexing system,which is only partly compatible with the existing cer-tification system, as too complicated and complainabout the administrative effort associated with theindexing process (ISL, 1999).

Competition between ports is an important issuewhen considering the application of an environmen-tal differentiation system to existing fees.The manda-tory introduction of a bonus/penalty system of har-bour dues would have a marked effect on competi-tion between ports. As a minimum requirement,therefore, all the countries whose ports compete withone another should be subject to a uniform system.To avoid the distortion of competition, levying a new,uniform charge that includes a bonus/penalty systemis the preferred option. Existing bonus systems forharbour dues could then continue to be applied. Feesshould not be set too low so that an incentive effectmay be achieved. In Sweden – in conjunction withother incentives such as subsidies for technologyrefits – first successes with regard to ship-based emis-sions have already been achieved (BMT, 2000b).

Charge on fuel or CO2 emissionsDiscussions on levying a charge on shipping fuel as away to promote environmentally sound ships are pri-marily focused on the imposition of a comprehensiveCO2 levy. The incentive effect of a charge on heavyoil will depend largely on the level of the charge.However, levying such a charge will cause some prac-tical problems. It is common practice nowadays forlarge ships on the high seas to be refuelled by smallertankers and the costs of transporting the fuel toEurope from Africa or the Near East has been put at€ 10–15 per tonne by the OECD. If a charge waslevied which clearly exceeded this amount, theinstances of large ships on the high seas being refu-elled with heavy oil bearing no charges are expectedto increase. The Californian heavy oil suppliersalready experienced considerable falls in revenue in1991 when heavy oil became subject to VAT for ayear in California. Such loopholes may only beavoided by the global introduction of such a charge.In this instance the charge should be levied directlyat the oil companies as the number of heavy oiltraders is very high making a charge less reliable toimpose (OECD, 1997).

Alternatively a direct CO2 levy may be imposedupon ship operators.The charge could be imposed byport officials in conjunction with the harbour dues,on the basis of the origin of the relevant freight forinstance, thereby closing the loophole mentionedabove. Whether the charge is levied on the basis ofactual heavy oil consumption – which would necessi-tate the establishment of appropriate fuel balancesheets on ships – or on the basis of certified technicalcharacteristics of the ships, this approach wouldmean a considerable amount of administrative workfor shipowners and port authorities (OECD, 1997).The Council is of the view that levying an environ-mentally-differentiated charge which comprises allthe main aspects of environmental pollution causedby shipping is the preferred option over a charge onshipping fuel (Section 4.4.5).

Levying a charge via tonnage taxAs the relevant flag states impose income taxes onshipowners and as fierce competition prevailsbetween the flag states, a charge levied via the rela-tively low income taxes on shipping revenues (ton-nage tax) would provide little opportunity to achieveadequate incentive or financing effects. Norway is,nevertheless, planning to develop a tax incentive sys-tem. Tonnage tax would firstly be increased by 50%in order that adequate discounts may then be grantedto ‘green ships’. No great financial benefit is expectedto be achieved by this incentive but it is hoped thatthe differentiated tonnage tax will give the desiredsignal (ISL, 1999).

4.4.5The Council’s preferred model for the levying ofuser charges

Criteria for levying user chargesThe Council favours levying a new, environmentallydifferentiated charge to be paid on an annual basis. Inthe opinion of the Council, the systems introduced todate are either too restricted in scope or too compli-cated to be introduced on a supra-regional or globalbasis. The former relates to the concentration onexhaust gas in the Swedish model and the latter con-cerns the Rotterdam ‘Green Award’ certificate whichis based on such extensive criteria that it would benecessary to pay for certification which would be tooexpensive for smaller ships.

The charging system proposed by the Council isbased primarily upon the deadweight tonnage ofships and the power of ship engines. It is not basedupon the length of the journey completed becausethe recording and accounting processes wouldrequire much evidential documentation and exten-


sive calculations. The ship is deemed to be in servicefor the whole year exerting a permanent adverseeffect on the environment. All measures taken toreduce adverse environmental effects and toimprove safety are taken into detailed considerationas ‘Quality Shipping’ measures leading to a bonus inthe charge calculation.

To identify Quality Shipping aspects, a cataloguecontaining 19 criteria grouped in three categories isproposed. These categories are: shipping companypolicy and management; ship design, constructionand equipment; and the management and technologyof operations on board ship. The catalogue wasdrawn up by the German Institute for Environmen-tal Protection and Safety in Shipping (GAUSS –Gesellschaft für Angewandten Umweltschutz undSicherheit im Seeverkehr). All these criteria can beevidenced by already existing internationallyaccepted certificates and documents, which leads to arapid and straightforward monitoring process. Table4.4-1 details the 19 criteria and the points achievedfor fulfilling these criteria (ISL, 2001).The higher thenumber of points, the larger the bonus granted as arebate on the base charge. In the system, concretemeasures to protect the environment which havedirect environmental effects score higher than man-agement tools and systems which have positiveeffects on the basic frameworks for implementingconcrete measures and often benefit other non-indexed areas.

The catalogue must be reviewed regularly in orderto integrate new technologies which become avail-able or to remove criteria which have become legalrequirements and thus no longer qualify for a bonus.For example, bonus points are only granted for theremoval of TBT anti-fouling paint if this is achievedwell before the final IMO ban in 2008.

The absolute level of the bonus needs to be deter-mined in the policy arena and should be oriented tothe intended environmental incentive effect and fis-cal revenue. The concessions granted are notintended to achieve complete payback of therequired capital expenditure and operational costs.Discounts and reductions will be granted more as anadditional incentive to implement the Quality Ship-ping criteria.

The granting of a bonus seeks to amplify the posi-tive effects of environmental protection measuresfrom the perspective of shipowners (meeting therequirements of charter and forwarding companies,exploiting market potential through public relations,gaining image, increased safety, etc.).

Concessions should be given for relatively lownumbers of points so that they may act as a signal.The concessions granted are also based on a parallelprogression which respects the rising marginalexpenditure required to gain further points.

A concession of 25% of the maximum possiblebonus will be granted for points of 50 and abovewhich may be achieved at relatively low expense on

Criterion Points ∑ Evidenced e. g. by

Category I: Shipping company policy and management1.1 Environmental liability insurance 10 Insurance policy1.2 Quality management 3 ISO, ISMA, GA certificate1.3 Environmental management 3 ISO, ISMA, GA certificate1.4 Personnel management 15 ITF blue card, training

record, GA certificate1.5 Green Award 3 34 Certificate

Category II: Ship design, construction and equipment2.1 Selection and use of materials 5 Material pass2.2 Collision protection measures 10 Class notation2.3 Redundant systems 10 Class notation2.4 Hull stress monitoring 10 Certificate2.5 Emergency tug systems 10 45 Certificate

Category III: Management and technology of operations on board ship3.1 Gaseous emissions from refrigeration plant 15 Specification of refrigerants3.2 Sulphur oxide emissions 20 Certificate3.3 Nitrogen oxide emissions 20 Certificate3.4 Soot and particulate emissions 10 Certificate3.5 Solid waste 15 Waste log, certificate3.6 Black and grey water (sewage) 15 Disposal protocol, certificate3.7 Bilge water 5 Certificate3.8 Anti-fouling 20 Specification3.9 Ballast water 10 130 Certificate, log

Total 209

Table 4.4-1Quality Shipping criteriaand records.Source: GAUSS, 2001


the part of the ships. Commitment is thereforerewarded and an incentive is created to undertakefurther improvements with regard to the operationalmanagement of environmental and safety issues. Thenext level of concession is granted for more extensiveimprovements and for points of 100 and above. Asubstantial concession of 60% of the maximum pos-sible bonus may be achieved in this instance.A bonusof 100% may be granted for points of 150 and above.This number of points is only achievable by a smallnumber of existing ships as it involves significantmeasures. The relationship between the concessionsand number of points may be adjusted in the longterm as the environmental compatibility of shippingdevelops.

This graduated model is based on the followingconsiderations:• Bonus points may be achieved regardless of the

type and size of the ship or of the requirements incertain shipping regions.

• Certified management systems are themselves notsufficient to achieve the required minimum num-ber of points. Further criteria relevant to environ-mental and safety issues must be fulfilled.

• The maximum concession may be achieved solelyby adhering to the stringent criteria contained inthe category of management and technology ofoperations. If this is achieved, it may be assumedthat the shipping company has achieved a highlevel of quality performance.

Technical implementationThe user charge proposed here should generally notbe levied in conjunction with harbour dues. In orderto simplify matters, an annual charge for all the shipson the registers of the participating countries is underconsideration. Only ships from non-participatingcountries will be subject to the levy of a user chargein conjunction with harbour dues. The whole annualcharge may be paid or, if the ship rarely calls at ports,a small fraction of the charge may be paid. Payingsuch a fraction of the charge should preclude the shipfrom paying further charges in the waters of the par-ticipating states for a certain period. Voluntary regis-tration on the participating ship registers may also beconsidered as a way of levying the user charge.

The notion of calculating concessions on ship-related charges rather than on harbour dues leads tomany crucial advantages:• The accounting process would be considerably

simpler if the charge and the entitlement to abonus were determined only once a year by a cen-tral office.

• The ship would benefit from a higher total conces-sion per annum compared to the sum of the indi-vidual concessions gained when calling at each

port as long as there is no prevailing bonus modelthat encompasses all ports. The annual concessionshould be set in such a way as to have an appre-ciable incentive effect.

• The level of savings may be calculated by theshipowner and does not depend on the often ran-dom number of calls at certain ports.

The most expedient solution, therefore, appears to bethe introduction of a user charge which is conditionalupon the characteristics of a ship. Ships which fail tomeet the environmental criteria pay the full charge;the others receive concessions which can amount tothe majority of the charge for exemplary ships. Portstate control should take on the task of fixing theconcession on the basis of their expertise.

Amount and calculation basis of the chargeA ship’s tonnage is one of the bases for calculatingthe base charge. Relating the charge to the volume ofgoods handled does not appear to be feasible as ship-based environmental damage does not depend onwhether or not it is loaded to capacity or on the typeof load being transported. Moreover a measurementin terms of load would not encompass non-cargoships. Measurement by way of gross tonnage alsoraises issues such as the relatively high charge thatwould have to be paid by Ro/Ro ships with theirlarge enclosed interior areas but low deadweight car-rying capacity. It should also be mentioned that thegross measurement of most ships is kept low by thecurrent practice of calculating cubic capacity feeswhich endangers the safety of the ship and the cargo.

The charge should therefore be related to thedeadweight carrying capacity of ships, measured intonnes deadweight (tdw). Charges for tankers andbulk cargo freighters would then be clearly depen-dent upon ship size. Parcel, container and Ro/Roships would pay slightly less in comparison to acharge based on gross tonnage. This type of calcula-tion also contains the first environmental factor:Ships with the highest deadweight carrying capacitieshave the largest draughts which tends to lead to moredredging work. The resulting disposal of dredgingspoil is difficult and causes further natural damage.

Another, more significant environmental factormay be integrated by taking account of the ship’sengine power in kW as ships with larger engines alsocause more environmental impact. Due to the factthat parcel and regular service ships have a relativelylow tdw value but more power than tramp and bulkcargo ships, the lower tdw values will approximatelybe balanced out in the total calculation.As parcel andregular service ships carry more valuable loads at farhigher rates, higher charges for more powerful shipsare acceptable.

29Undesired side-effects 4.5

Gross tonnage would need to be used as an assess-ment basis for non-cargo ships, but might possibly beweighted with a different factor than deadweighttonnage.

The Council initially proposes the simplest way tocalculate the base charge on the basis of the tdw andkW values. The charge will be calculated from thesum of the deadweight tonnage in tdw and enginepower in kW, these being weighted by the charge fac-tors F1 and F2 respectively, both of which are depen-dent upon the intended incentive effect and the totalrevenue targeted:

Base charge [€] = T x F1 + L x F2

Deadweight tonnage T [tdw]Factor F1 [€/tdw]Engine power L [kW]Factor F2 [€/kW]

Table 4.4-2 contains examples of charge calculationson the basis of tdw and kW values for selected shipswith the application of charge factors of € 0.5 and € 1.The charge factors could also be used to treat L andT differently, in order to thereby reflect environmen-tal impacts in a more differentiated manner.

All examples are based on ships which called atGerman ports in 2000 with the exception of the large,high-speed ferry (46,000 kW engine power, speed 29knots) which was running in Rostock for a short time.This large ferry would be subject to around doublethe charge of a ferry of the same size with a conven-

tional speed (20 knots).This would draw attention tothe environmentally dubious trend towards highspeed ships which consume significantly more fueland therefore cause increased CO2 emissions. Thismodel therefore offers an incentive to reduce theCO2 emissions of international ocean shipping,thereby closing the regulatory gap left by the KyotoProtocol.

The Council is of the opinion that a reasonableincentive effect may be achieved with a factor of€ 0.5–1 per tdw or kW. Revenues of around € 360million (at € 0.5 per tdw or kW) or € 720 million (at€ 1 per tdw or kW) would be achieved at a roughestimate under the assumption that each ship con-trolled by a shipowner resident in the EU pays anannual charge to traverse EU waters. The conces-sions for Quality Ships would then have to bededucted from the net amount due (ISL, 2001).Theserevenues would increase accordingly if all OECDstates were to participate.

The OECD would monitor whether the usercharges were levied and paid by the participatingcountries in a legitimate manner in accordance withthe model proposed here.


No real effect on trade flows is anticipated from theCouncil’s proposed charge. With a factor of € 0.5 pertdw or kW, the charge equals a charge per tonne of

Type of vessel Deadweight Engine Charge for Charge fortonnage power F1 = 1 €/tdw F1 = 0,5 €/tdw

F2 = 1 €/kW F2 = 0,5 €/kW

[tdw] [kW] [€] [€]

Coaster 1,230 625 1,855 928Multi-purpose freighter 4,900 3,960 8,860 4,430Container 7,946 6,600 14,546 7,273Container 44,966 18,757 63,723 31,862Container 104,969 54,840 159,809 79,905Vehicle transporter 21,505 14,314 35,819 15,910Ro/Ro freighter 7,440 11,030 18,470 9,235Bulker 6,258 2,795 9,053 4,527Bulker 17,162 6,840 24,002 12,001Bulker 37,448 6,620 44,068 22,034Bulker 71,747 7,834 79,581 39,791Tanker 801 441 1,242 621Tanker 13,050 4,200 17,250 8,625Tanker 32,250 8,340 40,590 20,295Tanker 99,122 14,050 113,172 56,586Tanker 159,719 13,440 173,159 86,580Ferry 631 3,820 4,451 2,226Ferry 6,538 18,000 24,538 12,269Ferry 6,900 46,000 52,900 26,450Catamaran 36 3,676 3,712 1,856Passenger cruise ship 5,500 15,400 20,900 10,450

Table 4.4-2Examples of annual usercharges for different types ofships.Source: modified after ISL,2001


€ 0.04–0.06 (factor 1 € per tdw or kW: € 0.08–0.12) forshort sea traffic, € 0.08–0.14 (factor 1 € per tdw or kW:€ 0.16–0.28) for medium-sized ships including largecontainer ships and up to € 0.20 (factor 1 € per tdw orkW: € 0.40) for large tankers.

The maximum charge of € 0.20 or € 0.40 wouldapply to a tonne of crude oil at a value of around€ 100.A tonne of coal or grain in a Handymax bulkerwould be subject to a charge of around € 0.08 or€ 0.16 with a complete container or trailer beingcharged € 0.60–1 or € 1.20–2.0.A tonne of cellulose inBaltic Sea trade would incur around € 0.04 or € 0.08.In total the Council’s proposed charge equates to0.4–4.0% of turnover (factor 1: 0.8–8%). This per-centage is practically negligible compared to the fluc-tuations in charter rates (ISL, 2001).

No negative effects on exports by developingcountries are expected. Slight disadvantages may beexperienced if old ships are used which are harmfulto the environment and are subject to the full charge.In view of the comparatively slight effect of the pro-posed charge on charter rates, no drop in shippingrevenues is expected. It is therefore assumed thatthere will be no negative effects on the labour mar-ket. Due to the low charge per tonne of cargo, tradeflows are not anticipated to shift to the roads.This hasbeen demonstrated by past experience with increasesin freight rates. Such a shift is often impossible forpurely technical reasons (ISL, 2001).

The fundamental assumption is that the burdenimposed by the user charge will only have a minimaleffect on rates and the shipowners may pass on thecost of the relevant discounted charge to the for-warders or the recipients of the cargo.The charge willtherefore be at least partly borne by the consumer.Nonetheless, the levy rates graded according to envi-ronmental criteria will result in competitive advan-tages for shipowners with environmentally soundfleets which should trigger an incentive to modernizeolder fleets more quickly (ISL, 2001).

4.6Use of funds

Levying a charge, as proposed here, which is gradedin accordance with environmental criteria, estab-lishes a direct relationship between the use of theoceans and the charge to be paid. The catalogue ofcriteria presented offers shipowners various oppor-tunities to achieve a reduction in the charge, all ofwhich serve to improve quality although the easewith which these may be achieved will differ depend-ing on the type, size and age of the ship. Grading thecharges according to the environmental impact ofships provides an incentive to modernize shipping

which will lead to a reduction in ship-based environ-mental damage. However it is assumed that theincentive effect of levying this charge will not be suf-ficient to reduce pollution from shipping to an envi-ronmentally acceptable level. Even those ships whichlargely fulfil the criteria of the catalogue presentedwill still have an adverse effect on the environmentwhich, in conjunction with land-based emissions, willcontinue to endanger the marine environment. Thisis where the fiscal function of user charges comesinto play. The revenues from the charge are to beearmarked to protect the marine environment as aglobal common good.

After the introduction of the charge, two possibil-ities for deploying the funds should be considered.First and foremost financial support should be pro-vided to shipyards and shipping companies to adaptto more environmentally sound standards. Secondly,the funds should be deployed to restore some of themarine environment impaired by shipping.

4.6.1Use of funds to provide financial support for theapplication of more environmentally soundtechnologies?

In principle, the modernization of the world tradingfleet could be accelerated by way of a financial sub-sidy from the user charge revenue.This could serve toreduce shipping-induced environmental impacts.

However there are a number of reasons why therevenues from the charges should not be used to sup-port shipping. Environmentally-intensive activitiesare potentially furthered by the false impression thatthe oceans are available for use ‘free of charge’. Theproposed system of graded charges should providemore information about the use and cost of exploit-ing the oceans for transportation purposes (Klem-mer and Wink, 2001). The Council believes that thecosts for ships, which would enjoy a reduced chargeand also a subsidy to improve their environmentalquality, would no longer correspond to the socialcosts of shipping. Moreover, it hardly seems possiblethat a subsidy system could be developed which takesaccount of all the environmental criteria evaluated inthe proposed catalogue. A one-sided subsidy fortechnical adaptation measures would reduce the sig-nificance of the other environmental criteria con-tained in the catalogue thereby undermining thecareful targeting of the catalogue.

The primary reasons against using these revenuesfor shipping arepractical ones. Much bureaucracywould be involved on the national level with regardto selecting the targets and monitoring the correctpurpose of the funds. On the international level, a

31Use of funds 4.6

new, comprehensive monitoring system would haveto be developed. It is possible that direct aid toshipowners may be regarded a circumvention ofWTO agreements, such as the Agreement on Subsi-dies and Countervailing Measures, or the GeneralAgreement on Trade in Services (GATS). Conflictsmay also arise with European Community law, suchas the general prohibition of subsidies (Art. 87 ECTreaty) (ISL, 2001; BMT, 2000a). Furthermore such ause of funds would lead to freerider effects which dis-criminate against the shipowners who made a timelyeffort to comply with high environmental standards.Consequently the Council is not in favour of usingthe revenues to fund measures on board individualships.

4.6.2Use of funds to remedy damage to the marineenvironment

In order to maintain the connection between thelevying of the charge and the use of funds, the rev-enues from the user charge must be used to protectthe oceans. For the sake of political acceptance thesefunds should be used where possible for the specificpurpose of remedying damage caused by shipping.There are, however, a number of problems associatedwith this objective. Firstly, it will be difficult to local-ize the pollution caused by shipping, in particular inrelation to the diffuse emissions and discharges suchas NOx, VOCs or TBT. Problems will also ariseattributing the cause of individual environmentaldamage directly to shipping due to the fact that shipand land-based pollutants act in combination.

The Council therefore proposes that the purposefor which the funds are earmarked be extended: therevenues should be used to protect the oceans intheir entirety. Besides the obstacles mentionedabove, there are two primary arguments in favour ofusing the funds in such a way to remedy the damagecaused by shipping. Firstly, experiences to date inmarine protection have shown that the oceans, and inparticular the coastal waters, may only be protectedeffectively if all the relevant pollutants are taken intoaccount. This is due to the combined effects of vari-ous environmental influences and the complexity ofthe marine ecosystem. Secondly, the availableresources should be used as efficiently as possible.We should therefore promote those measures whichensure the greatest benefit to the marine environ-ment, regardless of the cause. The Council is there-fore of the opinion that the revenues from the usercharge should be employed mainly in the area ofintegrated coastal management, as the integrated

approach is to be reduced to an environmentallyacceptable level (UNEP, 2001).

On the basis of the fact that the developing andtransition countries lack the resources to developand implement an integrated coastal managementprogramme, the Council considers it justifiable todeploy the available resources primarily in thesecountries.An efficient use of funds is also essential inthis case. It is assumed that the developing and tran-sition countries provide the greatest potential toachieve a comparatively cost-effective reduction ofmarine environmental pollution. However, there arealso political considerations in favour of reducing thenumber of recipients. Firstly it should be mentionedthat developing and transition countries will not bewilling and able to use their limited resources toachieve a reasonable level of marine protection whilean improvement in the situation is already apparentin industrialized countries. However, more impor-tantly, such a deployment of the funds would lend aclear development policy element to the proposedcharge which promises to enhance political enforce-ability at international level.

International structures are available which maybe developed with regard to the administration offunds. At project level the funds should be adminis-tered by the Global Environment Facility (GEF)whose operational programmes already cover thearea of marine environmental protection.The princi-ple of limiting support to the ‘agreed full incrementalcosts’ should be adhered to in this instance. The sub-stantive specifications for allocating the funds shouldbe determined within the framework of the GlobalProgramme of Action for the Protection of theMarine Environment from Land-Based Activities(GPA). The integrated approach of the GPA and theclose collaboration with the UNEP Regional SeasProgramme make the GPA the most suitable forumfor developing the required priorities and politicalstandards. Close coordination with the BiodiversityConvention would also be recommendable. Thereare already marine environmental protection pro-jects currently being supported within the context ofGEF activities.

In the light of the additional responsibilities forport state control, the Council considers that it is nec-essary to use a limited portion of the revenues toexpand the capacity of this institution. Ensuring theenvironmental compatibility of a ship’s structure andoperation requires, besides the adherence to legalrequirements, a number of voluntary measures asdetailed in the catalogue of criteria mentionedabove. A reasonable level of funding is required todevelop port state control into a fully functioningtool. This will ensure that a sufficient number of ade-quately certified inspectors are available in all partic-


ipating countries, a reasonable and uniform level oftraining is achieved resulting in substantiated inspec-tion results, and that the technical equipment permitsworldwide cooperation. In parallel, eligibility of portstate control for financial support may serve as anincentive for countries outside the OECD to partici-pate in the system of user charges.


The Council is of the opinion that the introduction ofa charge on the use of the oceans by shipping is basedon a win-win situation which should facilitate thepolitical enforceability of the proposal. Industrial-ized countries will benefit from the modifications inbehaviour associated with the charge which in themedium term should lead to a significant improve-ment in marine water and air quality in the industri-alized countries themselves and elsewhere. Theindustrialized countries will also obtain funds tostrengthen port state control at the same time. Finallythe user charge may be presented at internationallevel as a sign of a renewed commitment to improv-ing the financing of global sustainability. Developingcountries will also benefit from the incentive effectsin terms of the environment and will in addition gainaccess to new financing resources which may con-tribute considerably to the improvement of themarine environment and therefore also to humanhealth.

Considerations within the EU regarding the intro-duction of an emission levy for shipping indicate thatlevying a charge would be politically enforceable.However we should not underestimate the aversionof the industrialized countries to a restriction of theirfinancial sovereignty by the earmarking of usercharges and their disbursement by internationalorganizations. The discussion regarding an EU-wideintroduction of a CO2 levy shows the difficulty ofimplementing international levies. It is possible thatthe United Nations International Conference onFinancing for Development (UNFfD) will providean opportunity to reduce this resistance because ofits focus on the North-South context.

Resistance from shipowners should be surmount-able in view of the transparency of the system, thelow level of influence on freight rates and the com-petitive advantages for shipowners with modernfleets resulting from the differentiated system. Resis-tance from OPEC states, which benefit from lowcosts in respect of oil transport, should also not standin the way of implementing a user charge thanks tothe deployment of the funds.

4.8Conclusion on charging the use of the oceans byshipping

The Council is of the opinion that levying a charge onthe use of the oceans by shipping will make a consid-erable contribution to the protection of the marineenvironment. Levying an annual user charge gradedaccording to environmental criteria promises to gen-erate an incentive effect which could promote theintroduction of an effective management of the envi-ronment as well as investment in environmentallysound technologies in the shipping sector. Deployingthe revenues from the charge in the area of inte-grated coastal management will contribute in thelong term to an abatement in the pollution of the par-ticularly endangered coastal waters. Especiallyencouraging results are anticipated from concentrat-ing the use of the funds in developing and transitioncountries. Much can be learned from existing inter-national institutions with regard to administering thefunds at project level and developing political speci-fications for their use. Overall, the concept presentedhere of a charge on the use of the oceans by shippingmay make a promising contribution to the UNFfDprocess, with the focus on the North-South contextalso facilitating the political enforceability of theconcept.

5Non utilization obligation payments (NUOPs)

5.1Introduction

In its 2000 annual report, the Council took up theconcept of “compensation for abstaining from usinga resource” – in short: non utilization obligation pay-ments (NUOPs) – as an instrument of global envi-ronmental policy and outlined the more far-reachingidea of a “worldwide system of commitments not touse particular resources” – in short: non utilizationcommitment certificates (NUCCs) (WBGU, 2001b).

The following discussion examines the two con-cepts in greater detail. In contrast to the user chargesdiscussed in the previous sections, the two conceptsdo not provide any direct mechanisms for generating(additional) funding for global sustainability policy.On the contrary – their implementation will requireadditional state funds. Nonetheless, they are in somerespects similar to the concept of user charges, asthey share the ultimate goal of safeguarding the con-servation of environmental resources by establishinga system in which payments are made for their use.

However, unlike user charges for airspace and thehigh seas, instruments based on non utilization oblig-ations cannot be implemented on a global level overthe short to medium term.This is particularly true fora system of NUCCs, which can presumably only berealized with a long-term horizon.

5.2The concept

The emergence of global environmental problems isnot limited to elements of the global commons forwhich the allocation of property rights is absent orentirely inadequate. In contrast to airspace or theoceans, most land and freshwater areas fall clearlyunder the sovereignty of states. These have, as a mat-ter of principle, the sovereign right to fully use theirnational environmental assets and, including theright to destroy them. As soon as a natural resourceyields significant external benefit of global scope, the

destruction of this resource presents a global envi-ronmental problem. One example among many is theloss of forests, which serve as carbon sinks and regu-lators of macroclimate and contribute to the conser-vation of biological diversity. Biodiversity is also anexample of a good that is distributed largely acrossthe sovereign territories of states, but whose exis-tence and conservation has benefits for the whole ofhumanity and thus has global value.As such environ-mental resources fall under the sovereignty of indi-vidual states and do not ‘belong’ to the global com-munity, they are not counted as global commongoods in the narrower sense. That their conservationmust nonetheless be a “common concern of human-kind”, as the Convention on Biological Diversity(CBD) formulates it for the conservation of biodi-versity, stems from the high global value of such envi-ronmental resources (Biermann, 1996). It must besaid, though, that the boundaries between globalcommon goods in the narrower sense and national-level goods of global value are fluid.

In the case of ecologically highly sensitive and par-ticularly valuable resources of global concern thatare located in national lands and waters, the Councilargues for priority of nature conservation over allother interests (WBGU, 2001a). From a perspectiveof global ecology, it is advisable – at least in the caseof such “landscape-use type N” (WBGU, 2001a) – toabstain from a degrading use of national land orwater areas.

However, it is a fundamental problem that thecosts of non utilization (more precisely: of abstainingfrom degrading types of utilization) are incurredlocally and would be borne predominantly by thehost country, while all states would benefit from con-serving the resource. The costs of abstaining fromdestructive local forms of utilization include on theone hand the costs of safeguarding non-degradingutilization, and on the other hand the opportunitycosts such as the foregone income from forest clear-ance and subsequent agricultural utilization.The hostcountry thus has less interest in conserving theresource than the rest of the international commu-nity (Suplie, 1996).

34 5 Non utilization obligation payments (NUOPs)

The geographic distribution of these environmen-tal goods is often highly uneven. As a consequence,the (opportunity) costs of conserving the goodswould also be distributed very unevenly. This is par-ticularly apparent in the case of tropical forests andbiological diversity in general. The greater part ofthese resources is located in ‘hotspots’ in developingcountries (Myers et al., 2000). Many developingcountries have economies highly dependent uponthe unrestricted use of natural resources and are nei-ther willing nor able to bear the costs of non utiliza-tion desirable from the perspective of the globalenvironment (Swanson, 1997).

This is the starting point for the concept of non uti-lization obligation payments (NUOPs) in the nar-rower sense, which are also termed compensationpayments.

Compensation paymentsIn order to motivate developing countries, in particu-lar, to engage in non utilization to the globallydesired degree, international compensation pay-ments are made in return for their abstaining from adegrading local utilization. The international com-munity, which benefits the conservation of aresource, because it at least indirectly exploits itsexistence or global systems control function (exis-tence value and functional value; WBGU, 2001a),makes a payment in return for this.The resultant rev-enue is used to give the host countries incentives tosafeguard the conservation of the resource and itsfunctions.

The level of the compensation payment corre-sponds in the ideal case – under simplified assump-tions – both to the benefit that those countries mak-ing the payment derive from the non-occurrence ofresource degradation and also to the net costs of nonutilization incurred by the host country (monitoringand opportunity costs of abstaining from degradinglocal utilization less the host country’s own benefitfrom resource conservation). In other words: If thecompensation payment is marginally higher than thenet costs of non utilization incurred by the host coun-try, then the host country has an incentive to enterinto the NUOP contract.

If the compensation payment is marginally lowerthan the level of the benefits derived by the potentialpayers through conservation of the resource or mar-ginally lower than the level of damage which thepotential payers would suffer as a result of degrada-tion of the resource, then a NUOP contract is worth-while for them.

NUOPs can be implemented by various groups ofactors. Potential payers can be a state, a group ofstates, the international community or also privateorganizations (e.g. foundations, environmental

NGOs). Potential recipients are in the first instancethe host states, but also private entities in these coun-tries if the property rights to an environmentalresource are assigned to them.

In connection with compensation payments, theCouncil wishes to stress that it does not take ‘non uti-lization’ to mean an abstention from every kind ofutilization. First, even in the case of total protectionof a natural good of global value, the purpose is pre-cisely to be able to continue to use the good globally,in the sense of participating in the benefit derivedfrom conservation of the resource. In other words:The payment is made for the use of the functionalvalue and existence value of an ecologically intactresource. Second, this does not exclude the possibil-ity that certain local forms of utilization continue, sothat ‘non utilization’ means above all abstentionfrom degrading local forms of utilization.

A fundamental aspect of NUOPs is thus that theapproach can be applied to individual forms of localutilization. For example, non utilization can refer tonon-clearcutting a specific forest area while leavingother – sustainable – forms of utilizing the same areaunaffected. NUOPs therefore are consistent with theecosystem approach of the Biodiversity Convention(CBD, 2000), which integrates the conservation andsustainable use of biological diversity. It would thusbe more accurate to speak of ‘payments for obliga-tions to abstain from unsustainable types of utiliza-tion’ instead of ‘payments for non utilization obliga-tions’. However, the following discussion uses theshorter, latter form due to the unwieldiness of theformer.

Implementing NUOPsNUOPs can be implemented by various mechanisms(WBGU, 2001b). The most obvious avenue isthrough negotiations on concrete non utilization pro-jects between the relevant players, i.e. those partiesinterested in the conservation of the resource on theone side and the owners on the other (in a fashionsimilar to bilateral tropical forest conservation pro-grammes, debt for nature swaps and similarschemes).

A more far-reaching variant would be the attemptto institutionalize a market or a clearinghouse for thepurchase of non utilization obligations. In this mar-ket, governmental and private owners of resourceswould offer a supply of non utilization obligations.Those parties interested in conserving the resourceswould constitute the demand. The advantage of thisapproach as compared to case-by-case negotiationsis that the level of payments would be determined bycompetitive processes. In an ideal case, resourceswould always be conserved where the costs of nonutilization are lowest. However, the problem with

35The concept 5.2

this variant is that it presupposes a sufficiently highlevel of supply and, above all, a sufficiently high levelof demand. Moreover, the resources on offer for nonutilization must be comparable, i.e. largely homoge-neous. If these two preconditions are not met, this‘market’ in non utilization obligations ultimatelydoes not differ from ‘conventional’ internationalnegotiation mechanisms.

Market in non utilization units(TCC approach)In order to improve the supply and comparability ofthe rights traded, use could be made of the concept of‘tradable conservation credits’ (TCCs). TCCs areunder discussion primarily for the conservation ofsoil and biological diversity in the tropics (Panay-otou, 1996; McNeely, 1999; Plän, 1999). In highly sim-plified terms, the system operates as follows:A (trop-ical) host country splits up into individual plots theconservation area potentially available for non uti-lization (or, more accurately, for sustainable use) andprovides information on the type and state of theplots and on the species occurring in each plot. Thisprovides the potential demand side of the marketwith an overview of the available supply of non uti-lization units that could otherwise only be obtainedthrough wearisome bilateral negotiations and atgreat cost. If it were possible to develop internationalstandards for the selection of conservation areas suit-able for TCCs – for instance based upon experiencewith criteria for designating internationally recog-nized protected areas (e.g. IUCN, Ramsar Conven-tion, World Heritage Convention; WBGU, 2001a) –this would facilitate the applicability of NUOPs atthe international level and would support the emer-gence of a market in non utilization units. For onething, it would bolster supply; for another, theimproved transparency would have the effect ofstimulating demand owing to the reduced transac-tion costs.

In order to integrate further demand-promotingeffects into the concept of creating a market in TCCs,it has occasionally been proposed that industrializedcountries give domestic companies the opportunityto purchase TCCs in lieu of a part of their local envi-ronmental and nature conservation obligations. Thiswould raise awareness of global interrelationshipsand enhance economic efficiency. If implemented,the opportunity for companies to exploit such com-pensation measures in their advertising would evencreate an incentive for these companies to becomeinvolved in the mechanism.

A system of tradable non utilizationcommitment certificatesThis leads us to a third option for implementingNUOP arrangements, which the Council terms trad-able NUCCs (WBGU, 2001b). The initial function ofNUCCs is above all to generate demand for non uti-lization obligations. The approach can be outlinedusing the example of tropical forests: A preconditionis that as many states as possible – ideally all, but atleast a large group – undertake to ensure that a cer-tain amount of tropical forest area is not utilizeddestructively. The second step is to distribute thisundertaking among the individual countries. Statesthat have a ‘surplus’ of tropical forest for non utiliza-tion on their own sovereign territory can conse-quently sell NUCCs to those countries that have noor too little unused tropical forest. From an economicperspective, the attractiveness of the tradableNUCCs approach lies, as with tradable emissionspermits, in a high level of efficiency. Moreover, thisapproach would create an automatic financing mech-anism for the conservation of environmental goodsof global value.

Once again, however, there is the problem that theresource would need to be relatively homogeneousso that tradable non utilization units can be created.Finally, the tradable NUCCs approach presupposesthat the international community can resolve toundertake these commitments and that they are alsocomplied with. The initial distribution of the certifi-cates is crucial. Consideration would need to be givennot only to the proportionate benefit derived by acountry from the conservation of the global environ-mental resource, but also to that country’s economiccapacity and physiographic endowments. Poorercountries whose territories harbour no areas forwhich NUCCs can be undertaken can hardly beexpected to deploy their scarce financial resources topurchase NUCCs.

Whether NUOPs can contribute to conservingenvironmental goods of global value depends upon arange of conditions. The key preconditions includesufficient demand for non utilization obligations (i.e.willingness and ability to pay), unequivocallyresolved use rights with respect to the resources andadequate means of monitoring and enforcement.Regardless of whether NUOPs are actually suitableand feasible, an international debate on them wouldhave the positive effect of making it clear that theconservation of goods of global value by host coun-tries cannot be taken for granted, but involves coststo which all states should contribute, because, afterall, they all derive benefit from the conservation ofthese goods. The necessity to monetarize the benefitmay contribute to making apparent the existencevalue and functional value of these goods (WBGU,


1999), thereby enhancing the incentive and willing-ness to conserve the resources in both North andSouth.

5.3Existing similar mechanisms

Mechanisms similar to NUOPs are known mainlyfrom the local or national level. Examples – albeitless motivated by environmental policy considera-tions – include the land set-aside payments made bythe European Union, the ‘water penny’ (Wasserpfen-nig) of the German regional state of Baden-Würt-temberg, urban planning approaches in the USA(Tradable Development Rights; Panayotou, 1995)and various instruments for forest and coastal con-servation in Costa Rica. In Costa Rica, TradableReforestation Tax Credits for primary forest conser-vation were initially issued; after a trial phase, thesewere followed by a system of Certified TradableEmission Offsets (CTO) (Panayotou, 1998; Castro etal., 2000).

A number of mechanisms similar to NUOPs canbe found at the bilateral level.These include debt fornature swaps, development cooperation projects ortransboundary regional cooperation schemes. Inthese arrangements, one state makes paymentsexplicitly or implicitly to neighbouring states for cer-tain environmental protection services. However, allthese mechanisms are only sporadic. They are inade-quate for ensuring the enforcement of an appreciableand lasting non utilization of an environmental goodof global value (Didia, 2001). Moreover, theseschemes are often environmental protection projectsof limited duration, at the end of which further con-servation is not guaranteed. However, precisely theaspect of long-term protection is of great importancein connection with global environmental resources.

At the global level, no NUOP schemes are yet inplace. However, there are moves to extend nationalpilot projects to the international level. Moreover,there are a number of mechanisms into whichNUOPs could be integrated, at least theoretically,and institutions that may provide starting points fordesigning a mechanism for implementing NUOPs.These include some aspects of the Convention onBiological Diversity (CBD), the Global Environ-ment Facility (GEF) and the Kyoto mechanisms inparticular.

The CBD provides an international arena inwhich an ‘international ecological network’ (Bennettand Wit, 2001) could be established. NUOPs couldpossibly be integrated, as a financing mechanism,into such a network. The Subsidiary Body on Scien-tific, Technical and Technological Advice (SBSTTA)

of the CBD has already elaborated recommenda-tions – focussing specifically on forest biodiversity –for the establishment of protected area networks(CBD, 2001). The strategic decision in favour of an‘international ecological network’ is already beingcalled for in various quarters and may be taken bythe CBD COP-6 in April 2002. This would also pro-vide an opportunity to put NUOPs – and, if appro-priate, the concept of NUCCs – on the agenda and toexamine to what extent these instruments could beoperationalized through the GEF, which is thefinancing mechanism of the CBD.

In addition to biodiversity conservation projects,GEF funds are also used to finance other environ-mental projects, e.g. in the fields of climate protectionand ozone layer protection (Klemm, 1998).The GEFand similar funds are concerned above all with the‘agreed full incremental costs’ (Biermann, 1997), inwhich, at least in theory, the opportunity cost con-cept, which characterizes NUOPs in the narrowersense, is already of importance. However, givinggreater weight to opportunity costs within the con-cept of ‘agreed full incremental costs’ is hampered bysubstantial practical difficulties in identifying, demar-cating and monetarizing the opportunity costs, aswell as by the scarcity of funds (Plän, 1999).

For the concept of NUCCs set out above, itappears expedient at first sight to consider the flexi-ble instruments under the Kyoto Protocol (CDM,emissions trading) as a mechanism that might pro-vide a number of starting points for the design andoperationalization of a worldwide system of non uti-lization obligations. In principle, the difficulties inpractical implementation set out above are also to beexpected for the Kyoto Protocol’s flexible mecha-nisms. However, it needs to be kept in mind that aworldwide system of non utilization obligations doesnot establish international trade in emissions andthus use rights that might, at least theoretically, beput on offer by every country or from whose pur-chase each country can abstain. The concept ratheraims to establish international trade in non utiliza-tion units that can only be put on offer by host coun-tries. Non-host countries would accordingly beforced to procure tradable non utilization units. Ingeneral, (future) experience with the flexible Kyotoinstruments can be expected to be helpful in imple-menting a worldwide system of non utilization oblig-ations, but the transferability of the Kyoto mecha-nisms is limited.

Finally, experience gained with instruments simi-lar to TCCs that are currently being trialled in a num-ber of countries (e.g. Costa Rica, Mexico) wouldneed to be evaluated. These can be expected to pro-vide, in particular, an understanding of the technicalfeasibility of creating a market in non utilization

37Preconditions for the application of NUOPs 5.4

units (Castro et al., 2000). If, in the field of biologicaldiversity, the vision of an ‘international ecologicalnetwork’ is to be realized, NUCCs represent anoption worth considering.

5.4Preconditions for the application of NUOPs

For the NUOP approach to be applied, at least fivecriteria must be met:1. The abstention from commercial utilization of the

resource, or its conservation by means of non-degrading utilization, generates significant trans-boundary benefit.

2. The parties entitled to use the resource (state,owner or association of owners) and thus thepotential negotiating partners and recipients ofpayments are known.

3. Monitoring of compliance with non utilization (orsustainable use) is possible at reasonable expense.

4. Non-degrading utilization is clearly definable.5. The parties entitled to use the resource locally are

capable of enforcing their right of use vis-à-visthird parties.

The first and second criteria illustrate that NUOPsinitially only enter into consideration for ‘non-real’global commons for which the property or use rightsare clearly defined and whose degradation generatestransboundary negative effects. Nonetheless, there isa connection between such national-level resourcesof global value and global common goods. The con-servation of an environmental good of global valuecan contribute indirectly to conserving a ‘real’ globalcommon good. This once again is apparent with ref-erence to the example of tropical forest conservation:Non-degradation of forest areas contributes to,among other things, the protection of the Earth’s cli-mate, a component of the global commons.

Besides the special case of forest conservation, it isabove all biodiversity conservation in general that isunder discussion as a potential field of application forNUOPs. Here, interest is focused on the designationof protected areas, as this is most likely to meet thethird criterion in addition to the first two.

The fourth criterion can most simply be met if thestatus quo is to be preserved through total non uti-lization, as this condition is particularly easy to define(e.g. IUCN protected area categories I-III; McNeelyet al., 1994). In the field of biological diversity it isnecessary to combine the conservation and sustain-able use of ecosystems and to distinguish these fromdegrading utilization, so that the scope of applicationof NUOPs need not be limited to ‘strict total protec-tion’. However, ecosystem conservation by means ofNUOPs will scarcely be compatible with those forms

of extractive use of biological resources (logging,grazing, hunting etc.) that trigger changes in ecosys-tem structure and function and thus in biologicaldiversity.

As financing by means of NUOPs is most suitablefor areas in which nature conservation has priority,this is not a ‘universal’ tool. Indeed, care needs to betaken that the application of this specific instrumentis embedded in an overarching strategy (a system ofdifferentiated intensities of use; WBGU, 2001a). Inecosystem management, the entire spectrum fromtotal protection through to ‘artificial’ ecosystems(e.g. intensively used agro-ecosystems) must beviewed from an integrated perspective and accord-ingly other instruments would need to continue to betaken into consideration (WBGU, 2001a).

To what extent the fifth criterion is met dependsabove all upon the structures for enforcing propertyand use rights. Contracts with the owner (the state orother parties) on the designation of a tropical forestconservation area make little sense if, for instance,the owner is unable to effectively prevent fire clear-ing by others. NUOPs for nature reserves that them-selves are damaged by negative spillovers (e.g. water-course pollution, acid rain) also appear dubious.

Contracts with private owners are more suscepti-ble to these problems than contracts obliging statesto commit themselves to non utilization, as states aremore likely to be in a position to remedy such effects.

Potential areas in which to apply NUCCs mustalso meet the above criteria. The range of resourcesentering into consideration will likely be substan-tially narrower than for NUOPs because, firstly, amultilateral non utilization obligation needs to beentered into. Secondly, the resources need to be com-parable (cf. the discussion of a market in non utiliza-tion obligations). For instance, it will not suffice foreach country to give a certain overall quantity of landprotected status and then to meet this obligation bypaying another country for not using the same quan-tity of land. Mudflats, deserts and rainforests are notinterchangeable. It will be very difficult to defineconversion factors. Consequently, NUCCs wouldonly enter into consideration for comparatively fewenvironmental resources, namely those for whichTCCs or similar schemes can in principle be stan-dardized at the international level.

All in all, NUOPs,TCCs and NUCCs appear mostreadily implementable for the conservation of thoseland and freshwater areas whose ecological functionnecessitates largely total protection (IUCN Cate-gories I-III or WBGU Category N; WBGU, 2001a).Consequently, pilot projects in this field appearadvisable. This is not to say that the approach shouldremain restricted to payments for abstaining from allkinds of local utilization. On the contrary, certain


forms of utilization that are in harmony with the eco-logical conservation of the resource can be explicitlypermitted (positive limiting list within the context ofan ecosystem approach). However, it is essential thatthe permitted utilization options are narrowlydefined and not too numerous. For ecological rea-sons in particular, the Council is sceptical about pro-posals which provide for international compensationpayments if specific forms of utilization are abstainedfrom, as would be the case with a worldwide systemof ‘transferable development rights’ (Panayotou,1998). With such a negative list approach it wouldnever be possible entirely to preclude the risk ofdegrading utilization.

5.5Aspects of operationalization

5.5.1Modalities

First of all, a time horizon needs to be defined overwhich non utilization is to be agreed. From an eco-logical, preventive perspective, a period that is aslong as possible – possibly unlimited – is generallydesirable. If non utilization should prove to be coun-terproductive or unnecessary due to new informa-tion or developments, then the contract can be termi-nated or the non utilization obligations bought back.On the other hand, the aspect of political enforce-ability of non utilization in the country of the recipi-ent of the payments speaks against a very long oblig-ation period, as do uncertainties concerning thefuture value of non utilization and thus the ‘proper’level of the payments.

It further needs to be decided whether one-offpayments for non utilization are to be made or, alter-natively, recurrent, conditional payments. In mostcases, recurrent payments (analogous to leasing) willbe preferable because, in the absence of effectiveinternational enforcement mechanisms, there wouldotherwise be a comparatively great incentive tobreach the contract (cf. on leasing in the environ-mental sphere Oberndörfer, 1989; Swanson, 1995;Richards, 2000).

One-off payments and theoretically infinite nonutilization are ultimately only conceivable in the caseof the purchase of, for example, land areas, and pre-suppose, in turn, a stable, functioning state governedby the rule of law in order to enforce the propertyand use rights. However, strictly speaking, the pur-chase of ‘resources of global value’ by the interna-tional community (or by foreign private-sector enti-ties) for the purpose of conservation does not fall

under the NUOPs approach. In the NUOP approachno property rights are transferred, but use rights are‘leased’. Moreover, the purchase of areas by otherstates or private entities would encounter politicaland legal limits. For NUOPs proper, finite periods ofabout 10–30 years are conceivable and recurrentannual payments expedient, the payments roughlymatching the annual costs of non utilization (moni-toring and opportunity costs). Largely the same con-siderations apply to tradable NUCCs.

5.5.2Financing sources

NUOPs can be agreed upon bilaterally between pay-ers and recipients, and financed accordingly. Depend-ing upon the type of payer (state or private-sector/NGO entity), the payment comes out of thegeneral state budget or from donations. Dependingupon the form of fiscal law and the law of founda-tions, the general public bears a part of the costs ofpayment even in the case of private-sector contracts.In principle, financing for bilateral NUOPs wouldscarcely differ from that of ongoing resource conser-vation programmes operated by environmental orga-nizations or development cooperation agencies,including debt for nature swaps. Less obvious simi-larities can also be seen with the CDM under theKyoto Protocol, particularly if private-sector entitiescould partially ‘exempt’ themselves from specificlocal nature conservation obligations by purchasingnon utilization obligations from developing coun-tries. With regard to multilateral approaches, it needsto be resolved who contributes how much finance. Inprinciple, the same issues arise as for the GEF andother international environmental funds.

Financing through voluntary contributions notbound by any specific set of rules is the most readilyenforceable approach, but provokes freerider behav-iour among payers and thus leads to a deteriorationin payer honesty (global commons dilemma). More-over, such an approach creates planning uncertainty,which would greatly impede the very long-term con-servation of environmental resources of global value.On the other hand, binding payment commitmentsare harder to enforce, as they necessitate permanentexpenditure commitments by payers that can beexpected to encounter political resistance. Finally,paying states need to agree on an allocation formula.Under the benefit principle, all states would have toparticipate in financing NUOPs in accordance withthe benefit that they derive from the conservation ofthe resource. However, this approach founders uponthe circumstance that the specific benefit cannot beidentified and quantified, particularly as each coun-

39Aspects of operationalization 5.5

try has an interest in concealing its benefit anddeclaring it to be very small in order to make its con-tributions as small as possible. Population numberscould therefore be taken as a proxy allocation for-mula. However, both the benefit principle and – quiteparticularly – this proxy indicator would run counterto development policy goals, as developing countriesnot endowed with the resource in question wouldhave to contribute to financing to a degree similar tothat of industrialized countries or would even have tomake higher payments.

The ability-to-pay principle suggests the participa-tion of states according to their economic perfor-mance (e.g. the UN financing formula). As it can beassumed that the monetary benefit derived fromenvironmental conservation tends to rise in step withincome, this principle would also partially do justiceto the benefit principle. Moreover, it is argued for thefield of tropical forest conservation that its conserva-tion contributes to protecting the Earth’s atmos-phere, which is under pressure from impacts causedmainly by the industrialized countries. An allocationformula based upon the economic performance ofcountries thus would indirectly also do justice to thepolluter-pays principle.

In the case of tradable non utilization units andwith a more far-reaching system of NUCCs, financingwould be up to the individual states. No allocationformula for financing would be necessary. However,in a system of NUCCs, the allocation of certificatesamong the countries is crucial in determining theextent to which individual countries are required tocontribute to financing. If the system obliges all coun-tries to ensure non utilization of certain quantities ofa resource within their own territory or abroad, it isnot impossible that – depending upon the resource –a developing country will become a net payer and/oran industrialized country will become a net recipient.It therefore appears advisable to exempt from thecommitment poorer developing countries that arenot endowed with the resource to be conserved and,if appropriate, to exclude industrialized countriesfrom the group of recipients. Besides the ability-to-pay principle as a distributional criterion, in the fieldof biosphere conservation the area of a countrywould enter into consideration as a supplementarybasis of assessment.

5.5.3Level of payments (financing requirement)

It is scarcely possible to make statements in advanceon the level of the compensation payments to bemade for a specific field of application. For one thing,there are major problems in identifying the benefits

and costs of non utilization, be it due to general infor-mation deficits and/or as a result of asymmetricallydistributed information among the negotiating par-ties.Attempts to monetarize the costs and benefits oftropical forest conservation illustrate that the level ofpayments considered necessary depends very greatlyupon the underlying assumptions with respect totime horizons and the discount rates chosen (Diehl,1993; Costanza et al., 1997; Plän, 1999; Cremen et al.,2000; Pimm et al., 2001). Nevertheless, these esti-mates do show that the sums will be in the region ofthousands of millions of Euros.

The level of payment – in other words the price ofa non utilization obligation – ultimately dependsupon whether non utilization obligations are trad-able and how high the demand for them is.While with‘traditional’ NUOPs the price is determined throughbilateral negotiations and information costs are rela-tively high, in the case of tradable non utilizationunits pricing is left to the market. Under the systemof NUCCs, the agreed overall quantity of units to beconserved critically determines the level of demandand thus the price.

5.5.4Recipients of payment and use of funds

It is normally assumed that the recipients of interna-tional NUOPs are the host states and that compensa-tion payments are ultimately made to governments.On the other hand, if the use rights to the non utilizedresource are allocated within the host country toother levels (e.g. local authorities, private-sector enti-ties), then it is in principle conceivable that these maybe the recipients of payment. However, private own-ership of resources does not necessarily imply thatthe private owners must receive the paymentdirectly. Thus, a host country that enters into non uti-lization obligations can provide compensation to theprivate-sector owner or can take coercive measures.Equally, depending upon the statutory situation, thestate can prevent private-sector entities from enter-ing into NUOP arrangements directly. Because theconcept of NUOPs should not be overburdened inintergovernmental debate by the specific problemsof the inner-state distribution of property and userights and since, moreover, the recipient state is bet-ter able than private-sector entities to ensure effec-tiveness, it is advisable to proceed initially with thestate as negotiating partner or market partner andrecipient of the payments. Such an approach neednot exclude per se a conditionality of the use offunds, such as the requirement that they be chan-nelled to those economic units that effectively bearthe opportunity costs of non utilization .


The original concept of international compensa-tion payments makes no explicit provision for condi-tions upon the way funds are deployed. However,there are good reasons for introducing conditionalityfor a large part of the payments (Plän, 1999).This canprevent abuse of the instrument by elites (Section5.6) and can enhance the acceptance of the instru-ment among the population in both the payer andrecipient countries (Section 5.7). Moreover, soildegradation in particular is poverty-induced in manyinstances. Abstaining from degrading utilization can,in specific cases, impact upon the economic liveli-hoods of the poorest, so that it is essential to deployfunds to their benefit.

5.5.5Conclusion

The considerations set out above illustrate that themost varied preconditions need to be met before theNUOPs approach can be operationalized on abroader scale at the global level.These preconditionsinclude:– Removing information deficits and asymmetries

relating to the costs and benefits of non utilization,– standardizing reasonably homogeneous non uti-

lization units,– developing ‘specimen contracts’ (thus reducing

transaction costs),– defining non utilization or non-permitted forms of

utilization, and– ensuring effective monitoring and penalties.In summary, NUOPs – and NUCCs in particular –will best be operationalizable for those ecosystemareas for which largely total protection is the aim, orfor which there is a clear positive limiting list that setsout permitted, sustainable forms of use and prohibitsall other, degrading uses.

Although a need for research on many aspectsremains, the Council nonetheless recommends exam-ining to what extent a framework might already existnow, notably in the shape of the Biodiversity Con-vention, within which the concept of NUOPs orNUCCs may be operationalizable.The strategic deci-sion to establish an international ecological network– which may already be taken at CBD COP-6 –would be a possible first step. A declaration by theWSSD in favour of such a worldwide system, alreadyproposed by the Council elsewhere (WBGU, 2001b),would be a further important step. NUOPs andNUCCs could be considered as elements of thefinancing of such a network. The GEF, in its capacityas the financing mechanism of the Biodiversity Con-vention, would have the role of implementing theseinstruments.


NUOP instruments harbour the risk of freerider andsubstitution effects in the host countries.With regardto freerider effects NUOPs create incentives to des-ignate areas for conservation that would anyway nothave been used degradingly, substitution effectsinvolve an intensified utilization of unprotectedareas. This ‘perverse’ substitution effect may even beexacerbated by ‘successful’ NUOPs, as these lead toscarcity and price increases of the products for whoseproduction the resource is degraded. Rising prices, inturn, create an incentive to intensify production onthose areas that are not officially protected.

Moreover, the risk of ‘moral hazard’ must cer-tainly not be underestimated: NUOPs can create anincentive for host countries to contribute intention-ally to the destruction of ecological resources inorder to qualify as NUOP recipients. However, themoral hazard problem could be mitigated greatly bymeans of a global system of conservation commit-ments in which (tradable) NUOPs are embedded.Assoon as the resource has been inventoried and, aboveall, as soon as the commitments have been allocatedin binding form, the above behaviour is no longerworthwhile.

Moreover, compensation payments have in com-mon with other international transfers for environ-mental protection the danger that states and sectionsof the population develop an attitude in which con-servation is viewed primarily in exchange for inter-national funding (recipient mentality), which weak-ens their own responsibility for the conservation ofthe ecosphere. In the extreme case, NUOPs create asituation in which natural resources are only con-served if international compensation payments aremade in exchange.This danger is smaller in a non uti-lization obligation system than in ‘ordinary’ compen-sation payment systems. This is because every coun-try participating in the system and endowed with therelevant resource must initially undertake a commit-ment to ensure the conservation of at least a certainquantity of the resource in question without receiv-ing any payment for this undertaking.

The undesired side-effects of NUOPs furtherinclude the risk of their abuse by the elites in the hostcountries for their own advantage. If the behaviour ofthe government is not geared to the greatest benefitof the economy as a whole, but to the interests ofindividuals, then there is an increasing risk thatNUOPs will become an impediment to development.This potentially perverse effect speaks in favour ofconditionality on the use of funds as well as involve-ment of the local population.

41Conclusion on non utilization obligation payments (NUOPs) 5.8

Finally, it is necessary to examine the internationaldistributional effects generated by a global NUOPsystem. NUOPs imply a redistribution of financialresources from the ‘North’ to those developing coun-tries that are rich in resources of global value.Withinthe context of scarce financial resources for interna-tional environment and development policy, it mustbe expected that this will be at the expense of lessresource-rich developing countries. These, however,are frequently precisely the poorest developingcountries (Myers et al., 2000). The redistributiveeffects of NUOPs and similar mechanisms can thusquite well run counter to development policy objec-tives, such as that of commensurability with specificneeds.


The political acceptance of NUOP instruments canbe expected to be greatest in the industrialized coun-tries (the payer states) in cases where the resourcesin question are those whose global benefit is readilyappreciable and for whose conservation there is ahigh degree of sensitivity, such as tropical rainforestsor individual animal and plant species. However, theconcept of opportunity costs is difficult to communi-cate to the public, so that there might be resistance ifthe recipient states were rewarded for ‘doing noth-ing’. Consequently, acceptance could be enhanced bymaking the use of funds subject to conditionality andby spending the funds at least partly on projectsworthwhile in terms of environmental and develop-ment policy. This would have the further effect ofreducing pressures on official development coopera-tion. However, this effect stands and falls with theassumption that the political enforceability of a bud-get item titled ‘global environmental protection’ isgreater than that of an attempt – at present scarcelyfeasible in Germany – to increase the budget item forstate development cooperation activities.

On the part of the South, which will be rewardedby payments for its provision of natural goods ofglobal value, acceptance will be far greater. However,it should not be underestimated that NUOPs have, atfirst sight, an aspect of charity, against which resis-tance may quite well emerge. Moreover, they mayheighten the economic dependence of economicallypoorer countries upon more wealthy countries.Above all, however, NUOPs may be viewed as anassault on the sovereignty of countries and as anattempt to transform them into the ‘nature conserva-tion park of the North’. Finally, those who sufferincome loss by abstaining from locally degradinguses or whose future sources of income are blocked

can be expected to argue against NUOPs. Not leastfor this reason, it would make sense to require thatthe funds are channelled to the (potentially) dam-aged parties or into development projects that bene-fit them. Above all, though, those immediatelyaffected – such as local communities, includingindigenous peoples – need to be involved intensivelyin the development and implementation of the con-cept (participation principle).

5.8Conclusion on non utilization obligation payments(NUOPs)

On the one hand, NUOPs differ from global usercharges in that they are not a financing instrument inthe narrower sense. Rather, they are a vehicle for val-orizing a limited set of (national-level) goods ofglobal value. On the other hand, it is precisely for thisreason that NUOPs are related to the concept of usercharges: The payments that must be made can beviewed as a charge for using or deriving benefit fromthe conservation of an environmental resource.

Moreover, NUOPs can be utilized to generateadditional funds for development cooperation if pri-vate demand for them strengthened. For instance,promoting the TCC approach could increase the par-ticipation of private-sector entities (NGOs, founda-tions, possibly companies) in NUOP arrangements.The influx of funding from the private sector couldbe further increased if state incentives were createdto enter into private-sector NUOP arrangements(e.g. through fiscal law and the law of foundations, orby partially exempting companies from local envi-ronmental protection requirements in return for pur-chasing TCCs).

A system of NUCCs is the only variant of NUOPsthat would create an international automatism forthe financing of resource conservation. However, thepreconditions for operationalizing this concept arenot in place at present. Nonetheless, the Council rec-ommends promoting international policy debate onthis concept. An examination of whether non utiliza-tion units can be defined worldwide (for instance inthe tropical forests or another biodiversity field, orwithin the context of a global ecological network)could be a first step. The second step would be aninternational agreement defining how many unitseach individual country must possess, i.e. for howmany units of a resource each individual countrymust ensure that they are not degraded.

Recommendations for action and research6

The present special report of the German AdvisoryCouncil on Global Change (WBGU) is concernedwith the politically viable operationalization of theconcept of charges for the use of global commongoods. This proceeds from the understanding thatregulatory gaps are causing global common goods tobe overexploited which is jeopardizing their func-tional capacity. Global user charges could close theprevailing regulatory gaps. Charging use-relatedenvironmental costs creates economic incentives toreduce the use of global common goods (environ-ment-related incentive function of user charges). Atthe same time, financial resources are mobilized thatcan be used to preserve functional capacity or toadapt to damage resulting from overexploitation(financing function of user charges).

The Council has applied this basic idea of globaluser charges to three environmental fields and rec-ommends to the German federal government that it• promotes the levying of an emissions-based

charge for the use of the atmosphere by interna-tional aviation,

• promotes the levying of an environmentally dif-ferentiated charge for the use of the oceans byinternational shipping,

• promotes the intensified integration of ICAO (foraviation) and IMO (for ocean transport) intoglobal environmental policy,

• raises the profile of the concept of non utilizationobligation payments (NUOPs) on the interna-tional agenda, and

• deploys the revenue generated by global usercharges as true additional resources for the financ-ing of global sustainability policy.

Charging the use of the atmosphere byinternational aviationInternational aviation generates numerous environ-mental problems.The Council has concentrated uponthe atmospheric impacts of aviation in the presentreport, thus largely focusing on the radiative forcingemissions.Aviation is the source of greenhouse gaseswith the highest growth rate worldwide. In variousscenarios, the IPCC estimates that by the year 2050

the contribution of aviation to overall radiative forc-ing from anthropogenic greenhouse gas emissionswill reach 3.5–15%. It is a cause for concern that,despite this considerable climate impact, the emis-sions of international aviation are not yet subject toany reduction obligations. They are not included inthe emissions inventories of states and therefore donot fall under the quantitative commitments of theKyoto Protocol.The Council thus views the use of theatmosphere by international aviation as a major reg-ulatory gap that urgently needs to be closed for rea-sons of climate protection. This could be achieved bya user charge.

Among the various design options for a usercharge on aviation, an emissions-based charge is par-ticularly suited. The levy rate could be based uponthe specific radiative forcing from the various emis-sions of aviation. An emissions-based charge wouldhave a relatively high degree of practicability andwould establish a largely direct connection betweenthe extent of impacts, the level of revenues and thepurpose for which revenues are used. This is of greatimportance with regard to the acceptance of a usercharge on aviation and thus the efficacy of the mea-sure.

The Council therefore recommends to the Ger-man federal government that it uses its influence topromote the introduction of an emissions-based usercharge on aviation, ideally at the global level.According to the provisions of the Kyoto Protocol,ICAO should regulate this matter. If resistance atglobal level should prove to be too great, the Councilrecommends initially introducing an emissions-baseduser charge at the European Union level.

Assessment of the levy rate should be based pri-marily upon climate protection goals. Consequently,the revenue from the user charge would have to meetthe proportionate financing requirement for mea-sures to restore the global climate and adapt to cli-mate damage – particularly first-order damage. It fol-lows from the estimated share of aviation in the over-all climate impact from anthropogenic greenhousegas emissions by 2050 that costs in the order of € 3–30billion annually can be attributed to aviation. It can

43Recommendations for action and research 6

be assumed that an emissions-based levy can indeeddeliver a long-term revenue in this order. This wouldmake air transport more expensive – an effect that isdesirable from an environmental perspective. Thiscan dampen the growth in demand for air transportand stimulate the development of new emission con-trol technologies. In order to avoid the resistance thatwill doubtlessly emerge against introduction of sucha charge, the Council recommends commencing ini-tially with a moderate levy rate. This applies particu-larly in the case of EU-wide introduction in order toavoid excessive competitive disadvantages for theEuropean aviation sector. The further rises of therate dictated by climate protection considerationsshould be set in a fixed time schedule in order to bothenhance the environmental incentive effect on a con-tinuous basis and permit long-term calculations forthe aviation sector.

The funds are to be deployed for climate protec-tion goals. The Council recommends that the greaterpart of the revenue of the emissions-based usercharge be channelled to the new funds establishedunder the climate regime (special climate changefund, adaptation fund and least developed countriesfund). A part of the revenue should also be allocatedto the climate window of the GEF, being the financ-ing institution of the Climate Convention. In thatcase, however, it would need to be ensured – in orderto do justice to the concept of user charges – that therevenue is used to finance climate-related measures.

Charging the use of the oceans byinternational shippingAs yet, the use of the oceans by shipping is only inad-equately regulated. The Convention on the Law ofthe Sea calls upon the states parties to agree regula-tions to protect the oceans against the negativeeffects of ocean shipping, but the results achieved todate within the IMO context are unsatisfactory. Thisis all the more so considering that the overall state ofthe oceans is continuing to deteriorate. It should bementioned in this context that marine pollutionstems predominantly from land-based inputs via dis-charges and the atmosphere. Nevertheless, the Coun-cil views the use of the oceans by international ship-ping as a further regulatory gap that leads to consid-erable damage and thus justifies levying a usercharge. However, the case of the oceans must indeedbe distinguished from the use of the atmosphere byinternational aviation. Over long distances, oceantransport is the most environmentally sound mode oftransport and also particularly energy-efficient com-pared to aviation. Attention should therefore notfocus on reducing ocean transport as a whole bymeans of correspondingly strong environment-related incentive effects. Incentives should rather be

given to make ocean transport more environmen-tally sound. The revenue generated through a usercharge could then be used for the targeted protectionof the most severely affected waters.

The Council recommends to the German federalgovernment that it urges the introduction of an envi-ronmentally differentiated user charge to be leviedon an annual basis. The list of ‘Quality Shipping’ cri-teria and assessments developed by GAUSS and thecorresponding calculation formula provide a goodbasis for this. Such a user charge should initially onlybe levied in the industrialized states, but regardless offlag state and shipowner. This group of participantswould cover the greater part of ocean shipping. Aninitial participation of all OECD countries would bedesirable. At a later time, other states could join acharging system agreed at OECD level in coordina-tion with the IMO. If resistance is too great, theCouncil proposes an initial EU-wide introduction.

In implementing the charging model proposedhere, the Council recommends setting the charge fac-tors, which are decisive for both the incentive effectand the revenue, at between € 0.5 and 1.0 per tdw orkW. Given an EU-wide introduction, this wouldmean an annual revenue between about € 360 and720 million (minus the rebates for environmentallysound ships). The funds generated by the chargeshould not only be deployed for the environmentaldamage arising directly from ocean transport butshould also be used as efficiently as possible for theregeneration of the oceans as a whole. Consideringthe importance of land-based pollutant inputs,financing integrated coastal management measuresin developing and newly industrializing countries willbe a particularly effective use of funds.

The greater part of the funds should be assigned tothe GEF, whose operative programmes already coverthe marine environmental protection sector.The sub-stantive conditions for awarding funds should bedefined within the context of the Global Programmeof Action for the Protection of the Marine Environ-ment from Land-Based Activities (GPA). Closecoordination with the Biodiversity Conventionwould also be recommendable. There are alreadymarine environmental protection projects currentlybeing supported within the context of GEF activities.

Integrating ICAO and IMO more closelyinto global environmental policyICAO or IMO could assume an important functionwithin the process of introducing user charges. TheCouncil recommends to the German governmentthat it urges, in the course of international negotia-tions, a stronger integration of the two organizationsinto global environmental policy. The aim of thisshould be to ensure that in both bodies global envi-

44 6 Recommendations for action and research

ronmental objectives are given greater importancevis-à-vis the short-term economic interests of indi-vidual countries.

Climate policy objectives could be strengthenedwithin ICAO by the contracting parties to the KyotoProtocol calling upon ICAO to take measures toreduce the greenhouse gas emissions of aviationwithin a set period. If this does not produce thedesired result after expiry of that period, an emis-sions-based user charge on aviation should be intro-duced by the parties to the Kyoto Protocol.

In the view of the Council, a similar strengtheningof environmental objectives within the IMO could bepromoted by the introduction at OECD level – incoordination with the IMO – of a user charge onocean shipping that is graduated according to envi-ronmental criteria. Implementation of the approachof user charges for the oceans would not only give astrong political signal for the strengthening of envi-ronmental concerns in the ocean shipping sector.Thedevelopment of a catalogue of criteria could also givedecisive impulses for the swift (further) developmentof binding environmental standards.

Payments for non utilization obligationsIn contrast to the two forms of user charges set outabove, the concept of non utilization obligation pay-ments (NUOPs) does not address global commongoods in the narrower sense, but goods whose con-servation is a ‘common concern of humankind’.These can be, for instance, the conservation of bio-logical diversity or of land and freshwater areas.These goods fall clearly under the sovereignty ofstates. In that sense, there is no regulatory gap. Nev-ertheless, the regulation up to today endangers theconservation of biological diversity, for example,because for many states the degrading use of theirnatural resources generates (over the short term)higher yields than the provision of the good ‘conser-vation of biological diversity’. This is where the con-cept of NUOPs comes into play. In the framework ofthe concept, abstaining from degrading use isrewarded by payments in order to provide incentivesto conserve goods of global value. The generation offunds is to be seen in connection with payments forthe global use of the conservation of resources.Among the possible forms of NUOP arrangements, asystem of tradable non utilization commitment cer-tificates (NUCCs) is the only one that establishes aninternational automatism for the financing of theconservation of these goods.

The Council is aware that the concept cannot beimplemented over the short to medium term andthat, in particular, there is a considerable need forfurther research. The Council is nonetheless con-vinced that the idea of a global system of NUCCs is

worth pursuing as an alternative to other financingmechanisms such as a tropical forest fund. For theconservation of biological diversity, for instance, theextent to which the idea of NUOPs or NUCCs couldbe operationalized within the context of the Biodi-versity Convention should be examined.The Counciltherefore recommends raising the profile of NUOPson the international policy agenda and intensifyingresearch activities in this field.

True additionality of financial resourcesfrom global user chargesVarious studies of budgets for official developmentassistance show that a considerable proportion ofthese funds needs to be provided for the creation andpreservation of global public goods, notably those inthe environmental sphere. The United NationsDevelopment Programme (UNDP), for instance,estimates this proportion at about 25% (Kaul et al.,1999). Methodological problems in calculating suchproportions aside, it is clear that the pressures ondevelopment cooperation funds traditionally allo-cated to development purposes could be reducedsubstantially by levying user charges. However, thiswill require a corresponding political will.The Coun-cil therefore recommends factoring the financingcontribution of user charges out of ODA. The rev-enue of global user charges would then correspond toan imaginary budget item, namely ‘Global sustain-ability policy’. The availability of additional financialresources for global sustainability policy makes itpossible to deploy development cooperation funds ina more targeted manner for the ‘classic’ tasks ofdevelopment cooperation. This approach wouldachieve true additionality of the funds from the rev-enue of user charges.

User charges promise positive global environmen-tal protection effects due to their environment-related incentive function, and generate additionalfunds for the financing of environment and develop-ment policy measures. The Council therefore recom-mends to the German federal government that itexploits the opportunity of Monterrey by arguing infavour of implementing the forms of user charges setout in this special report.

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Publications of the German Advisory Council on Global Change (WBGU)

Charging the Use of Global Commons. WBGU Policy Paper 2.Berlin: WBGU © 2002, 16 pages, free of chargeISBN 3-936191-00-X

World in Transition: New Structures for Global Environmental Policy. 2000 Report.London: Earthscan © 2001, £ 50ISBN 1-85383-852-7

The Johannesburg Opportunity: Key Elements of a Negotiation Strategy. WBGU Policy Paper 1. Berlin: WBGU © 2001, 20 pages, free of chargeISBN 3-9807589-6-6

World in Transition: Conservation and Sustainable Use of the Biosphere. 1999 Report.London: Earthscan © 2001, £ 50ISBN 1-85383-802-0

World in Transition: Strategies for Managing Global Environmental Risks. 1998 Report.Berlin: Springer © 2000, EUR 134,00ISBN 3-540-66743-1

World in Transition: Environment and Ethics. 1999 Special Report.Website: http://www.wbgu.de/WBGU/wbgu_sn1999_engl.html

World in Transition: Ways Towards Sustainable Management of Freshwater Resources. Report 1997.Berlin: Springer © 1998, EUR 124,00ISBN 3-540-64351-6

The Accounting of Biological Sinks and Sources Under the Kyoto Protocol - A Step Forwards or Back-wards for Global Environmental Protection? Special Report 1998.Bremerhaven: WBGU © 1998, free of chargeISBN 3-9806309-1-9

World in Transition: The Research Challenge. 1996 Report.Berlin: Springer © 1997, out of printISBN 3-540-61832-5

Targets for Climate Protection 1997. A Study for the Third Conference of the Parties to the Framework Convention on Climate Change in Kyoto. Special Report 1997.Bremerhaven: WBGU © 1997, out of print

World in Transition: Ways Towards Global Environmental Solutions. 1995 Report.Berlin: Springer © 1996, out of printISBN 3-540-61016-2

World in Transition: The Threat to Soils. 1994 Report.Bonn: Economica © 1995, out of printISBN 3-87081-055-6

Scenario for the Derivation of Global CO2 Reduction Targets and Implementation Strategies. Statement on the Occasion of the First Conference of the Parties to the Framework Convention on Climate Change in Berlin. 1995 Special Report.Bremerhaven: WBGU © 1995, out of print

World in Transition: Basic Structure of Global People-Environment Interactions. 1993 Report.Bonn: Economica © 1994, out of printISBN 3-87081-154-4

All WBGU Reports can be downloaded through the Internet from the website http://www.wbgu.de.

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