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Shipping industry associations from five countries have launched a discussion paper which argues that a global trading scheme is the most effective method of reducing carbon emissions in the shipping sector.

National ship industry associations of Australia, Belgium, Norway, Sweden and the UK jointly launched the paper on Wednesday, which asserts that a cap and trade scheme would be the most beneficial for the industry.

Shipping is estimated to have emitted 1,046 million tonnes of CO2 in 2007, which corresponds to 3.3 percent of the global emissions during 2007. At present, shipping and aviation are the only industry sectors not regulated under the Kyoto Protocol, which sets targets for greenhouse gas emissions from 2008-12.

Speaking at a news conference, Jan Kopernicki, vice president of the UK Chamber of Shipping, said "We firmly believe that a trading solution is the right answer."

Under a cap and trade scheme individual companies or countries would face a carbon limit. If they exceed their limit, they would be able to purchase allowances from other polluters that remain below their cap.

According to Robert Ashdown, head of the UK Chamber of Shipping's technical division, an emission trading scheme would cost the shipping industry between 5 billion and 6 billion euros a year, prompting concerns that weaker shipping companies could be pushed out of business.

Carbon markets are often seen as more politically acceptable than carbon taxes and the proposed scheme could potentially be set up as an extension of the existing European Union Emission Trading Scheme (EU ETS) to also cover the international shipping sector.

The European Union Emission Trading System is the largest multi-national, emissions trading scheme in the world, and is a major pillar of EU climate policy. The EU ETS currently covers more than 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU's emissions of CO2 and 40 percent of its total greenhouse gas emissions.

Under the EU ETS, large emitters of carbon dioxide within the EU must monitor and annually report their CO2 emissions, and they are obliged every year to return an amount of emission allowances to the government that is equivalent to their CO2 emissions in that year.

Under the current cap and trade scheme proposal for shipping, two options were offered. The first would be to effectively treat shipping as a country in its own right and provide shipping with a specific amount of credits.

Under the second option, the number of credits made available to the shipping industry would be determined by the number of sales of bunker fuel sold by governments at auction to shipping firms.

Earlier this year, the International Maritime Organisation (IMO) commissioned a study on greenhouse gas emissions (GHGs) from ships which appeared to strengthen the case for a global maritime emissions trading scheme. An international consortium led by MARINTEK prepared the 2009 update to a study first published in 2000 on behalf of the IMO.

The IMO has been under pressure to come forward with a workable international solution to the perceived problem of growing shipping emissions.

In July, the Marine Environment Protection Committee (MEPC) of the IMO approved a package of interim and voluntary technical and operational measures to reduce greenhouse gases (GHGs) from international shipping. It also agreed a work plan for its further consideration of market-based instruments. However, environmental groups argued that the measures did not go far enough to address the emission issue.

The decisions of the MEPC on GHG emissions from ships will be reported to the Conference that the United Nations will convene in Copenhagen in December 2009 to debate a successor instrument to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC).