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The European Union is likely to propose that shipping reduces its CO2 emissions to 20 percent below 2005 levels over the next decade, Reuters reports.

According to Reuters, EU diplomats said the cuts could be linked to a fuel tax in order to generate billions of dollars to help poor countries cope with climate change.

A recent report by the European Commission calculated that both the shipping and aviation sectors combined could generate revenues as high as 25 billion euros ($36.7 billion) a year in 2020, if their emissions were capped at 30 percent below 2005 levels.

The EU is scheduled to present its proposal at a meeting in Bangkok, where climate representatives from up to 190 countries are expected to push for a new deal to replace the existing Kyoto climate change treaty, which was agreed in 1997.

A number of countries including Britain, France, Ireland and the Netherlands have already indicated their support for an emission reduction of 20 percent or more below 2005 levels, whilst seafaring nations including Cyprus, Malta and Spain are in favour of less stringent CO2 cuts.

Last week Bunker Index reported that shipping industry associations from five countries had launched a discussion paper which argues that a global trading scheme would be 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 23rd September.

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.

A cap and trade scheme may be seen as more politically acceptable than a carbon tax and 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.

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.

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, depending on the price of carbon.