The role of a cap-and-trade market in reducing NO x and SO x emissions: Prospects and benefits for ships within the Northern European ECA

This article presents a financial evaluation of alternative approaches to the abatement of NO _x and SO _x emissions from ships operating within the emission control area (ECA) of Northern Europe. The objective of this article is to assess the financial viability of a range of alternative technologies and fuel types, by accounting for revenue that might be generated from emissions trading within a cap-and-trade market for NO _x and SO _x emissions. Using a sample of real ships that operate within the ECA, NO _x and SO _x emissions for each alternative are estimated, and the revenue generated within a cap-and-trade system is calculated under a given set of assumptions. The results suggest that distillates are not an economic solution to meeting regulatory requirements. Conservative estimates of revenue generated within any prospective cap-and-trade system suggest that seawater scrubbers and Humid Air Motor (HAM) and Selective Catalytic Reduction (SCR) systems would all constitute financially attractive abatement options, while the use of liquefied natural gas (LNG) is the most financially attractive alternative. A cap-and-trade system is found to be highly efficacious in providing a relatively inexpensive source of finance for investments in improved environmental performance, as well as incentivizing such improvements, thereby removing any requirement for public sector support.