Carbon allowance allocation in the shipping industry under EEDI and non-EEDI

The CO ₂ emissions targets in this study are based on the Paris Agreement, which aims to cut emissions in 2050 to half of the 2005 levels, with a focus on the shipping industry. This study uses data for various kinds of vessels following the guidelines set in the Energy Efficiency Design Index (EEDI)and examines emission levels and the results of using different strategies during three different business climates. Carbon allowance allocations and cost benefit ratios (CBR)are included. The results show that the minimal free carbon allowances in 2050 for vessels in keeping with EEDI or non-EEDI scenarios should be set so that (1)under prosperous business cycles they are 29% and 14%; (2)under steady business cycles 83% and 42%; (3)under sluggish business cycles 510% and 255%, respectively. In addition, when shipping companies follow the emission cap guidelines, the CBR in 2050 for vessels in both scenarios will be (1)37.52% and 47.45% during prosperous business cycles; (2)43.49% and 45.65%during steady business cycles; (3)and 53.60% and 53.83% during sluggish business cycles, respectively. The results indicate that during prosperous business cycles, although the free carbon allowance for shipping companies will be greatly insufficient, their profits will still be higher than during sluggish business cycles.