Environmentally Differentiated Port Dues: A Case Study for a Transparent Scheme

Gas emissions from ships are a major environmental concern of the international maritime community. Market-based measures with incentive have been developed to reduce gas emissions. One such measure is the differentiation of port dues through the provision of rebates to environmentally friendly vessels. Existing research reveals several limitations that hinder their actual impact on emissions, such as low rebate rates, the lack of transparency of the schemes, and the costs for the port authorities, among other factors. Our article reveals that differentiated schemes can be improved to elicit changes in the shipping industry. Based on data from the Port of Tallinn, we develop an illustrative air emission index to show how transparency in the scheme can be reconciled with environmental targets. The brackets and rates of the scheme should be determined transparently based on an ex ante target and on the distribution of the emission index of vessels that call at the port. From a policy perspective, we highlight how such a transparent process can increase compliance with the schemes and how surcharges are essential to the provision of attractive rebates by preserving the financial stability of the port authority.