Marginal abatement cost curves (MACCs) for assessing the role of market-based measures (MBMs) in enhancing the adoption of alternative marine fuels

Abstract Uncertainties on the global availability and affordability of alternative marine fuels are stalling the shipping sector’s decarbonization course. Several candidate measures are proposed at the International Maritime Organization, including market-based measures (MBMs), environmental policies like carbon taxes and emissions trading systems. Their implementation increases the cost of fossil fuel consumption and provides fiscal incentives towards greenhouse gas emissions reductions. MBMs can bridge the price gap between alternative and conventional fuels and generate revenues for funding the up-scaling of alternative fuels' production, storage and distribution facilities and, thus, enhance their availability. By estimating the fuels' implementation and operational costs and carbon abatement potential, this study develops their marginal abatement cost curves and estimates the optimal level of carbon pricing needed to render investments into alternative fuels cost-effective. The results can assist policymakers in establishing the fundamental factors and MBM design principles that can make MBMs a robust and effective decarbonization measure.