As mentioned above, the preferred solution for carbon pricing in the maritime sector is through an international agreement. If such agreements were to take the form of an upstream global fuel tax or levy, carbon pricing would occur upstream, with little need for data. Conversely, if the measure were to take the form of an ETS or a levy or tax on emissions, the measure would require data regarding the emissions released by single vessels or for transporting single cargoes. A monitoring, reporting and verification (MRV) system could be introduced by means of a global agreement enforced by the IMO. Recent developments at the IMO and the amendments to MARPOL Annex VI represent a move in this direction.<sup>81</sup> Indeed, a global data collection mechanism will provide flag states with data on fuel consumption, emissions and proxies for transport work (i.e. the product of the mass of cargo transported and the distance covered) per ship. IMO data could also be used to introduce a regional carbon-pricing measure. However, since the data are provided to flag states, a sub-global measure with large emissions coverage that relies on these data could only be introduced by states in which a non-trivial share of shipping companies are registered. In addition, a measure implemented on the basis of the flag of the vessel offers the potential for tax avoidance through re-registration in other jurisdictions that do not price carbon emissions from shipping. There are therefore doubts regarding the effectiveness of flag-based measures.<sup>82</sup> For the _first/last vessel_ and _time-based measures_ , a main option is to institute a top-down MRV system that requires vessels calling at the port of a state that is implementing the measure to report data.<sup>83</sup> An example of this type of regulation that could be applicable to a _first/last vessel measure_ is the EU’s MRV,<sup>84</sup> which provides all the necessary data regarding emissions released by vessels in their first/last voyage to/from an EU port.<sup>85</sup> Alternatively, the distance covered could be obtained using the Automatic Identification System (AIS).<sup>86</sup> In a _holistic route cargo measure_ , emissions could be established based on the cargo weight, distance covered and fuel efficiency of the vessel(s) used to transport that cargo.<sup>87</sup> While data on cargo weight and distance are already available to the customs authorities, the fuel efficiency of vessels is sometimes not easily known.<sup>88</sup> There is, therefore, a risk that carbon pricing would charge an imprecise proxy measure of the actual emissions released by a vessel, potentially distorting the incentives.

An alternative solution that could partially obviate this problem is a voluntary MRV mechanism.<sup>89</sup> The basic features of the mechanism are the following:<sup>90</sup> i) carbon pricing is imposed via an emissions tax or levy; ii) the accounting unit used to calculate the tax is the cargo; iii) the tax liability is imposed on the consignee/consignor of the cargo; iv) the tax is imposed on the basis of default values that approximate to the social cost of the emissions; and v) emissions data are obtained by offering a rebate to the owners of ships that emit less than the estimated default value.

Under taxation based on default values, taxpayers are incentivized to provide data voluntarily, and these data are then used to improve the accuracy of the default values.<sup>91</sup> The incentive works as follows. Taxpayers that have released fewer emissions than assumed by the tax authorities are

> 81 See the amendments to MARPOL Annex VI agreed at MPEC 70 (MEPC.278(70)).

> 82 See, for instance, Ringbom (2011).

> 83 See, for instance, Kågeson (2007); Bäuerle et al. (2010); Kollamthodi et al. (2013). For a discussion of various data sources on emissions released in the maritime sector, see Kollamthodi et al. (2013, pp. 42-46). 84 Regulation 2015/757 (as amended by Delegated Regulation 2016/2071).

> 85 Heine et al. (2017, p. 16); Heine and Gäde (2018).

> 86 Smith et al. (2014).

> 87 Bäuerle (2010, p. 60). Note that customs documents would allow to identify the port of origin of each cargo. Therefore, distinct cargoes loaded on a vessel in different ports would be taxed differently on the basis of the direct trade lane from that port of origin to the port of destination for the cargo.

> 88 Bäuerle et al., (2010, p. 60); Smith et al. (2014).

> 89 Heine et al., (2017, pp. 6 ff); Heine and Gäde (2018).

> 90 Heine at al. (2017, p. 6); Heine and Gäde (2018).

> 91 Heine at al. (2017, p 12); Heine and Gäde (2018).

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