- **_Cause local pollution and other adverse side effects_** . Take-offs and landings at airports contribute to local air pollution, noise, and congestion.  Maritime operations can have a range of negative environmental impacts, such as oils spills and transport of invasive species in ballast water, and also contribute to local air quality problems, for example in port cities.<sup>7</sup> A charge on fuel use could go some way towards addressing these problems, but would not be the best-targeted instrument; this aspect is therefore considered no further.<sup>8</sup>

- **_The bulk of emissions from the two sectors (especially for shipping) are associated with international activities and the majority of emissions are from services to developed countries_** . As indicated in the top panels of Figure 1, an estimated 83 percent of maritime emissions are from international activities while for aviation this share is 62 percent. The main reason for this is that goods transport, which is overwhelmingly international, dominates shipping while people transport dominates aviation (middle panels of Figure 1).<sup>9</sup> Fuel disbursed in developed countries accounted for about 65 percent of total aviation emissions (35 percent is from disbursements in developing countries) and 60 percent for maritime.<sup>10</sup> In aviation, about 12 percent of all flight activity (in terms of fuel consumption) consists of pure cargo flights, but a similar fraction of fuel consumption can be ascribed to freight carried by passenger planes.<sup>11</sup>

- **_Make an essential contribution to a well-functioning global economy_** . Around 90 percent of all world trade, by tonne-kilometer, for instance, is carried by ship.

7 See Keen and Strand (2007) and Corbett and Fishbeck (2001) respectively for a discussion of these broader side effects from aviation and maritime.

8 For example, location-specific, peak-peak pricing is generally far more effective for alleviating congestion, and vehicle emissions standards for reducing local pollution (see Parry et al. (2007) for a discussion of appropriate instruments in the context of automobile problems). In any case, IMO is introducing requirements that will reduce considerably the sulphur content of heavy fuel oil from 2.7 percent to 0.5 percent by 2020, which will encourage new refining processes.

9 Fishing, while largely conducted in international waters, is considered a domestic activity (as it pertains to particular nations; and catches are largely landed in the individual nations). Most ferry traffic is international. Cruise traffic where cruisers travel to at least two nations is considered international.

10 There is some disagreement over these shares for maritime activity. Faber et al. (2010) suggest that about onethird of emissions are attributed to ships arriving in non-Annex 1 countries, suggesting that about one-third might be allocated to their own use. AGF (2010b), Table 6, on the other hand claims that more than 50 percent of maritime emissions should be attributed to non-Annex I countries. Stochniol (2011b) calculates the overall share of global imports by ̳developing‘ (non-Annex II) countries to 40 percent, which is that assumed here.

11 See Bofinger (2011), Appendix II.

12