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LONDON (Reuters) - A sector-wide cap-and-trade scheme is the best way to cut carbon dioxide emissions in the global shipping sector, the UK Chamber of Shipping said on Wednesday, as opposed to joining the European Union's emissions trading scheme (EU ETS).
The sector accounts for over 3 percent of man-made CO2 emissions. It has widely opposed entering the EU ETS, arguing that ships will try and avoid paying for carbon permits by re-fuelling in non-EU ports.
The EU Commission has threatened to include shipping in the ETS if it does not take strong enough measures to cut carbon.
The EU ETS currently caps the emissions of some 12,000 factories and power plants, forcing them to buy carbon permits when they emit more than a certain limit.
"The market-based approach of cap-and-trade is attractive in allowing choice and flexibility within a global, goal-based system," the trade association said in a report.
A sector-wide, two-phase scheme would add to measures agreed by the International Maritime Organisation (IMO) in July, namely energy efficiency design standards, the report said.
It could be implemented quickly and easily by the IMO and help the industry contribute to CO2 reductions, it added.
The British Chamber represents more than 900 ships and is among the world's top 11 flag nations. It among the first national shipping bodies to publish its views on how to tackle CO2 emissions.
The first phase of the scheme would "likely last several years" and the overall cost to the industry was estimated at 0.8 billion euros (877 million pounds), the report said.
A ship operator would buy and surrender carbon offset credits relative to the amount of bunker fuel it buys.
The carbon offsets used to comply with the scheme could be bought from the open market through emissions reduction projects under the U.N.'s Clean Development Mechanism, or other carbon schemes approved by IMO members.
"Since offset credits would be purchased from the open market, the funds would result directly in CO2 reductions outside the shipping sector," it added.
Even though baselines or benchmarks would not be necessary, the scheme could still produce an accurate record of vessel fuel consumption and emissions, the report said.
Under the second phase, emissions would be capped and credits equal to the cap would be issued and/or auctioned.
Operators who adopt cleaner technologies or operational measures would either buy fewer credits or sell their surplus to those who have higher costs from adopting such measures.
"By giving a financial incentive to control emissions, and the flexibility to determine how and when to reduce emissions, the capped level of CO2 entering the atmosphere is achieved at lowest cost," the report said.
David Symons, director at global environmental consultancy WSP Environment & Energy, said slowing down was the simplest way to reduce emissions.
"Using complete sail ship again is probably unrealistic, but a combination of sail and fuel could help reduce emissions by up to 35 percent, making a serious dent on global carbon emissions," he said.
In another document, the UK chamber of shipping also proposed charging shippers a fixed amount per tonne of the bunker fuel they bought, with revenues going to an "international greenhouse gas contribution fund."
The fund could purchase carbon offset credits, contribute to a U.N.-backed climate fund and/or reward firms which implement carbon reduction technology.
Editing by Anthony Barker