Legal application of carbon emission trading system in international shipping industry and China’s response

The international shipping industry is pivotal to achieving the climate goals of the Paris Agreement. As a critical market-based instrument for global greenhouse gas (GHG) emission reduction, emission trading system (ETS) is extending from national governance to the international maritime sector. Currently, the International Maritime Organization (IMO) has released the 2023 IMO Strategy on Reduction of GHG Emissions from Ships and Net-Zero Framework, and the European Union Emissions Trading System (EU-ETS) has incorporated shipping into its carbon market. However, the legal application of ETS in international shipping faces multifaceted challenges. The mobile nature of shipping complicates both the accounting of aggregate emissions and the identification of liable entities. The flag of convenience system severs the link between flag states and beneficial owners, undermining the applicability of the principle of Common but Differentiated Responsibilities (CBDR). Further, the integration of international carbon markets encounters technical, institutional, and geopolitical hurdles, including divergent national participation. Accordingly, constructing a carbon market for international shipping must promote the green transition of shipping industry, enhance domestic legislation, advocate for mutual recognition of technical standards and international collaboration, adhere to the CBDR principle and the central governance role of the IMO in maritime carbon emission reduction.