Carbon Revenue Recycling: The Cornerstone of the Carbon Pricing Mechanism Within the Shipping Industry

In a carbon pricing mechanism, the collection of contributions (taxes) and the distribution of carbon revenue are both equally critical, as they constitute the interdependent elements of the same system. While contribution collection serves to economically incentivize stakeholders, carbon revenue distribution fosters participation in decarbonization efforts through mechanisms such as rebates, rewards, and green loans. The economic effects of a carbon pricing mechanism vary significantly depending on how the generated revenues are used. A well-structured organizational framework can assist policymakers in optimizing the allocation of carbon revenues, thereby supporting a robust fiscal policy that promotes efficiency, long-term growth, and equity. Despite the critical role of carbon revenue distribution, there is a notable absence of literature addressing this issue in the maritime context. To address this gap, this study draws on insights from other sectors and global carbon pricing mechanisms to develop a simulatory template for evaluating its applicability to the maritime industry. The simulation yields a comprehensive classification of approaches to carbon revenue recycling, while also examining the associated risks and challenges in implementing future carbon pricing mechanism in the maritime industry.