The European Union (EU) has extended the application of the EU emissions trading scheme to international shipping and the International Maritime Organization (IMO), and various countries are working on implementing instruments that put a price on greenhouse gas emissions (GHG) from this sector. Due to these policy developments, GHG emissions from shipping may become subject to multiple pricing instruments in the coming years. In response, stakeholders have voiced concerns over the potential negative impacts that this could have on both the shipping industry and international trade, and called for double pricing to be avoided. Against this background, this article discusses the potential pros and cons of double pricing GHG emissions from shipping and identifies options to reduce its negative impacts. Overall, the article finds that the case to avoid double pricing rests on a balance of competing interests, contextual factors, and instrument design. If policymakers aim to avoid double pricing, regulatory cooperation between policymakers working on shipping decarbonisation and border carbon adjustment mechanisms can provide important lessons on how to do so.

This paper analyses the role that companion policies have had in the reduction of emissions regulated by the EU Emissions Trading System (EU ETS) and the related policy interactions, with a view to identifying relevant insights for China's forthcoming Emissions Trading System (ETS). The investigation rests on: (a) the observation of the EU's and China's ETSs and policy mixes; (b) economic theory concerning companion policies and ETS design; and (c) empirical ex-post evidence from the EU ETS. Three main conclusions emerge from the analysis. First, China's ETS, while not imposing a fixed cap on emissions, will not be immune to waterbed effects of companion policies. Second, the European experience stresses the importance of making explicit the objectives pursued by companion policies, and of balancing policies for innovation and policies for adoption of low-carbon technologies. Third, in the presence of a major market surplus, only permanent adjustments to allowance supply can be effective in raising prices.