A Comparison of the Cost-Effectiveness of Alternative Fuels for Shipping in Two GHG Pricing Mechanisms: Case Study of a 24,000 DWT Bulk Carrier

Jinyu Zou, Penghao Su () and Chunchang Zhang
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Jinyu Zou: College of Ocean Science and Engineering, Shanghai Maritime University, Shanghai 201306, China
Penghao Su: College of Ocean Science and Engineering, Shanghai Maritime University, Shanghai 201306, China
Chunchang Zhang: Merchant Marine College, Shanghai Maritime University, Shanghai 201306, China

Sustainability, 2025, vol. 17, issue 13, 1-15

Abstract: The 83rd session of the IMO Maritime Environment Protection Committee (MEPC 83) approved a global pricing mechanism for the shipping industry, with formal adoption scheduled for October 2025. Proposed mechanisms include the International Maritime Sustainable Fuels and Fund (IMSF&F) and a combined approach integrating GHG Fuel Standards with Universal GHG Contributions (GFS&UGC). This study developed a model based on the marginal abatement cost curve (MACC) methodology to assess the cost-effectiveness of alternative fuels under both mechanisms. Sensitivity analyses evaluated the impacts of fuel prices, carbon prices, and the GHG Fuel Intensity (GFI) indicator on MAC. Results indicate that implementing the GFS&UGC mechanism yields higher net present values (NPVs) and lower MACs compared to IMSF&F. Introducing universal GHG contributions promotes a comparatively fairer transition to sustainable shipping fuels. Investments in zero- or near-zero-fueled (ZNZ) ships are unlikely to be recouped by 2050 unless carbon prices rise sufficiently to boost revenues. Bio-Methanol and bio-diesel emerged as the most cost-competitive ZNZ options in the long term, while e-Methanol’s poor competitiveness stems from its extremely high price. Both pooling costs and universal GHG levies significantly reduce LNG’s economic viability over the study period. MACs demonstrated greater sensitivity to fuel prices ( P fuel ) than to carbon prices ( P carbon ) or GFI within this study’s parameterization scope, particularly under GFS&UGC. Ratios of P carbon %/ P fuel % in equivalent sensitivity scenarios were quantified to determine relative price importance. This work provides insights into fuel selection for shipping companies and supports policymakers in designing effective GHG pricing mechanisms.

Keywords: GHG pricing mechanism; ZNZ fuel; cost-effectiveness; marginal abatement cost curve (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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