Modelling the effects of emission control areas on shipping company operations and environmental consequences

Ran Jiang and Laijun Zhao

Journal of Management Analytics, 2021, vol. 8, issue 4, 622-645

Abstract: In this study, two integrated game models are developed to explore the possible economic and environmental consequences of Emission control areas (ECA) regulations. Moreover, the analytical solutions compared with a benchmark case are derived. We find that vessel speed and SO2 emissions will decrease under the ECA regulations. However, shipping company’s level of competition has no effect on the equivalent speed. The equivalent freight volume to be reduced or increased is determined by the additional operational cost per voyage due to ECA regulations. Numerical study and sensitivity analysis reveal that the vessel speed and SO2 emission reduction are very sensitive to the inventory costs of in-transit cargo. Furthermore, if low-sulphur marine gas oil is used throughout the voyage, the SO2 emission reduction may be greater than 80%, with a low impact on the shipping company’s profit. Thus, considering the environmental effects, much stricter limits can be set in the future.

Date: 2021
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DOI: 10.1080/23270012.2021.1993455

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