OIL SPILL REDUCTION AND COSTS OF SHIP DESIGN REGULATION

Thomas D. Hopkins

Contemporary Economic Policy, 1992, vol. 10, issue 3, 59-70

Abstract: The 1990 Oil Pollution Act mandates double hulls for new ocean‐going tankers unless the U.S. Coast Guard can find superior designs to reduce oil spill risks. This paper, based on a 1991 National Research Council (NRC) study of alternative tanker designs, examines policy implications of prescribing construction standards. Alternative construction designs for tankers, such as that of the Exxon Valdez, have markedly differing effects both on oil transport costs and on the risks of future oil spills. Annual costs of shipping oil to the United States would rise by anywhere from $462 million to $2,047 billion, depending on which of five plausible designs are selected. The chief objective of such designs is to reduce the outflow of oil occurring during groundings and collisions. Over the past decade, an average of about 7,500 tons have spilled annually from these causes in U.S. waters—representing roughly 20 percent of transportation‐related maritime oil pollution in 1990. NRC‐sponsored simulation research indicates that the various designs likely would prevent 2,600–5,600 tons from being spilled in a typical year. The paper presents cost‐effectiveness comparisons of the alternatives, contrasting these with available information on societal benefits per ton of oil spill avoided. Costs appear substantial relative to benefits, and lawmakers' emphasis on design standards deflects attention from alternative risk reduction strategies—e.g., operation and maintenance measures—that warrant equal attention.

Date: 1992
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