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Effects of market-based measures on a shipping company: Using an optimal control approach for long-term modeling

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  • Tanaka, Hidemi
  • Okada, Akira

Abstract

Market-based measures for international shipping, which have been discussed by the Marine Environment Protection Committee, provide shipping companies with incentives to reduce carbon dioxide (CO2) emissions and change long-term behavior for ships, especially investment in capacity and fuel efficiency. This study presents a fundamental theoretical model to deal with the issues before applying real data. Specifically, since the literature has focused less on these issues, we develop an optimal control model to analyze the investment behavior of a shipping company, improvement of fuel efficiency, and CO2 emissions from ship operations by introducing a tax on them. The results of analysis show the classification of optimal conditions, the relationships between fuel price with emission tax and investment behavior, and the rebound effect of improving fuel efficiency of the tax. A policy mix, which consists of the tax and a direct subsidy, is deemed optimal for an international shipping company.

Suggested Citation

  • Tanaka, Hidemi & Okada, Akira, 2019. "Effects of market-based measures on a shipping company: Using an optimal control approach for long-term modeling," Research in Transportation Economics, Elsevier, vol. 73(C), pages 63-71.
    • Handle: RePEc:eee:retrec:v:73:y:2019:i:c:p:63-71
    DOI: 10.1016/j.retrec.2019.01.006
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    References listed on IDEAS

    as
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    4. Wang, Kun & Fu, Xiaowen & Luo, Meifeng, 2015. "Modeling the impacts of alternative emission trading schemes on international shipping," Transportation Research Part A: Policy and Practice, Elsevier, vol. 77(C), pages 35-49.
    5. Hartl, R.F. & Kort, P.M., 1996. "Marketable permits in a stochastic dynamic model of the firm," Other publications TiSEM 1a6e45ee-b1f0-41d9-a6d6-c, Tilburg University, School of Economics and Management.
    6. Sinem Celik Girgin & Thanasis Karlis & Hong-Oanh Nguyen, 2018. "A Critical Review of the Literature on Firm-Level Theories on Ship Investment," IJFS, MDPI, vol. 6(1), pages 1-19, January.
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    Cited by:

    1. Mohamad Issa & Adrian Ilinca & Fahed Martini, 2022. "Ship Energy Efficiency and Maritime Sector Initiatives to Reduce Carbon Emissions," Energies, MDPI, vol. 15(21), pages 1-37, October.
    2. Sotiria Lagouvardou & Harilaos N. Psaraftis & Thalis Zis, 2020. "A Literature Survey on Market-Based Measures for the Decarbonization of Shipping," Sustainability, MDPI, vol. 12(10), pages 1-23, May.

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    More about this item

    Keywords

    Optimal control model; Market-based measures; Capital investment; Fuel efficiency; CO2 emissions;
    All these keywords.

    JEL classification:

    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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