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Enforcement of the global sulphur cap: Can self-reporting provide a better solution?

Author

Listed:
  • Sheng, Dian
  • Wang, YiYao
  • Wang, Hua
  • Liu, Baoli
  • Tang, Tianpei

Abstract

The latest maritime sulphur regulation poses a great challenge to effective enforcement issues. This study aims to achieve greater enforceability by proposing a novel self-reporting scheme, in which truthful reporting of non-compliance from the ship operator is certainly penalized with a smaller and ex-ante fine while falsified reporting of compliance is probabilistically penalized with a larger and ex-post fine as it has to be verified by the agency through random inspection. A simultaneous compliance game model is developed for the current enforcement scheme without self-reporting while a sequential game model is dedicated to self-reporting. Mixed strategy Nash equilibriums are derived separately to characterize the interactions between the agency’s inspection strategy and ship operators’ reporting strategy as well as complying strategy. Compared with the current scheme, it is demonstrated that self-reporting can always save some inspection costs as long as the current fine is between the smaller fine and the larger fine as specified in self-reporting. The savings come from the fact that the agency does not need to inspect some non-complying ship operators who report non-compliance. Moreover, the larger fine of falsified reporting acts as a stronger deterrent so that the inspection frequency can be decreased. In terms of total environmental cost (TEC) and total compliance cost (TCC), they cannot be decreased simultaneously. However, the total compliance rate can be improved together with TEC or TCC under certain conditions. Finally, self-reporting might decrease the total system cost without increasing the (total) penalty burdens perceived by (all) individual ship operators. The associated conditions are derived separately, allowing the policymakers to fine-tune the fine levels so that self-reporting can replace the current enforcement scheme and satisfy certain policy targets with higher acceptability from the stakeholders.

Suggested Citation

  • Sheng, Dian & Wang, YiYao & Wang, Hua & Liu, Baoli & Tang, Tianpei, 2024. "Enforcement of the global sulphur cap: Can self-reporting provide a better solution?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:transa:v:184:y:2024:i:c:s0965856424001393
    DOI: 10.1016/j.tra.2024.104091
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