How to support shore-to-ship electricity constructions: Tradeoff between government subsidy and port competition

The adoption of shore-to-ship electricity (SSE) during ship berthing significantly reduces air pollution, yet the substantial investment required for SSE infrastructure poses a major barrier to its widespread implementation. This challenge raises the issue of whether government subsidies should be provided to support SSE construction. This study employs a Stackelberg game model to explore the strategic interactions between a government and two port operators, analyzing how different subsidy strategies impact the decisions of SSE construction. In this study, four subsidy scenarios are examined: no subsidy, subsidizing the 1st port operator, subsidizing the 2nd port operator, and subsidizing both two port operators, with the goal of maximizing social welfare. The findings reveal that if the conversion degree of SSE construction is high, the absence of subsidies often results in a Prisoner’s Dilemma, where both two operators may engage in simultaneous SSE construction that is not economically viable. Although resorting to abandoning SSE construction can resolve this dilemma, government subsidies tend to reduce the likelihood of achieving both environmental and economic benefits simultaneously. These insights offer valuable guidance for designing effective subsidy schemes that can contribute to the sustainable construction of port infrastructure, accelerating the process of maritime decarbonization.