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Energy-Saving Potential and an Economic Feasibility Analysis for an Arctic Route between Shanghai and Rotterdam: Case Study from China’s Largest Container Sea Freight Operator

Author

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  • Zheng Wan

    (College of Transport and Communications, Shanghai Maritime University, Shanghai 201306, China
    Institute of Transportation Studies, University of California Davis, Davis, CA 95616, USA)

  • Jiawei Ge

    (Institute of Logistics Science & Engineering, Shanghai Maritime University, Shanghai 201306, China)

  • Jihong Chen

    (College of Transport and Communications, Shanghai Maritime University, Shanghai 201306, China)

Abstract

Global warming has significantly reduced summer ice coverage in the Arctic region, providing long-awaited opportunities for the shipping industry to open new routes through a region known for its harsh navigational conditions. If a shortcut between Asia and Europe via the Northern Sea Route (NSR) is adopted, significant energy saving and pollution reduction are possible compared with conventional southern routes. However, opinions in literature differ regarding this shortcut’s economic viability. We present an analysis from the perspective of COSCO, China’s largest container sea freight operator. We perform a cost–benefit analysis under several scenarios considering the following current realities: (1) declining oil prices not seen for decades, even lower than the lowest prices assumed in previous studies; (2) declining Russian NSR tariff as an effort to attract shipping traffic; (3) possible emission control areas along a northern route may require much cleaner energy and thus impact costs not studied in previous models; and (4) the capital cost difference between a hired and a self-owned vessel. Classical case studies of shipping routes between Shanghai and Rotterdam are adopted for comparison. We explain how different factors impact the shipping costs and to what extent can the NSR be economically viable. Occasional usage of NSR (e.g., one time transit) is unlikely to be more profitable given the higher unit transportation cost, but the route could be economically competitive in terms of the total profits earned for continuous usage. A more aggressive scenario which requires ships on the NSR to switch to much cleaner fuel would erode this route’s competitiveness, but extra environmental benefits should be taken into consideration if future carbon emission trading schemes include the shipping industry.

Suggested Citation

  • Zheng Wan & Jiawei Ge & Jihong Chen, 2018. "Energy-Saving Potential and an Economic Feasibility Analysis for an Arctic Route between Shanghai and Rotterdam: Case Study from China’s Largest Container Sea Freight Operator," Sustainability, MDPI, vol. 10(4), pages 1-13, March.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:4:p:921-:d:137522
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    References listed on IDEAS

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    Cited by:

    1. Liu, ChengCheng & Lian, Feng & Yang, Zhongzhen, 2021. "Comparing the minimal costs of Arctic container shipping between China and Europe: A network schemes perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 153(C).
    2. Theocharis, Dimitrios & Rodrigues, Vasco Sanchez & Pettit, Stephen & Haider, Jane, 2019. "Feasibility of the Northern Sea Route: The role of distance, fuel prices, ice breaking fees and ship size for the product tanker market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 129(C), pages 111-135.
    3. Sung-Woo Lee & Jisung Jo & Sewon Kim, 2021. "Leveraging the 4th Industrial Revolution Technology for Sustainable Development of the Northern Sea Route (NSR)—The Case Study of Autonomous Vessel," Sustainability, MDPI, vol. 13(15), pages 1-12, July.
    4. Nestor Goicoechea & Luis María Abadie, 2021. "Optimal Slow Steaming Speed for Container Ships under the EU Emission Trading System," Energies, MDPI, vol. 14(22), pages 1-25, November.
    5. Xing, Hui & Spence, Stephen & Chen, Hua, 2020. "A comprehensive review on countermeasures for CO2 emissions from ships," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    6. Qiang Zhang & Zheng Wan & Shanshan Fu, 2020. "Toward Sustainable Arctic Shipping: Perspectives from China," Sustainability, MDPI, vol. 12(21), pages 1-12, October.
    7. Wang, Yangjun & Liu, Kefeng & Zhang, Ren & Qian, Longxia & Shan, Yulong, 2021. "Feasibility of the Northeast Passage: The role of vessel speed, route planning, and icebreaking assistance determined by sea-ice conditions for the container shipping market during 2020–2030," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    8. Sibul, Gleb & Jin, Jian Gang, 2021. "Evaluating the feasibility of combined use of the Northern Sea Route and the Suez Canal Route considering ice parameters," Transportation Research Part A: Policy and Practice, Elsevier, vol. 147(C), pages 350-369.

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