Investigating optimal green port investment strategies considering location-based externalities

Green port development benefits the port communities but might make shippers in the hinterland face positive or negative externalities. Those externalities to shippers might be amplified or reduced by congestion, which more likely happens when ports have a farther hinterland location. Therefore, the location-based externalities should be considered when decide green effort in competing ports. In this paper, we establish a competition-based green effort decision-making model in different scenarios, focusing on the impact of location-based externalities. By comparing the green effort and welfare under different investment modes and different market power structure, we discuss the impacts of location-based externalities and the motivation for joint-investment in green port development. We find that (1) The positive location-based externalities decrease the port profit due to the non-exclusivity of green port services. Public port governance mode and the dominant market position can alleviate port’s losses. (2) The negative location-based externalities make smaller port contribute more green effort than the larger port. (3) As the positive location-based externality increase gradually, the joint-investment between ports with similar size achieves lower total welfare than the separate-investment. Our findings suggest the necessity for flexible adjustment of green port plans to mitigate conflicting interests between ports and hinterlands.