Economic benefits of introducing LNG-fuelled ships for imported flour in South Korea

Abstract

As the concerns about air pollution have steadily increased, the perception that ships are the source of pollutants and toxic emissions is also expanding. Thus, the International Maritime Organization (IMO) is tightening maritime regulations to reduce air pollution from ships. Currently, the government and related industries are trying to replace heavy fuel oil with liquefied natural gas (LNG) to counter future IMO regulations. Since the use of LNG is expected to increase costs, it is necessary to estimate the social benefits to determine the legitimacy of the replacement. The purpose of this study is to analyse the public’s willingness to pay (WTP) for products imported in LNG-fuelled ships using the contingent valuation method. Flour, the most of which is currently imported in South Korea, is chosen as the subject of empirical analysis. As a result, the mean additional WTP was KRW 571 (USD 0.51) per kg. This value corresponds to about 36% of the existing flour price. Therefore, South Korean households are willing to pay a considerable premium on the flour imported via LNG-fuelled ships. These results can serve as useful bases for future LNG bunkering-related policies.