Effects of IMO sulphur limits on the international shipping company's operations: From a game theory perspective

Abstract

The International Maritime Organization (IMO) implements sulphur limits to control sulphur dioxides (SO2) emissions. Their measures include global sulphur cap (GSC) and emission control areas (ECA) regulations. The purpose of this study is to investigate the effects of IMO sulphur limits on vessel speeds, and examine the effectiveness of IMO sulphur limits in cross-linkage of SO2 and CO2 emissions, from a game theory perspective. We propose an integrated game model for multiple shipping companies in which the vessels sail at different speeds inside and outside ECAs. Besides the fuel costs, the cargo’s in-transit inventory cost and fixed cost are considered in the model. The analytical results suggest that the optimal speeds are strongly affected by fuel prices. IMO sulphur limits are not always effective in reducing SO2 and CO2 emissions, which depends on conditions such as the additional operational cost per nautical mile arises from ECA regulations and fuel prices. When fuel prices are sufficiently low or high, CO2 emissions will increase because of the new GSC. In numerical study, three scenarios and sensitivity analysis are examined. It is found that the new GSC and ECA regulations always reduce SO2 emissions. However, CO2 emissions may be increased due to the new GSC.