Abstract
Market-based measures for international shipping, which have been discussed by the Marine Environment Protection Committee, provide shipping companies with incentives to reduce carbon dioxide (CO2) emissions and change long-term behavior for ships, especially investment in capacity and fuel efficiency. This study presents a fundamental theoretical model to deal with the issues before applying real data. Specifically, since the literature has focused less on these issues, we develop an optimal control model to analyze the investment behavior of a shipping company, improvement of fuel efficiency, and CO2 emissions from ship operations by introducing a tax on them. The results of analysis show the classification of optimal conditions, the relationships between fuel price with emission tax and investment behavior, and the rebound effect of improving fuel efficiency of the tax. A policy mix, which consists of the tax and a direct subsidy, is deemed optimal for an international shipping company.
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