Emission charge and liner shipping network configuration – An economic investigation of the Asia-Europe route

Abstract

This paper models shipping lines’ operational costs and CO2 emissions under alternative geographic network configurations when an emission charge is imposed on operations from Asia to Europe. Our modeling results suggest that shipping firms’ network configuration is influenced by emission charge, fuel price, port loading and unloading cost, and demand pattern of cargo transport across different markets. Total emission will be reduced by an EU emission charge scheme. However, if the charge is above a threshold, carriers will reconfigure shipping networks to minimize their costs including emission charge payments. This will offset part of the emission reduction achieved by the emission scheme. As a result, a higher charge does not always lead to a higher emission reduction. The performance of major ports along the Asia-Europe routes will be influenced in different ways, leading to conflicting views from regional governments. These findings reveal possible regulation costs and market distortions associated with regional emission systems, and highlight the complex effects of international environmental policies when market dynamics are considered.