Environmental discounts for Swedish ports and fairways: A ship owner perspective

Abstract

Sweden has adopted environmental discounts for ships arriving at fairways and in some ports to encourage investment in measures to reduce shipping’s impact on climate change, air quality and marine environment. The present study investigates the impact of these discounts in 2020 on investment decisions made by ship-owners. As a starting point, this impact was assessed by comparing the potential annual benefits of the discounts with the annualized costs of retrofitting four selected abatement technologies. The results indicate that, while the port discounts are relatively small when compared to the costs of abatement, the fairway discounts could be significant for ships frequently calling at Swedish ports under specific conditions. However, we conclude that the discounts alone are insufficient to incentivize ship-owners to invest in abatement technologies for older ships. To improve the usefulness of these discounts, the design should incorporate a more precise internalization of abatement costs. This could be achieved by implementing individual discounts for different abatement strategies, establishing dedicated subsidies for high-cost innovative technologies, enhancing scoring systems, and by better matching the discount with other market-based policies internationally.