How Government Subsidy Impacts on the Supply Chain Decision for LNG-Fuelled Ships

Abstract

LNG-fuelled ships help fight environmental pollution induced by fossil fuel. Chinese government has also considered encouraging the shipbuilder’s initiative of producing or introducing LNG-fuelled ships through subsidies. However, rare scholars have concerned the impact of government subsidy on the supply chain decision of LNG-fuelled ships in the existing studies. This study takes green degree and government subsidy into account in the LNG-fuelled ship supply chain of a manufacturer and an owner and studies the pricing, market demand, and supply chain benefits. Our main contributions are considering the correlation between the green degree of LNG ships and government subsidy factors and exploring the influence of government subsidy on supply chain decision-making under decentralized and centralized decision-making by ship manufacturers and owners. The results show that government subsidies are conducive to promoting the whole profit and the market demand in the ship supply chain. Centralized decision generates higher profits than decentralized decisions. In the centralized decision model, government subsidies and the green degree of LNG-fuelled ship are positively correlated with the market demand. In the decentralized decision model, the price of an LNG-fuelled ship charged by shipbuilder when providing subsidies for owners is greater than that when providing subsidies for shipbuilder. Manufacturers and owners should pay attention to the greenness of ships, and the government should adopt appropriate subsidy policies to encourage the production and application of LNG ships.