Reducing emissions in international transport: A supply chain perspective

Abstract

• Propose a novel approach to reduce sulphur emissions, which can be trade enhancing. • Investment in supply chain performance can reduce emissions via indirect mechanisms. • Emission targets achieved by promoting trade and using larger vessels to move goods. • A combination of an augmented gravity equation and econometric models are applied. • The proposed indirect mechanism is complementary to the IMO sulphur emissions cap. This paper proposes a novel way to reduce sulphur emissions in international transport, by focusing on the role of logistics improvements and vessel size. Using an augmented gravity model and advanced econometric methods, we assess the impact of logistics performance on bilateral trade, and then evaluate the link between bilateral trade and vessel size. The estimation results are translated in terms of sulphur emission reduction. The models are estimated on an original panel data set composed of worldwide bilateral trade of manufactured goods, several characteristics of container vessels and maritime routes, and indicators of logistics performance. We show that investing in logistics improvements can generate trade growth, and reduce sulphur emissions per unit of goods transported by promoting the utilization of larger and more fuel-efficient vessels. The proposed indirect mechanism is complementary to the current sulphur emissions cap, and allows decision-makers to reduce emissions which can be trade enhancing.