Shore power vs low sulfur fuel oil: pricing strategies of carriers and port in a transport chain

Abstract

Abstract With the increasingly serious pollution from the ships berthing at port and the emergence of low-carbon policies, shore power (SP) and low sulfur fuel oil (LSFO) have become effective means to reduce the emissions from ships berthing in the ports. In order to analyse two emission mitigation strategies, we establish a non-cooperative game model in a transport chain consisting of a terminal and two carriers who adopt SP or LSFO strategy and obtain the equilibrium results and pricing strategies under different conditions. We observe that, when the carbon price is lower than a threshold, both carriers will choose LSFO; otherwise, both carriers will adopt SP. However, if the two carriers cooperate to maximize their total profits, they will simultaneously choose LSFO when the carbon price is lower than another threshold or choose SP when the carbon price is higher than the threshold, which will maximize the total profits of the transport chain. If the carbon price is less than the threshold, the consumer surplus will be maximized when two carriers adopt LSFO, otherwise the consumer surplus will be maximized when two carriers use SP. If two carriers cooperate to maximize their total profits, this will maximize the entire transport chain’s profits and the consumer surplus. Finally, the validity of model is verified by taking Shenzhen Port as an example.