Subsidy, tax or green awareness: Government policy selection for promoting initial shore power usage and sustaining long-run use

Abstract

Shore power (SP) can provide electricity from the land for ships instead of from ship engines; this approach can eradicate carbon emissions and foster green port development. However, due to the high SP installation cost and high electricity prices faced by shipping operators, the utilization rate of SP is still low. For the government, it is important and urgent to develop an effective policy to promote shore power usage. However, previous studies have not compared the effects of different government policies and have ignored the differences in SP usage stages. Therefore, in this study, three kinds of policies, subsidy, carbon tax and shipper green awareness improvement, are taken into consideration. The SP usage process is divided into two stages, namely, stimulating ship retrofitting for SP in the short term and sustaining SP usage in the long run. The purpose of this study is to provide policy-selection suggestions for short- and long-term SP promotion. Considering shipping supply chain competition, game theory is applied, and a series of Nash game models are formulated to investigate the equilibrium strategies of shipping operators on SP usage under different policies. A comparison of the results reveals that in the short run, the subsidy policy is superior to the carbon tax policy when both can promote SP usage. However, a moderate carbon tax is able to remedy the failure of subsidies. In the long run, a carbon tax may promote SP at the cost of diminishing social welfare. Improving shipper green awareness is more likely to be a preferable choice for both SP usage and social welfare. This paper also analyses the impacts of scale-based port congestion and green awareness. These findings can provide valuable suggestions for government and shipping operators to promote SP usage, reduce emissions and achieve the goal of green port construction.