The effects of financial incentives on vessel speed reduction: Evidence from the Port of Long Beach Green Flag Incentive Program

Abstract

We analyze the efficacy of using dockage-fee discounts as an incentive for oceangoing vessel operators to comply with the Vessel Speed Reduction programs of seaports, such as those implemented at the ports in Long Beach, Los Angeles, San Diego, New York and New Jersey. On the basis of unique data from the Port of Long Beach’s program, we find that discounts are indeed effective, and that those effects vary considerably by operator type, suggesting a role for differentiated pricing strategies to better motivate compliance. We also develop a novel method for exploiting those data to estimate the value of time for vessel operators, with estimates ranging from US$268 to $759 per hour. Our findings are obtained from a discrete-choice model for panel data that estimates how the probability of compliance is influenced by potential dockage-fee savings and speed-reduction delays, and by the characteristics of operators and their vessels. That model also reveals the tradeoffs those operators make between time and money, from which we derive our value of time estimates.