Chapter 3 Evaualting the fuel switching policy under the 0.5 sulfur cap

3.0.1 Firm 1; New Panamax; A fleet with Big capacity ~ 14,000 TEU 1.1.HFO(3.55%) ULSFO (0.5%)

3.0.2 Firm 2; Post Panamax II; A fleet with medium capacity ~ 8000 TEU HFO(3.55%) ULSFO (0.5%)

3.0.3 Firm 3; Post Panamax I: A fleet with medium capacity ~ 6000TEU HFO(3.55%) ULSFO (0.5%)

## [1] "total market transport work in TEU"
## [1] 253266848.3

3.1 Evaluating the sulfur cap fuel switching abatement policy per vessel size

3.1.1 Carbon emissions and Vessel Returns to scale in the presence of the sulfur cap policy

3.1.2 Sulfur emissions and Vessel Returns to scale in the presence of the sulfur cap policy

## [1] "sulfur"

3.1.3 Observations:

  • Why is it that only firm 3 the only firm to see a decrease in its carbon emission as a result for the sulfur cap policy

  • the fuel-switching option is more cost-e ciency under Scenario 1 and 2. This is because of the short distance of global and Chinese SECAs in the whole line, which only accounts for 4.3% in the total distance In terms of the other scenarios with stricter global sulfur cap, i.e., 0.5% Sulfur cap regulation on global high seas, the compliance choice changes owing to the truth that more low-sulfur oil has to be used in the whole cycle. The scrubber system shows its advantages during the vessels’ lifespan when a stricter sulfur cap is e ective in a large scale. In Scenario 3, the sulfur cap of 0.1% is required in global SECAs and 0.5% within Chinese SECA and global high seas, which is the most possible situation in

  1. The result shows that the scrubber system is more economic after the 10th year. In Scenario 4, the sulfur cap of 0.1% is assumed in all SECAs and 0.5% on global high seas, which is stricter than Scenario 3. The result suggests that the daily costs increase with the increasingly strict sulfur policy and the advantageous year of the scrubber installation option will begin from the 8th year. Through the discussion, we can see that the stricter the sulfur regulations, the higher the priority of installing scrubbers due to the more cost-savings by using high-sulfur fuel (lower in price). The speed di erentiation in the fuel-switching option is also analyzed under four scenarios in Table 4. We find that the variation of speed in di erent areas is smaller under the latter two scenarios. This may be due to the relatively narrow distance within SECAs in the cycle, and the smaller price spread between the low-sulfur oils, i.e., oils with sulfur content of 0.1% and 0.5%. These could be further investigated in the future. The last observation from the numerical analysis in Table 4 is about the emission abatement e ciency of the two options. All scenarios confirm the higher abatement e ciency of the scrubber system on SOx emission. In terms of CO2 emission, the scrubber system has a higher value comparing with the fuel-switching option due to more energy consumption in the scrubber system, which is consistent with the result acquired by Abadie et al. [26]. The di erences of emissions and total daily costs for two compliance options are listed (D Daily cost, D CO2, and D SOx), which shows the variations between the fuel-switching and scrubber system. Obviously, stricter sulfur caps can reduce sulfur emissions in both compliance options. However, it does not work for carbon emissions. Actually, it increases the carbon emission, which urges the renegotiation of environmental policies for shipping activities.