A1471
Title: The economics of shipping decarbonization: Carbon, production, and allocative efficiencies
Authors: Yao Shi - City University of London (United Kingdom) [presenting]
Ioannis Moutzouris - Bayes Business School (United Kingdom)
Abstract: The trade-off between environmental and economic performance is investigated in the case of the shipping industry. Existing environmental regulations largely omit the economic efficiency dimension, which, in turn, delays the clean energy transition. A stochastic frontier analysis is applied to assess the relationship between carbon emissions and economic factors as capital, labour, earnings, and transport work, both across all major shipping segments and at an individual-vessel level. The empirical results suggest that technical and operational inefficiencies raise the total cost of owning and operating a vessel by 6\%, with market price dynamics and inefficient allocation of economic resources increasing it by 17\%. There is scope for the average vessel to reduce its carbon emissions by 31\% although carbon efficiency varies significantly depending on the vessel type and period. Higher production efficiency is observed in newer vessels, vessels spending more time at sea, and vessels equipped with more ESTs, and companies with more EST investment. A reduction in speed of up to 15\% can improve a vessel's overall efficiency and reduce total cost. Policy interventions need to be carefully designed in order not to negatively impact the overall efficiency of global shipping.
