Emission Abatement Technology Selection, Routing and Speed Optimization of Hybrid Ships

This paper evaluates the effect of a large-capacity electrical energy storage, e.g., Li-ion battery, on optimal sailing routes, speeds, fuel choice, and emission abatement technology selection. Despite rapid cost reduction and performance improvement, current Li-ion chemistries are infeasible for providing the total energy demand for ocean-crossing ships because the energy density is up to two orders of magnitude less than in liquid hydrocarbon fuels. However, limited distance zero-emission port arrival, mooring, and port departure are attainable. In this context, we formulate two groups of numerical problems. First, the well-known Emission Control Area (ECA) routing problem is extended with battery-powered zero-emission legs. ECAs have incentivized ship operators to choose longer distance routes to avoid using expensive low sulfur fuel required for compliance, resulting in increased greenhouse gas (GHG) emissions. The second problem evaluates the trade-off between battery capacity and speed on battery-powered zero-emission port arrival and departure legs. We develop a mixed-integer quadratically constrained program to investigate the least cost system configuration and operation. We find that the optimal speed is up to 50% slower on battery-powered legs compared to the baseline without zero-emission constraint. The slower speed on the zero-emission legs is compensated by higher speed throughout the rest of the voyage, which may increase the total amount of GHG emissions.

Refunding Emission Payments: Output-Based Versus Expenditure-Based Refunding

We analyse two mechanism designs for refunding emission payments to polluting firms: output-based refunding (OBR) and expenditure-based refunding (EBR). In both instruments, emission fees are returned to the polluting industry, typically making the policy more politically acceptable than a standard tax. The crucial difference between OBR and EBR is that the fees are refunded in proportion to output in the former but in proportion to the firms’ expenditure on abatement technology equipment in the latter. To achieve the same abatement target as a standard tax, the fee level in the OBR design is higher, whereas the fee level in the EBR design is lower. The use of OBR and EBR may lead to large differences in the distribution of output and costs across firms. Both designs imply a cost-ineffective provision of abatement, as firms put relatively too much effort into reducing emissions through abatement technology compared with reducing output. However, a standard tax may be politically infeasible and maintaining output may be seen as a political advantage by policymakers if they seek to avoid activity reduction in the regulated sector.

Promotion of Green Technology under Different Environmental Policies

In this paper, I develop a two-stage game of pollution abatement technology adoption in a Cournot oligopoly to investigate a firm’s decision to adopt pollution abatement technology. In particular, I study the adoption incentives and welfare implications of popular environmental policies, namely emission fees and quotas. Tradeable permits result in identical outcomes to emission fees. Within each policy regime, the conditions for Nash equilibria are identified where both firms invest in the green technology, neither firm invests in the technology, or only one firm invests. The following extensions are also analyzed: asymmetric adoption costs, increase in the marginal cost of production from adoption, and a type-dependent fee where adoption reduces the emission fee. Social welfare under an emission fee is identical to that under a quota. However, when policy is (not) stringent, firms are more willing to adopt expensive technology under a fee (quota) than under a quota (fee, respectively).