The effectiveness and costs of speed reductions on emissions from international shipping

Greenhouse gas emissions from international shipping are an increasing concern. The paper evaluates whether vessel speed reduction can be a potentially cost-effective CO2 mitigation option for ships calling on US ports. By applying a profit-maximizing equation to estimate route-specific, economically-efficient speeds, we explore policy impacts of a fuel tax and a speed reduction mandate on CO2 emissions. The profit-maximizing function incorporates opportunity costs associated with speed reduction that go unobserved in more traditional marginal abatement cost analyses. We find that a fuel tax of about $150/ton fuel will lead to average speed-related CO2 reductions of about 20–30%. Moreover, a speed reduction mandate targeted to achieve 20% CO2 reduction in the container fleet costs between $30 and $200 per ton CO2 abated, depending on how the fleet responds to a speed reduction mandate.