Incentive policy for reduction of emission from ships: A case study of China

- Particulate matter (PM) emissions from ships contribute to air pollution.
- An incentive policy is conceptualized.
- The most economically efficient approach for PM emission reduction is identified.
- Shipping companies are encouraged to apply PM emission reduction technologies.

Particulate matter (PM) emissions from ships in ports are a major contributor to air pollution and smog in port cities. The issue of how to reduce PM emissions has become a critical concern for port city residents and governments. This paper establishes an incentive policy to reduce PM emissions from ships in ports. Using a Panamax bulk carrier as a case study, eight alternative approaches that could be adopted by shipping companies are compared and their operational benefits are estimated. By restricting the analysis to emission control areas (ECAs), the net present value (NPV) model shows that the diesel particulate filter (DPF) is the most advantageous approach with the highest NPV, while the exhaust gas scrubber (EGS) approach is the most economically inefficient. Meanwhile, due to DPF's excellent performance in PM abatement, it is suggested that governments should prioritize the DPF approach when promoting the application of emission reduction technologies. From the perspective of social welfare, a positive social benefit of about US $20,000 will be generated over the life cycle of a ship. However, a low government pricing in China will reduce shipping companies' operational performance as the emission control zone (ECZ) gradually expands. As a result, an appropriate subsidy scheme is necessary to encourage shipping companies to apply emission reduction technologies.