Cost assessment of environmental regulation and options for marine operators

Recent marine environment regulatory actions have ignited strong debates and discussions among policy-makers, researchers and operators. This paper provides a methodological framework for the estimation of the cost impact of some of the environmental measurements, and specifically on the increase of operating expenses of seagoing vessels due to the sulfur limits determined by MARPOL Annex VI. A model based on stochastic linear programming is presented that aims to minimize the total cost of an operator, by determining the fleet-mix and the capacity offered under budgetary and fleet attributes constraints, and taking into account demand and growth pattern per period of analysis. The stochastic scenarios are based on the probability of the fleet operating in a Sulfur Emission Control Areas (SECAs). A liner and a tramp shipping applications are presented, and the results are discussed. The paper concludes with a summary of the achieved goals, of the limitations of this model, and the future development of this approach.

► SLP decision model supporting strategic and tactical allocation of marine capacity. ► Focus on Sulfur Emission Control Areas (SECAs) and related cost issues. ► Assessment of compliance cost due to new environmental regulations. ► Uncertainties in demand and operational scenarios are incorporated in SLP model. ► A typical mixed-integer programming (MIP) problem is derived.