Abstract

This dissertation investigates the Greenhouse Gases (GHGs) from ships calling at U.S ports, calculates the marginal abatement cost to reduce vessel-based GHGs, and evaluates the cost-effectiveness of proposed polices targeting at GHGs reduction. The ship profit maximization model is constructed to analyze the reduction cost of CO₂ from speed reduction and compare the cost with other estimates. Two econometric models based on gravity model in International Trade are applied to calibrate the CDM distribution, the potential use of the CDM by the shipping industry, and the effects of ship size, power, and speed on transportation cost. The Trade, Ship empirical movement, Ship parameters, and origin-destination Pairs model (TSSP) is developed to estimate the GHGs, GHG reduction costs, and the cost effects on value of trade carried by the international shipping industry.

Results show that the abatement cost of speed reduction policy is higher than the carbon price in a cross-sectoral carbon market. Twenty-percent (20%) CO₂ reduction under $250 per ton fuel price generates between $15 per ton and $275 per ton marginal abatement cost. The shipping industry can substantially reduce their compliance cost per ship by investing in CDM projects outside the shipping sector in landside efforts among developing nations. Larger scale CDM projects demonstrate greater cost advantages for investment; therefore the relatively small size of offset in terms of CDM project scale hinders the effectiveness of this strategy for the shipping industry. The econometric model based on gravity theory quantified positive relationship between ship speed and transportation cost and also showed statistically significant coefficients for ship size and power. The cross-sectoral model demonstrates the substitution effects between speed and ship size and shows the speed is not the only factor that influences the long-run ship transportation cost. The TSSP model illustrates that the adherence to the Equal Treatment for All Ships principle in vessel-based GHG reduction may cost developing countries between $17.6 billion and $16.0 billion for ships calling at the U.S ports. Applying the Common but Differentiated Responsibility (CBDR) principle may help developing countries to avoid such cost but may generate other equity problems. Therefore, the policy which requires all ship to reduce GHGs but to subsidize developing countries is likely to be more effective and efficient in GHG reduction from ships.