Graphical Abstract Figure
Abstract
The shipping sector must reduce its greenhouse gas emissions. Consumers demand green travel and transport services, but shipping is still to a large extent powered by fossil fuels. One of the key factors affecting the released emissions onboard the ship is the type of fuel utilized. Technological development is making new kinds of engines running with carbon-neutral fuels available. However, the new build and retrofit projects encountering the green transition have to be planned in detail. We analyze future cash flows of ropax ships operating with different types of fuel systems on an identical route. We base our findings on calculated asset values and internal rates of return. Based on our analysis of the given scenarios, the transition to carbon-neutral fuels comes with a cost for the shipping companies. In the forthcoming shipping competition, ships using fossil fuels will be more likely than their less polluting counterparts to be categorized as stranded assets.
References
1.
Climeon
, 2022
, “Responsible Tourism: Can Cruise Ships Deliver Sustainable Travel? Responsible Tourism: Can Cruise Ships Deliver Sustainable Travel?2.
Christodoulou
, A.
, and Cullinane
, K.
, 2021
, “Potential for, and Drivers of, Private Voluntary Initiatives for the Decarbonisation of Short Sea Shipping: Evidence From a Swedish Ferry Line
,” Marit. Econ. Logist.
, 23
(4
), pp. 632
–654
. 3.
Meriaura
, 2022
, “Meriaura EcoVoy Contract – Carbon Neutral Sea Transport,” Meriaura. https://meriaura.fi/en/ecovoy/, Accessed January 29, 2024.4.
Schwartz
, H.
, Gustafsson
, M.
, and Spohr
, J.
, 2020
, “Emission Abatement in Shipping – Is It Possible to Reduce Carbon Dioxide Emissions Profitably?
” J. Clean. Prod.
, 254
, pp. 1
–12
. 5.
Zis
, T. P. V.
, Psaraftis
, H. N.
, Tillig
, F.
, and Ringsberg
, J. W.
, 2020
, “Decarbonizing Maritime Transport_ A Ro-Pax Case Study
,” Res. Transp. Bus. Manage.
, 37
, pp. 1
–12
. 6.
Kronthal-Sacco
, R.
, and Whelan
, T.
, 2021
, “Sustainable Market Share Index TM,” NYU, Stern. https://www.stern.nyu.edu/sites/default/files/assets/documents/Final 2021 CSB Practice Forum- 7.14.21.pdf, Accessed March 19, 2024.7.
Kronthal-Sacco
, R.
, and Whelan
, T.
, 2023
, “Sustainable Market Share Index,” NYU, Stern. https://www.stern.nyu.edu/sites/default/files/2023-09/Final 2022 CSB Report for website.pdf, Accessed March 19, 2024.8.
Sonnenschein
, J.
, and Smedby
, N.
, 2019
, “Designing Air Ticket Taxes for Climate Change Mitigation: Insights From a Swedish Valuation Study
,” Clim. Policy
, 19
(5
), pp. 651
–663
. 9.
BCG
, 2022
, “Customers' Willingness to Pay Can Turn the Tide Towards Decarbonized Shipping,” Boston Consulting Group. https://www.bcg.com/publications/2022/customers-willingness-to-pay-to-decarbonize-shipping, Accessed January 29, 2024.10.
Yliskylä-Peuralahti
, J.
, 2016
, “Sustainable Energy Transitions in Maritime Transport
,” J. Sustain. Mobil.
, 3
(2
), pp. 67
–93
. 11.
Faber
, J.
, Hanayama
, S.
, Zhang
, S.
, Pereda
, P.
, Comer
, B.
, Hauerhof
, E.
, et al, 2021
, Fourth IMO GHG Report
, International Maritime Organization
, London
.12.
Sharmina
, M.
, Edelenbosch
, O. Y.
, Wilson
, C.
, Freeman
, R.
, Larkin
, A.
, Littleton
, E. W.
, et al, 2021
, “Decarbonising the Critical Sectors of Aviation, Shipping, Road Freight and Industry to Limit Warming to 1.5-2C
,” Clim. Pol.
, 21
(4
), pp. 455
–474
. 13.
Köhler
, J.
, Dönitz
, E.
, and Schätter
, F.
, 2022
, “Transitions for Ship Propulsion to 2050: The AHOY Combined Qualitative and Quantitative Scenarios
,” Mar. Pol.
, 140
, pp. 1
–12
. 14.
DNV
, 2023
, “IMO Regulations,” DNV. https://www.dnv.com/maritime/hub/decarbonize-shipping/key-drivers/regulations/imo-regulations/index.html, Accessed January 29, 2024.15.
DNV
, 2021
, “Fit for 55 – New EU GHG Regulations for Ships Coming Soon,” DNV. https://www.dnv.com/news/fit-for-55-new-eu-ghg-regulations-for-ships-coming-soon-208746, Accessed January 29, 2024.16.
DNV
, 2018
, “IMO Regulations,” IMO Regulations. https://www.dnv.com/maritime/hub/decarbonize-shipping/key-drivers/regulations/imo-regulations/index.html, Accessed March 4, 2022.17.
Tsvetkova
, A.
, Hellström
, M.
, Schwartz
, H.
, Rabetino
, R.
, and Syed
, H.
, 2024
, “A Transition Towards Clean Propulsion in Shipping: The Role of PESTLE Drivers and Implications for Policy
,” Mar. Policy
, 161
, pp. 1
–12
. 18.
Xing
, H.
, Spence
, S.
, and Chen
, H.
, 2020
, “A Comprehensive Review on Countermeasures for CO2 Emissions From Ships
,” Renewable Sustainable Energy Rev.
, 134
, pp. 1
–18
. 19.
Hellström
, M.
, Rabetino
, R.
, Schwartz
, H.
, Tsvetkova
, A.
, and Syed
, H.
, 2024
, “GHG Emission Reduction Measures and Alternative Fuels in Different Shipping Segments and Time Horizons – A Delphi Study
,” Mar. Policy
, 160
, pp. 1
–10
. 20.
Balcombe
, P.
, Brierley
, J.
, Lewis
, C.
, Skatvedt
, L.
, Speirs
, J.
, Hawkes
, A.
, et al, 2019
, “How to Decarbonise International Shipping: Options for Fuels, Technologies and Policies
,” Energy Convers. Manage.
, 182
, pp. 72
–88
. 21.
Kou
, Y.
, and Luo
, M.
, 2015
, “Modelling the Relationship Between Ship Price and Freight Rate With Structural Changes
,” J. Transp. Econ. Policy
, 49
(2
), pp. 276
–294
.22.
Alizadeh
, A. H.
, and Nomikos
, N. K.
, 2007
, “Investment Timing and Trading Strategies in the Sale and Purchase Market for Ships
,” Transp. Res. Part B
, 41
(1
), pp. 126
–143
. 23.
Beenstock
, M.
, and Vergottist
, A.
, 1989
, “An Econometric Model of the World Tanker Market
,” J. Transp. Econ. Pol.
, 23
(3
), pp. 263
–280
.24.
Unruh
, G.
, Kiron
, D.
, Kruschwitz
, N.
, Reeves
, M.
, Rubel
, H.
, and Meyer zum Felde
, A.
, 2016
, “Investing for a Sustainable Future
,” MIT Sloan Manage. Rev.
, 57
(4
), pp. 1
–30
.25.
PwC
, 2022
, “Asset and Wealth Management Revolution 2022 – Exponential Expectations for ESG,” PwC. https://www.pwc.com/awm-revolution-2022, Accessed January 29, 2024.26.
Eliwa
, Y.
, Aboud
, A.
, and Saleh
, A.
, 2021
, “ESG Practices and the Cost of Debt: Evidence From EU Countries
,” Crit. Perspect. Account.
, 79
, pp. 1
–21
. 27.
WEF
, 2019
, “Banks Launch Green Charter to Help Shipping Reduce Its Carbon Footprint,” World Economic Forum. https://www.weforum.org/agenda/2019/06/how-banks-are-leading-shippings-green-transition/, Accessed January 29, 2024.28.
EU
, 2022
, “EU Taxonomy Navigator,” European Union. https://ec.europa.eu/sustainable-finance-taxonomy/, Accessed January 29, 2024).29.
Caldecott
, B.
, 2018
, Introduction: Stranded Assets and the Environment. Stranded Assets and the Environment–Risk, Resilience and Opportunity
, Routledge
, London
, pp. 1
–22
.30.
Cato
, M. S.
, and Fletcher
, C.
, 2020
, “Introducing Sell-by Dates for Stranded Assets: Ensuring an Orderly Transition to a Sustainable Economy
,” J. Sustain. Finance Invest.
, 10
(4
), pp. 335
–348
. 31.
Falk
, M.
, and Hagsten
, E.
, 2019
, “Ways of the Green Tourist in Europe
,” J. Cleaner Prod.
, 225
, pp. 1033
–1043
. 32.
Booking.com
, 2022
, “Sustainable Travel Report 2022,” Sustainable Travel Report. https://globalnews.booking.com/download/1161485/booking.comsustainabletravelreport2022final.pdf, Accessed January 29, 2024.33.
Tang
, C. M. F.
, and Lam
, D.
, 2017
, “The Role of Extraversion and Agreeableness Traits on Gen Y’s Attitudes and Willingness to Pay for Green Hotels
,” Int. J. Contemporary Hosp. Manage.
, 29
(1
), pp. 607
–623
. 34.
Miao
, L.
, and Wei
, W.
, 2016
, “Consumers’ Pro-Environmental Behavior and Its Determinants in the Lodging Segment
,” J. Hosp. Tour. Res.
, 40
(3
), pp. 319
–338
. 35.
Chekima
, B.
, Syed Khalid Wafa
, S. A. W.
, Igau
, O. A.
, Chekima
, S.
, and Sondoh
, S. L.
, 2016
, “Examining Green Consumerism Motivational Drivers: Does Premium Price and Demographics Matter to Green Purchasing?
” J. Clean. Prod.
, 112
, pp. 3436
–3450
. 36.
Martenson
, R.
, 2018
, “When is Green a Purchase Motive? Different Answers From Different Selves
,” IJRDM
, 46
(1
), pp. 21
–33
. 37.
Namkung
, Y.
, and Jang
, S.
, 2017
, “Are Consumers Willing to Pay More for Green Practices at Restaurants?
,” J. Hosp. Tour. Res.
, 41
(3
), pp. 329
–356
. 38.
Choi
, A. S.
, Gössling
, S.
, and Ritchie
, B. W.
, 2018
, “Flying With Climate Liability? Economic Valuation of Voluntary Carbon Offsets Using Forced Choices
,” Transp. Res. Part D
, 62
, pp. 225
–235
. 39.
Berger
, S.
, Kilchenmann
, A.
, Lenz
, O.
, and Schlöder
, F.
, 2022
, “Willingness-to-Pay for Carbon Dioxide Offsets: Field Evidence on Revealed Preferences in the Aviation Industry
,” Global Environ. Change
, 73
, p. 102470
. 40.
Schwartz
, H.
, Solakivi
, T.
, and Gustafsson
, M.
, 2022
, “Is There Business Potential for Sustainable Shipping? Price Premiums Needed to Cover Decarbonized Transportation
,” Sustainability
, 14
(10
), pp. 1
–20
. 41.
Tamannaei
, M.
, Zarei
, H.
, and Rasti-Barzoki
, M.
, 2021
, “A Game Theoretic Approach to Sustainable Freight Transportation: Competition Between Road and Intermodal Road–Rail Systems With Government Intervention
,” Transp. Res. Part B
, 153
, pp. 272
–295
. 42.
Owen
, G.
, 2013
, Game Theory
, 4th ed., Emerald Group Publishing Ltd
, UK
.43.
Nash
, J.
, 1953
, “Two-Person Cooperative Games
,” Econometrica
, 21
(1
), pp. 128
–140
. 44.
Song
, D.-W.
, and Panayides
, P. M.
, 2002
, “A Conceptual Application of Cooperative Game Theory to Liner Shipping Strategic Alliances
,” Marit. Policy Manage.
, 29
(3
), pp. 285
–301
. 45.
Bó P
, D.
, and Fréchette
, G. R.
, 2019
, “Strategy Choice in the Infinitely Repeated Prisoner’s Dilemma
,” Am. Econ. Rev.
, 109
(11
), pp. 3929
–3952
. 46.
Hwang
, I.
, 2018
, “A Theory of Bargaining Deadlock
,” Games Econ. Behav.
, 109
, pp. 501
–522
. 47.
Investopedia
, 2022
, “What Is Internal Rate of Return (IRR),” Investopedia. https://www.investopedia.com/terms/i/irr.asp. Accessed January 29, 2024.48.
Bockmann
, M. W.
, 2011
, “Hamburg Formula for Ship Valuations is Gaining Acceptance,” Wednesday January, 26. Lloyd's List 2011:4.49.
Investopedia
, 2022
, “How Game Theory Strategy Improves Decision Making,” Investopedia. https://www.investopedia.com/articles/investing/111113/advanced-game-theory-strategies-decisionmaking.asp, Accessed January 29, 2024.
