Impacts of a bunker levy on decarbonizing shipping: A tanker case study
Sotiria Lagouvardou, Harilaos N. Psaraftis, Thalis Zis
Abstract
The pressure on shipping to reduce its carbon footprint is increasing. Various measures are being proposed at the International Maritime Organization (IMO), including Market-Based Measures (MBMs). This paper investigates the potential of a bunker levy in achieving short-term CO2 emissions reductions. The analysis focuses on the tanker market and uses data from the latest IMO GHG studies and a variety of other sources. The connection between fuel prices and freight rates on the one hand and vessel speeds on the other is investigated for the period 2010–2018. A model to find a tanker’s optimal laden and ballast speeds is also developed and applied to a variety of scenarios. Results show that a bunker levy, depending on the scenario, can lead to short-term CO2 emissions reductions of up to 43%. Policy implications are also discussed, particularly vis-à-vis recent IMO and European Union (EU) action on MBMs.