The costs and benefits of sulphur reduction measures: Sulphur scrubbers versus marine gas oil

Abstract

This paper examines the costs and benefits of reduction measures for the shipping industry to comply with the forthcoming sulphur emission regulations. Sulphur scrubbers and marine gas oil are two promising alternatives for ship owners. However, their economic comparisons are primarily based on a private perspective. This paper provides a wider viewpoint by integrating the private abatement costs of ship owners and the social environmental benefits from emission reduction. The results showed that the price spread between marine gas oil and heavy fuel oil is a determining factor in making this choice. Marine gas oil tends to have higher net present values than scrubbers when the price spread of fuel is less than 231 Euros per tonne. Furthermore, it is more beneficial to install a scrubber on new ships than retrofits. An old ship is not suitable for a scrubber installation when its remaining lifespan is less than 4 years.

Highlights

• We compare the equivalent annual net benefits of using scrubber and marine gas oil.
• Abatement costs and environmental benefits for specific vessels and routes can be estimated.
• We provides a link between private abatement costs and social environmental benefits.
• The oil price spread is crucial in choosing the emission reduction measure.
• It is more beneficial to install a scrubber on new ships than retrofits.

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Fig. 2. The sensitivity of MGO’s annual net present value to the fuel price spread.

Fig. 3. Sensitivity of SWS’s equivalent annual net benefit to retrofit’s remaining lifespan.

by Liping Jiang^a, , , Jacob Kronbak^a and Leise Pil Christensen^b

^a Department of Technology and Innovation, University of Southern Denmark, Niels Bohrs Alle 1, 5230 Odense M, Denmark

^b Department of Environmental and Business Economics, University of Southern Denmark, Niels Bohrs Vej 9, DK-6700 Esbjerg, Denmark

Transportation Research Part D: Transport and Environment via Elsevier Science Direct www.ScienceDirect.com

Available online 9 January 2014

In Press, Corrected Proof 

Keywords: Cost-benefit analysis; Air pollution; Ship emission control; Environmental externalities; Sulphur scrubber; Marine gas oil