Ship-owner's Responses Under The Global Sulphur Control Policy

The International Maritime Organization has established the “2020 Global Sulphur Control Policy” in <The International Convention for the Prevention of Pollution>.This policy announced that since 2020,all oceangoing vessels must reduce the Sulphur content of fuels from 3.5% to 0.5%.In this circumstances,this paper,standing on the perspective of shipowners,studies the company's responses under the coming global Sulphur control policy.This paper first qualitatively compares three options for coping with the Sulphur control policy.They are changing to use the low-Sulphur fuel oil(LSFO),installing exhaust gas cleaning(EGC)system on ships,and switching to use cleaner LNG fuels.This paper argues that,comparing with the third option,the first two options are more reasonable and economical.Based on the qualitative result,this paper next analyzes changing to use LSFO and installing EGC system quantitatively.Three possible situations for these two strategies are considered:(1)only choose Option 1,i.e.changing to use LSFO;(2)only choose Option 2,i.e.installing EGC system;(3)choose mixed responses,that is,some ships choose option 1 and others choose option 2.For the single response strategy of(1)and(2),this paper analyzes their optimal operational problems first,and then compares two responses from the perspective of ship speed,total cost and other pollutant emissions.This part of the study found that shipping companies can make decisions based on the relationship between the two ratios,the square root of the ratio between high and low Sulphur oil prices and the ratio between installed/uninstalled fixed costs.For the mixed-decision problem of(3),this paper considers a threevariable decision-making problem.That is,shipowners need to decide the proportion of Option 2,and at the same time decide the operational strategies of ships using LSFO and ships installing EGC system.The existence and uniqueness of the solution under the mixed decision are both proved.It implies that,when considering the mixed decision,there is always an optimal installation ratio of the EGC system,and also the optimal operation strategies of ships using LSFO and ships installing EGC systems.This study aims to help shipowners' better response to the upcoming global Sulphur control policies.For shipping companies in the wait-and-see,this study helps them understand how to choose between using LSFO and installing EGC system.For the companies that have installed EGC systems,it helps them understand how to operate the fleet in the new situation.