Operating differential subsidies: problems and alternatives for the United States

In this paper a proposal for a Competitive Rate of Return (CRR) based operating-subsidy system is made as an alternative to the existing US foreign-cost parity ODS system. Such an alternative, if adopted, could be successful in meaningfully relating US government maritime subsidy programmes to the legitimate financial needs of the industry. From the operator's viewpoint, the risk of drastic revenue fluctuations is removed, yet adequate opportunities are provided for firms with above average performance to be rewarded for their efficiency in higher than average profits. similarly, poorly run firms have an opportunity to lose money, in spite of government subsidies.

From the government's viewpoint, the CRR programme guarantees the provision of essential shipping services at the lowest possible cost. Because of substantial incentives to the operator on both the revenue and cost side of his profit equation, it is more likely that long-run government operating subsidies can be reduced under CRR than under the present system.

Although the CRR system has been described for use in determining subsidies for both bulk and general cargo carriers, it has been recommended that this system be considered first for implementation in the case of bulk vessels, because of the newness of the bulk subsidy programme. In addition, the 1970 Act gives MarAd the flexibility to initiate such a programme for bulk vessels without the necessity of new legislation.     

Programming, optimal pricing and partnership contract for infrastructures in PPPs

The development of various forms of public-private partnerships for the financing, building and operating of public infrastructure has not fundamentally altered the economic calculations involved. This chapter examines to what extent it is necessary, however, to change the way that government uses socio-economic and financial evaluations, whether to optimise investment programming or pricing. Ensuring a coherent match between these two types of optimisation can provide a principle for determining the optimal programming price.We begin by showing that when projects are financed by both users (toll revenues) and taxpayers (subsidies), it is socially beneficial to plan these investments on the basis of the net present value (NPV) provided by each unit of public money invested. This NPV/subsidy ratio must obviously be higher than the public-funding scarcity coefficient or else the investment would destroy more wealth than it would produce.One of the ways of improving this ratio is also to optimise the toll level, since increasing it can lower the subsidy but has an adverse impact on the user surplus, it is essential to set the optimal toll.In the case of an approved project considered in isolation, we show that the optimal toll depends upon the public-funding scarcity coefficient. If there is no scarcity, the optimal toll is zero. As public-funding becomes scarcer, the optimal toll draws closer to the toll that optimises revenue.In the case of a programme of several projects subject to budget constraint, we show that the optimal toll no longer depends upon the public-funding scarcity coefficient and that there are several scenarios depending on the relative values of the maximum revenue and the total cost of the project:

−

when, whatever the toll, revenue can no longer cover over half of the cost, it is socially beneficial to choose not to levy any toll;

−

when there is a toll that covers the total cost, the operator may be left free to set it at the level he sees fit, with the issue of how the profits are to be shared between the franchisee and the franchisor being settled separately;

−

when the maximum revenue of the project falls between half and all of the total cost, the value of the toll that maximises the welfare function is lower than the revenue-maximising toll and must therefore be set for the private operator by government.

Thus, the partnership contract must be given a different content in these three cases of optimal pricing.

Preamble

Most of the theoretical studies devoted to optimising public investment programming and infrastructure pricing have, since the work of Jules Dupuit (1844), focused on the salient issues of the transport sector, even though this work was relevant to all sorts of public infrastructure. The analysis presented in this paper deals with transport economics, but in line with this tradition, is also applicable to any field in which public-funding is combined with commercial revenue. For example, the question of determining how the financing of an opera should be shared between taxpayers and opera-goers raises the same type of issues as the optimal combination of tolls and subsidies for financing a motorway project. This report will be focused on these issues. We shall see that certain precautions are called for in investment programming together with some new thinking on pricing principles.     

Impact of proposed federal limits on US bagged food aid shipments: reduction in MSF carrier profits—a risk assessment 1

This paper is a stochastic risk simulation of the impact of proposed federal tonnage limits on US Maritime Security Fleet (MSF) bagged food aid shipments. Only MSF (i.e. federally subsidized carriers/vessels for war, or emergencies) and non-MSF US carriers (therefore, at competitive disadvantage) can compete for such shipments—representing an indirect subsidy to both groups. To compensate, US Congress proposed a financial penalty (loss of voyage subsidy) on MSF carriers for food aid above a certain limit. Accordingly, certain carriers will be policy 'winners' (non-MSF—larger food aid shipments), and others 'losers' (MSF). By simulating loss-minimizing economic behaviour by MSF carriers—using five stochastic factors—I obtain losses substantially below those claimed by the MSF owners.

Simulated annual-average MSF profits reduction is $3.5 million—within a large confidence interval; if no carriers surrender their subsidies (as claimed by MSF owners), a reduction of $6.0 million. Only 16% of annual MSF voyages are affected by a 2,500-ton limit (3%; 5,000-ton limit). Minimizing losses, 25 (of 41 affected) annual MSF voyages replace 38,000 tons of food aid with 23,000 tons of other cargo—forgoing $2.1 million in yearly direct subsidies. Two assumptions explain most of this simulated loss reduction.     

The impact of the Merchant Marine Act of 1970 on subsidized US ship construction

The United States Congress reasserted the desire for continued financial support to domestic merchant-ship construction when in 1970 it amended the Merchant Marine Act of 1936 [1]. With regard to the shipbuilding industry, the most significant changes contained in the Merchant Marine Act of 1970 [2] are those designed to reduce the construction differential subsidy and to increase the variety of vessels that might be subsidized. Sections 501(a), 502(a), and 502(b) of the 1936 Act were amended to facilitate the reduction in subsidies; Section 905(a) was modified to encourage the subsidized construction of liquid and dry bulk cargo vessels. After a cursory review of the 1970 amendments to the 1936 Act, this paper is directed to ascertaining the results, in general, of the changes and whether they have generated increased domestic shipyard productivity and lower subsidy rates.     

Do maritime passengers’ subsidies in Europe affect prices?

Some European governments subsidize their residents when they travel at sea. This paper seeks to analyze the impact on prices of maritime passengers’ subsidies in Europe. Following a review of the scarce academic literature on this topic and the subsidy scheme in Europe, a sample of firms’ prices and other characteristics of 40 European routes for 2016 are analyzed. Both an estimation of a price equation and a matching approach are applied and reach the same conclusion: prices per kilometer are around 40 per cent higher on those subsidized routes due to subsidies. This outcome reduces the potential subsidy gain to consumers.     

Marine Protected Area Costs as “Beneficial” Fisheries Subsidies: A Global Evaluation

Marine protected areas (MPAs) are now generally accepted as important tools in the protection of coastal biodiversity. It is also likely that they play a positive role in enhancing fisheries. Yet currently, less than 1% of the global oceans are protected, although international agreements have targets ranging from 10–30% coverage. Despite its minuscule size, we consider the current MPA “network” to be beneficial to fisheries, and its running or maintenance cost, therefore, to be a positive contribution to the sustainability of fisheries, or a “beneficial” subsidy (“harmful” subsidies enhance fishing capacity and effort). A method was derived from data in Balmford et al. (PNAS, 101: 9694–9697) to estimate the annual cost of maintaining MPAs as a function of their size, and of the degree of development of the country in question. We provide national costs of the 53 countries that jointly contribute 95% of global fisheries catch and, assuming that this type of subsidy, in a given country, cannot exceed 15% of the ex-vessel value of its fisheries catches, estimated a global MPA subsidy to fisheries of 870 million US$. Given that total subsidies to fisheries currently range from 30–34 billion US$ annually (without MPA costs), this amounts to only 2.5–2.8% of total subsidies to fisheries being devoted explicitly to the maintenance of the biodiversity that sustains them.     

Towards a simplified performance-linked value for money model as a reference point for bus contract payments

The burgeoning commitment to contracting the delivery of bus services through competitive tendering or negotiated performance-based contracts has been accompanied by as many contract payments schemes as there are contracts. We are now well placed to design a simplified performance-linked payment (SPLP) model that can be used as a reference point to ensure value for money, given the accumulation of experiences throughout the world which have revealed substantive common elements in contracts. Whether the payment to the operator is framed as a payment per passenger or as a payment per service kilometre, the SPLP identifies efficient subsidy outcomes that are linked to a proxy indicator of net social benefit per dollar of subsidy. We illustrate how the SPLP model can be applied to obtain the gross (subsidy) cost per passenger (or per passenger km) from measures of gross cost efficiency and network effectiveness. This model can then be used as part of a benchmarking activity to identify reference value of money prospects in respect of passengers per $ subsidy outlay by adjusting for influences not under the control of the service provider. A single framework to identify contract payments to operators, and to assess (i.e., benchmark) operator performance on critical KPIs, is provided by internalising critical key performance indicators (KPIs) in the design of the SPLP. The proposed SPLP model is sufficiently general to be independent of the procurement method (competitive tendered or negotiated, for example) and of the treatment of revenue allocation (net or gross based contracts), with the additional advantage of being able to assess value for money for government.     

拆船新政的红利效应

如何让新的《实施方案》“接地气”,提高拆船厂的拆船动力成为关键。2013年12月,交通运输部、财政部、国家发展改革委、工业和信息化部联合印发（（老旧运输船舶和单壳油轮提前报废更新实施方案》,     

Opportunities for increased profit and reduced cost and emissions by service differentiation within container liner shipping

This paper investigates opportunities for increased profit and reduced emissions and cost by service differentiation within container shipping. Traditionally the strategy among the container lines has been profit maximization by utilizing economies of scale through the building of larger and faster vessels. In 2008, the financial crisis in combination with higher fuel prices put an end to this progress and in today’s market operators are basically trying to survive by providing standardized services at the lowest possible cost. This study investigates alternative strategies and the results indicate that container lines should provide two different services instead of one standardized service. A fast service to be more competitive versus air freight for fast-moving goods and a slow service to be more competitive versus traditional shipping types for transport of minor bulk, break bulk, liquid bulk and project cargo.     

Port state control versus marine environmental pollution

This United States stands alone amongst the nations of the world in its attempt to unilaterally regulate transnational ocean linear services. The major reason for current US regularity policies with regard to scheduled ocean transportation lies in its fundamental distruct of any form of co-operation amongst competitors as demonstrated by its history of antitrust legislation.

The linear industry, because of its unique technical and economic charectersitics has given rise to the establishment of ocean conferences—co ordinating sgreements between the operators of linear vessels. Whilst ocean conferences are permitted—even encouraged—by the their most diluted form, the so-called ‘open conferences.

This Paper offers a critical review of Successive US regulatory practices in maritime transport. It is argued that these practices result in excess costs in US trades to the order of $1 billion annually, and that the linear industry‘s efficient functioning is seriously impaired by these rules-rules imposed by a government administration which fails to recognize that the linear industry‘s technical efficiency is of far greater importance than its market performance.     

Public transit subsidies, output effect and total factor productivity

This paper extends previous works on total factor productivity decomposition when firms receive both operating and capital subsidies. It shows that previous works considered either the lump-sum or substitution effects of these subsidies but not together. Using constrained cost minimization as the framework it offers formal proofs to show that cost increases are inevitable if the total effects of the subsidies are considered, and that total factor productivity growth results from increasing amounts of subsidies under economies of scale and in the absence of technical change. Applications of the decomposition equations derived to a sample of transit systems finds near constant returns to scale and negative contributions of these subsidies to total factor productivity growth. Technical change reverses this decline and results in total factor productivity growth. Further, it finds that the lump-sum effects of the subsidies reduce total factor productivity more than does the substitution effect.     

Agricultural land preservation: The case of Carlsbad,California

Abstract

The purpose of this article is to describe a program of agricultural land preservation in Carlsbad, California. This program focuses on agricultural subsidies and has been adopted and certified by the California State Coastal Commission and is scheduled for implementation on January 1, 1982.

This subsidy program is a variation of development rights transfer. Although no property rights are actually transferred, owners of land designated for agricultural use are subsidized by fees imposed on land designated for potential conversion to residential use. The Carlsbad program is placed into context by means of a brief review of similar proposals which attempt to preserve agricultural land in a fair and equitable manner.

The importance of agricultural land preservation is emphasized through discussions of urban development pressure, the significance of agriculture in the Carlsbad coastal zone, and the work of the California State Coastal Commission.     

Meta-frontier function approach to operational efficiency for shipping companies

ABSTRACT

This study uses a meta-frontier function approach to estimate operational efficiency and technology gaps for shipping companies. Researchers have evaluated the relative efficiency of shipping firms with the assumption that shipping firms operate under one frontier technology. However, the assumption of one frontier technology is being argued by efficiency literature. Therefore, this study estimates relative efficiency of shipping firms in different market segments (dry bulk, liquid bulk, and containerized cargo), possibly operating with different technologies and, hence, under different frontiers. This study uses a meta-frontier function approach that allows us to distinguish separate frontiers for different groups and decompose efficiency scores relative to the meta-frontier. Data used in this study is collected from Thomson One Banker from 2001-2013 in the form of unbalanced panel data. Empirical results suggest that dry bulk firms’ production technology is more advanced than others and the production frontier is the closest to that of the meta-frontier. In addition, efficiency scores are all low, but containerized cargo firms achieve higher technological efficiency than the other two groups. It is also suggested that containerized cargo and liquid bulk firms should prioritize improvements in their production technology and dry bulk firms should prioritize improving group efficiency.     

Assessment criteria for the sustainable competitive advantage of the national merchant fleet from a resource-based view

To determine the competitive advantage of the national merchant fleet, based on the resource-based view, we collect competitive advantage assessment factors from literature, and use the analytic hierarchy process methodology to compare the importance of assessment dimensions and variables. The article's conclusions include a recommendation that the government review the current allocation of resources and implement measures to reinforce the national merchant fleet. This study's findings can be summarized as follows: (1) Criteria dimensions are ranked in the order of competitive strength, organizational capability, tangible assets, and intangible assets. (2) Criteria variables can be ranked in the order of freight revenue, cargo loading ratio, accuracy of shipping schedule, dead weight tonnage, number of vessels, standard of customer service, reputation of shipping company, cargo transportation volume, gross tonnage, sailing frequency, shipping knowledge, fleet specialization, number of crewmen, and fleet technological level. (3) The government should review existing maritime regulations and measures in order to formulate specific and transparent policies, and seek to adopt optimal alternatives from other countries concerning such issues as tonnage tax, bilateral income tax reduction or exemption agreements, second-registration mechanisms and shipbuilding basis, etc.     

An analysis of the overcapacity problem under the decentralized management system of container ports in Japan

This article is concerned with an analytical summary of how the Japanese container ports have been taking place overcapacity problem in a systematic way. It focuses on institutional aspects of the overcapacity problem from the viewpoint of accounting cost and opportunity cost. The first issue arises due to the port authority's accounting system and insufficient disclosures of financial statements of port business to the port users and taxpayers. The second issue is inherently related to resource allocation between the state government and local governments through the budget system and income distribution programmes. Since a proper allocation of economic resources in the port sector as a whole will depend on investment decisions being taken within a coherent framework for ensuring that costs are passed on to port users, these issues are closely related to each other in reality. Although the budget system is completely controlled by the state government, the local governments have authoritative power over port planning, financing, and management, which is assured by the Ports and Harbours Law. The overcapacity problem appears to be an inevitable result.     

Ten years after bus deregulation in Japan: An analysis of institutional changes and cost efficiency

The local bus market in Japan was deregulated in 2002. This study examines the impact of this deregulation on the market structure and the operators' cost efficiency over the last ten years. First, we perform a qualitative before-and-after-deregulation analysis of Japan's bus market, finding that there has been little change in the structure of the Japanese bus market so far. Second, we investigate the effectiveness of the deregulation and internal organisational factors by using a dataset of publicly owned (municipal) bus companies. We estimate the total cost frontier functions in order to examine their effects, showing that it is the internal organisational factors (i.e. governance structure) that affect the operator's efficiency, not deregulation. In fact, the coefficient of subsidies to companies is positive, with statistical significance, thereby suggesting that cost efficiency decreases as the subsidy ratio increases. The coefficient of the contracting-out (MCGL) dummy also obtains statistically significant results; thus, we provide an account of how contracting out clearly improves operators' cost efficiency. The deregulation variable did not show significant results.     

US Navy Studies on Alternative Fuel Sources and Power and Propulsion Methods for Surface Combatants and Amphibious Warfare Ships

The US Navy has been studying the technical and cost impacts associated with the availability and cost of fossil fuel contrasted with nuclear energy alternatives for surface combatants and amphibious warfare ships. Over the past 2 years these efforts have grown in maturity to examine the tactical and strategic implications of our Navy's dependence on fossil fuels from technical, economic, and military perspectives. This paper will present three major topics:

• ▪

  Background research on alternative energy sources.
• ▪

  A survey discussion of current and future power and propulsion system technologies.
• ▪

  An overview of principal Naval Sea Systems Command studies on the integration of alternative power and propulsion system technologies into notional surface combatants, submarines, and amphibious warfare ships.

Given the US Navy's dependence on fossil fuels and the expected increase in cost and reduced availability of fossil fuel, propulsion system investment decisions made today will have a profound impact on the future tactical and strategic roles of the US Navy surface fleet. This paper lays the foundation for providing robust and flexible technology decision opportunities for the Navy's future.     

Incentives to reduce port inefficiency: a theoretical approach

Over the last decades, the European Union (EU) has devoted a large amount of effort and money to projects aimed at boosting some of its maritime corridors as a modal alternative to road or rail freight transport. However, the overall design of most of these programmes has ex post revealed as very ineffective. This paper suggests that promoting port efficiency might be a more suitable target to increase the modal split of Short Sea Shipping (SSS) than subsidizing firms to transfer cargo from road to sea. But defining ‘port efficiency’ is a complex task and, therefore, granting money directly to port authorities could also generate perverse moral hazard effects, particularly when the improvements are difficult to monitor and many investments are non-refundable. The European Court of Auditors points out that millions of EU public port finance was wasted on empty terminal and other unused infrastructure. The objective of this paper is to design a proper subsidy to promote SSS by encouraging port improvements through a proper system of incentives. As a policy recommendation, in this paper we propose the development of a subsidy per inefficiency-reduction unit.     

GRACAT: software for grounding and collision risk analysis

From 1998 to 2000 an integrated software package for grounding and collision analysis was developed at the Technical University of Denmark within the project: Information technology for increased safety and efficiency in ship design and operation. The cost of the software development was 6 man-years. The software provides a toolbox for a multitude of analyses related to collision and grounding accidents. The software consists of three basic analysis modules and one risk mitigation module: (1) frequency, (2) damage, and (3) consequence. These modules can be used individually or in series and the analyses can be performed in deterministic or probabilistic mode. Finally, in the mitigation module risk profiles for the calculated consequences can be calculated and compared to alternative solutions by assignment of a cost function to the consequences. Thus, the possible analyses range from a deterministic crash analysis to a comparative risk analysis of two vessels operating on a specified route where the result is the probability density functions for the cost of oil outflow in a given area per year for the two vessels. In this paper, we describe the basic modelling principles and the capabilities of the software package. The software package can be downloaded for research purposes from www.ish.dtu.dk/GRACAT.     

Determinants of the property damage costs of bulk barge accidents

This study investigates determinants of the vessel, cargo, and other-property damage costs of bulk barge accidents in US inland waterways. Tobit estimation of a three-equation recursive model suggests that, in bulk barge accidents: (1) vessel damage cost is greater for collision, fire/explosion, and material/equipment failure accidents than for groundings; (2) cargo damage cost is greater at night and when the weather is foggy and increases with barge age; and (3) otherproperty damage cost is greater for multi-vessel accidents, but decreases with barge size. A dollar of vessel damage cost increases other-property damage cost by $1.38, while a dollar of cargo damage cost increases this cost by $6.90. An important result for formulating bulk barge accident cost-reduction policies is that a given determinant might have a negative effect on one type of damage cost but a positive effect on another.