Energy efficiency and time charter rates: Energy efficiency savings recovered by ship owners in the Panamax market |
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Affiliation: | 1. University College London Institute for Sustainable Resources (IRS), Central House 14, Upper Woburn Place, London WC1H 0HY, United Kingdom;2. University College London Energy Institute, Central House 14, Upper Woburn Place, London WC1H 0HY, United Kingdom |
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Abstract: | This paper presents the first analysis on how financial savings arising from energy efficient ships are allocated between owners and those hiring the ships. This as an important undertaking as allocation of financial savings is expected to have an impact on the incentives faced by ship owners to invest in more energy efficient vessels. We focus on the dry bulk Panamax segment as it contributes to around 50 Mt (5%) of total CO2 emissions from shipping in 2007 and therefore its importance in terms of environmental impact should not be neglected. The time charter market represents a classical example of the principal–agent problem similar to the tenant–landlord problem in the buildings sector. We discovered that on average only 40% of the financial savings delivered by energy efficiency accrue to ship owner for the period 2008–2012. The finding that only part of the savings are recouped by shipowners affecting their incentives towards energy efficiency could consequently have implications on the type of emission reduction policies opted at both, global and regional levels. |
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Keywords: | Energy efficiency Panamax Dry bulk Time charter EEDI |
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