Measuring the efficient control of SO(2) emissions from ships

Abstract

This research examines the efficient control of SO₂ from ships, a topic that has been discussed at the International Maritime Organization (IMO). The focus is on the economic evaluation of this problem, involving the concept of efficient abatement costs of controlling environmental externalities. The task is to derive an economic framework for quanlifying the costs and benefits of emissions control and then to evaluate environmental regulations on the basis of resource and environmental economic efficiency. For this purpose, this study includes a theoretical consideration of optimal emission in the case of multiple emitting agents as an appropriate framework for discussion of the SO₂ problem from ships, the derivation of an abatement cost function of SO₂ emissions, and a cost-benefit analysis for the optimal regulation of SO₂ by employing an appropriate economic model containing an abatement cost function and an environmental damage function. Theoretical consideration and cost-benefit analysis indicate that more efficient solutions can be achieved than the currently proposed IMO mandates. This will depend on the extent to which (1) variation in damage among affected areas is evidenced, (2) variation in abatement cost functions among emitting agents is effected, and (3) the range of potentially effective countermeasures is employed according to agent's choice. Based on the theory, a simple cost-benefit assessment is derived under the assumptions and conditions implied by the IMO to define their varied regulatory mandates and concerns. The method is to derive abatement cost engineering and environmental damage functions from pseudo-data for a representative case (Rotterdam). The derived formulation shows that the short-run optimal level of sulfur content regulation is 3.0% for bunker oil and 2.0% for land-based heavy oil in Rotterdam. Major conclusions of this research are that the regulation of SO₂ from ships should be considered on a region or area specific basis, and that the regulation should extend not only to ships but also to all relevant SO₂ emitting agents causing environmental damage, including land-based facilities.