Rehmatulla, N; (2014) Market failures and barriers affecting energy efficient operations in shipping. Doctoral thesis , UCL (University College London).

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Abstract

Shipping contributes to around 3% of global CO2 emissions and this is expected to increase to around 20 – 25% of global CO2 emissions by 2050 as other sectors under national inventories decarbonise to avoid dangerous climate change. Improving energy efficiency has a key role as one of the strategies to address the challenges of climate change and this research investigates the barriers to energy efficiency in shipping, which is motivated by the increasing attention given to this subject from shipping regulators, both regional (e.g. UK and EU) and international (e.g. UN and IMO). The few studies that analyse the shipping sector for barriers to energy efficiency lack clear barriers taxonomy, are not rigorous methodologically and theoretically and can benefit from empirical examination of barriers in other sectors. The aim of this research therefore is to thoroughly understand the energy efficiency gap in shipping by examining the level of implementation of energy efficient operational measures and the barriers that may be affecting implementation of these measures. To do this, the research establishes a novel framework for empirically analysing the barriers to energy efficiency. The framework utilises agency theory for comparing perceptions of barriers using the survey method to observed level of barriers using the content analysis method and actual operational data. The survey results show that operational energy efficiency measures are not fully implemented and their implementation varies by sector of operation, size of the firm and chartering level of the firm. More specifically, the survey results show that on average more operational measures are being implemented by firms which have a majority of their fleet on time charter in comparison to firms that have a majority of their fleet on voyage charter and that more measures are being implemented by firms in the drybulk sector than in the wetbulk sector. This supports the findings from fixtures analysis that shows the wetbulk sector has the majority of its fleet on voyage charter, and the content analysis findings show that the voyage charter is more prone to the principal agent usage problem, which affects the implementation of operational measures more than technical measures. The survey results also show that the respondents perceive more market failures in comparison to non-market failures as barriers to implementation of operational measures. This perception of barriers differs amongst the implementation of operational measures, with more technical operational measures being affected by informational problems and speed related measures being affected by split incentives. These findings suggest that the principal agent problem can be a plausible explanation for some of the energy efficiency gap in the implementation of operational measures in the shipping charter markets.

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