Decisions of shipping supply chain with Arctic route option and emission allowance

Abstract

With global warming, the Arctic shipping route has become an important alternative when traditional routes face disruption risk. This study sets up a multistage game-theoretical model to investigate the decision problem of shipping supply chain with the traditional route’s disruption risk, Arctic route option, and emission allowance. The paper finds that depending on some important factors (such as market potential, route distance, emission allowance, shipping disruption risk, etc.), the shipping strategy based on traditional route (STR) and that based on Arctic route (SAR) may either be mutually exclusive (i.e., only STR or SAR is selected) or coexist. Furthermore, the disruption risk may lead to two effects, the competition effect (i.e., decreasing the procurement quantity via the traditional route) and the dependence effect (i.e., increasing the procurement quantity via the traditional route). The emission allowance may either weaken or strengthen the dependence effect, but always strengthens the competition effect. A case study is conducted to verify the model and results. This study theoretically enriches the literature on shipping management and Arctic route management, and provide decision-making solutions for shipping supply chains.