Regulating the emissions of a bi-modal freight corridor considering non-cooperative authorities

Abstract

Transport authorities often adopt mode-based emission regulations to mitigate air pollution from road and waterway modes. However, this unilateral approach can lead to freight shifts among different transport modes, distorting regulation efficiency. This paper explores the policy implications of emission regulation in a bi-modal (road and waterway) freight corridor, managed by two non-cooperative transport authorities. A Bertrand-like competition model is used to represent the market structure of bi-modal transport along the corridor. We introduce a concept, the Price-of-Regulation ($PoR$), to quantify the market utility that an authority is willing to pay to reduce unit emissions. We examine the design of emission taxes under different $PoR$s, considering both aggregated and spatially-distributed demands, under three market structures: substitutable, independent, and complementary. Our findings suggest that, for the case of aggregated demand, equilibrium emission taxes increase (decrease) both market size (shipment demand) and quantity of emissions when two modes are substitutable (complementary). We also demonstrate that a win-win emission tax scheme exists when two modes are substitutable, simultaneously enlarging the market size and reducing emissions. For spatially-distributed demand, a non-linear mathematical programming model and a non-dominated sorting genetic algorithm II (NSGA-II) are proposed to determine the win-win emission tax scheme. Our models and algorithms are validated using data from the Yangtze River Economic Belt. This study provides valuable insights for policymakers in designing effective emission regulations for bi-modal freight corridors.