Shore power mitigates the prevailing carbon leakage driven by maritime market-based measures: A dynamic system interpretation

Abstract

Implementing market-based measures (MBMs) to manage maritime carbon emissions is a policy approach to reduce greenhouse gas (GHG) emissions in the shipping industry. However, as cargo shipping is significantly exposed to international trade, regional carbon pricing could lead to carbon leakage, undermining policy effectiveness. Adopting low-cost alternative energies is one method to mitigate maritime carbon leakage. Shore power, which converts ship auxiliary engines to land-based energy sources, is recognized for its ability to reduce emissions. However, its broader adoption is hindered by high costs. To address the execution risks of maritime MBMs and the investment barriers to energy transition, this study simulates cost control and carbon leakage risk under a regional emission trading system with the participation of shore power. Utilizing the Quebec Emission Trading System as an experimental example, a policy-improved system dynamics model simulates the feedback among government, container shipping companies, and port. The results indicate that shipping companies could achieve stable profits over time with more than a 40% shore power upgrade rate, while GHG emissions would be reduced by at least 30%. Governments and ports should advance shore power coverage at container berths to eliminate carbon leakage risk under a stringent maritime MBM with high emission reduction targets.