Combined China-Europe Railway Express and maritime transport with subsidy and emission tax considerations

Abstract

This paper investigates the effects of the combined China-Europe Railway Express (CERE) and maritime transport on the China-Europe cargo transport market with subsidy and emission tax considerations. The interrelationships among shippers, railway carrier, domestic liner carrier, foreign liner carrier and the social planner are described by a vertical structure model. Four types of carrier operating regimes, namely full competition, full cooperation, and the cooperation between railway carrier and domestic or foreign liner carrier, are explored and compared. The aim of the social planner is to achieve the welfare maximization of the system by optimizing the subsidies for the railway carrier and the emission taxes on the domestic and foreign liner carriers for creating a mankind community from a perspective of the shared future. The emission amounts before and after implementing the policies of the subsidies and the emission taxes are compared. The results show that: (i) the cooperation of the railway carrier and the domestic (or foreign) liner carrier reduces (or raises) the emission tax on the domestic (or foreign) liner carrier, but raises (or reduces) the subsidy for the railway carrier; (ii) the social planner tends to impose the emission tax on the domestic liner carrier for a low congestion level at the transfer port and a high substitution degree between combined CERE-maritime transport and direct waterway transport; the planner is inclined to subsidize the foreign liner carrier and the railway carrier for a low congestion level and a low substitution degree to encourage more shippers to use the low-carbon mode of the combined CERE-maritime transport; and (iii) the subsidy and emission tax policies are beneficial to emission reduction for a low congestion level and a high substitution degree. These findings provide a guidance for the Chinese and European governments to ‌promote‌ the development of the combined CERE-maritime transport mode and to control the carbon emissions of the China-Europe cargo transport market through adjusting the subsidy and emission tax policies.