Compliance decisions of bulker shipping companies under various emission reduction policies

Global pressure to reduce air pollutants has positioned the bulk shipping segment—which accounts for nearly half of global seaborne trade—as a strategic focus for decarbonization. This study investigates the choice between retrofitting existing vessels and investing in new-build fuel technologies by analyzing 12,436 bulk carriers from the Clarksons World Fleet Register. Using a Nested Logit model, we capture distinct substitution patterns between retrofittable and non-retrofittable compliance options, providing novel fleet-level evidence on how shipping companies respond to evolving emission policies. The empirical results support a hierarchical decision-making process between retrofits and new-build technologies. We model simultaneous adoption decisions across six major compliance options: scrubbers, LNG systems, alternative fuels, hybrid propulsion, Eco-design enhancements (Eco), and energy-saving technologies (EST). Key findings reveal that vessel characteristics, market conditions, and fuel prices significantly influence compliance strategies. Specifically, larger vessels and those constructed in European or American shipyards exhibit a greater propensity for retrofitting, whereas high Baltic Dry Index values discourage retrofits due to competitive expansion incentives. Bunker prices strongly stimulate the adoption of scrubbers, Eco-designs, and EST, but have limited effect on hybrid systems and alternative fuels such as LNG, which are primarily constrained by infrastructural and technological barriers. Evidence also indicates strategic interdependence: rivals' capacity expansion reduces individual companies’ incentives for retrofit investments. Our findings suggest that companies prioritize cost-effective retrofits in high fuel-price environments, while adoption of alternative fuels remains reliant targeted policy support. We conclude that effective decarbonization requires differentiated strategies: promoting mature, cost-efficient technologies in the near term, while accelerating infrastructure development and incentives for alternative fuels to facilitate long-term transition. These insights offer valuable guidance for both shipping companies and policymakers in promoting sustainable shipping.