Emission Control under Private Port Operator Duopoly

Recent trends in regulating maritime vessel emissions have negative effects on the competitiveness of many ports as regulations increase costs for shipping operators calling the ports. This paper develops analytical models to examine the emission standards set by governments for ports in their jurisdictions. Given the emission standards set by governments, which affects fuel cost experienced by shipping operators, ports determine charges for shipping operators. Unilateral, bilateral, and single-country regulation cases are investigated. Specifically, our analysis focuses on how increase in the maximum reservation price of shipping operators, port capacity, and environmental damage costs of ports affect optimal emission standards.