Promoting Liquefied Natural Gas (LNG) bunkering for maritime transportation : should ports or ships be subsidized?

Abstract

Alternative fuels have been recognized as a promising method to alleviate the air emission problem of the maritime industry. LNG, as one of the most promising alternative fuels in shipping, has attracted extensive attentions, and government subsidies are extensively adopted to promote its application. We consider two-stage subsidy methods in this paper and aim to find the optimal subsidy plan under different scenarios. Distinguished from previous studies, we obtain the analytical solution to the subsidy plan optimization model. It is revealed that subsidizing ships or ports performs better in the homogeneous scenario, but a uniform subsidy amount would lead to a waste of subsidy when ships are heterogeneous. Besides, the influence of critical parameters on the optimal LNG selling price are also analyzed, and the conclusions we obtain correspond with the intuition, showing the details of as well as the logic behind such correlations.