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Title: Subsidy design in a vessel speed reduction incentive program under government policies
Authors: Zhuge, D 
Wang, S 
Zhen, L
Laporte, G
Issue Date: Apr-2021
Source: Naval research logistics, Apr. 2021, v. 68, no. 3, p. 344-358
Abstract: As a green port and shipping‐related policy, the vessel speed reduction incentive program (VSRIP) involves using a subsidy to induce ships to reduce their speed in a port area so that the emissions can be reduced at the port. However, this program may attract new ships to visit the port because of the subsidy; in this case, the port's profit will grow due to more ship visits, but its total emissions may also increase, which is counter to the original intention of the subsidy. The government could then intervene by providing part of the subsidy for the VSRIP or by collecting air emission taxes for the increased emission at the port. This paper studies how to design suitable subsidies for ships participating in a VSRIP. Two bilevel subsidy design models are formulated based on a Stackelberg game to maximize the port's profit (related to the profits from original and new ships, the subsidy provided by the port, and air emission taxes) and to minimize the government's cost (related to the damage cost of air emissions, the subsidy provided by the government, and air emission taxes). We determine which policy (including a sharing subsidy policy, no government intervention, and an air emission tax policy) should be implemented by the government in different cases and how much subsidy should be provided by the port under each government policy. We find that these decisions are affected by several practical factors, such as the damage cost of air emissions per ton of fuel and the subsidy sensitivities of original and new ships. We also outline several meaningful insights based on the analysis of these practical factors.
Keywords: Air emission taxes
Green port and shipping
Sharing subsidy
Subsidy game
Vessel speed reduction incentive program
Publisher: John Wiley & Sons
Journal: Naval research logistics 
ISSN: 0894-069X
EISSN: 1520-6750
DOI: 10.1002/nav.21948
Rights: © 2020 Wiley Periodicals LLC
This is the peer reviewed version of the following article: Zhuge, D, Wang, S, Zhen, L, Laporte, G. Subsidy design in a vessel speed reduction incentive program under government policies. Naval Research Logistics. 2021; 68: 344– 358, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
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