Switching fuel or scrubbing up? A mixed compliance strategy with the 2020 global sulphur limit

This article examines how a shipping fleet, mixed with scrubber-fitted and fuel-switching types of ships, copes with the “IMO 2020” global sulphur limit by taking the effects of potential decarbonizing market-based measures into account. We first develop an “IMO 2020” compliance model that combines a strategic-level decision on “what is the optimal structure of either ship type” and an operational-level decision on “what are their optimal sailing strategies”. We prove that the two questions can be solved simultaneously, and that their solutions are unique. Then, we extend the compliance model to incorporate the effects of potential market-based measures that might be used to control carbon emissions. We find that, because of decarbonization, it is better to maintain a percentage of fewer than 50% of scrubber-fitted ships within a mixed fleet.