Mechanism Design for Container Sharing under the Impact of Carbon Tax

Abstract

Nowadays, appropriate management of carbon emissions is becoming one of the most urgent tasks for governments in the world. Also, the shipping industry is seriously suffering from the issue of empty container management. Hence, how to resolve the accumulation problem and improve the efficiency of empty container utilisation under the impact of government carbon tax becomes an academically interesting research question. This thesis considers three research questions:1) how a fixed carbon tax rate affects the coordination of container sharing system; 2) what is the optimal carbon tax rate that can maximise the economic benefits of container sharing system; 3) what is the optimal carbon tax rate that can maximise the social welfare for container sharing supply chains. Three game theoretical models, with each corresponding to a sub-problem, have been developed for a container shipping system that includes the government and two liner shipping carriers. The first is a typical Newsvendor game; the second and third models extend Newsvendor games by considering more decision making variables and different objective functions. Each of the three models have considered both centralised and decentralised decision-making mechanisms. The centralised decision-making mechanism reflects an ideal situation where two shipping carriers operate in perfect collaboration. The decentralised model considers a realistic situation, where two carriers sign a specific contract to split the container sharing costs and benefits. This research has obtained several valuable managerial insights: (1) both Buy-back Contract and Revenue-sharing Contract can be applied to conditionally coordinate the business of empty container sharing system under the impact of government Carbon Tax impact; (2) The carbon tax can significantly affect two carriers’ coordination mechanism and it should be constrained within a specific range to guarantee the coordination and (3) Two carriers’ coordination can be achieved and the social welfare can be maximised if the government sets the appropriate carbon tax. These outputs provide some policy implications. For example, carriers can reach cooperation by applying Buy-back Contract and Revenue-sharing Contract to offset the negative impacts on carriers’ operation when government levies carbon tax on the container with cargos. Moreover, the Revenue-sharing Contract appears to be more flexible in terms of achieving system coordination compared to the Buy-back Contract. Last but not least, government can levy a carbon tax on shipping carriers which will not interfere with the sharing of empty containers and will not significantly damage their profits. In summary, through the investigation, it is suggested that liner shipping carriers should cooperate with each other when government levies carbon tax to reduce profit loss and relieve the operation risk. Also, government should create carbon tax scheme cautiously and appropriately. The government should not only take into consideration environmental issues, such as the cost of carbon treatment and the investment in innovative carbon recovery technologies, but also the operation of liner shipping companies, since these companies play an important role in a country's transit.