Inland shipping network of LNG-fueled ships under emission control, - The case of China’s Belt and Road shipping corridor along the Yangtze river

Abstract

Liquefied natural gas (LNG) is used as an environmentally friendly source of fuel for inland river shipping in selected markets. However, the investment costs for bunkering stations and the price volatility of LNG have prevented it from being used more widely. In this study, we investigate the operation of LNG-fueled shipping in an inland river network, taking into account the effects of emissions regulations, the bunkering station locations, the price competitiveness of LNG, and the heterogeneity of the navigational conditions in inland rivers. The model is used to study bulk-cargo transportation along the Yangtze River, a major inland waterway of growing importance due to the Chinese government’s Belt and Road initiative. The modeling results suggest that the optimal shipping operations and bunkering station locations are significantly affected by the emissions regulations and incentive policies. In the Yangtze River market studied, low-sulfur fuels are the preferred option for carriers at a wide range of emission control levels. However, LNG only becomes an attractive fuel option when the emissions cap is set significantly below the current emissions level. For the promotion of LNG-fueled shipping, unit fuel subsidies are more effective than lump-sum capital subsidies for bunkering stations when the LNG price is high. However, the availability of bunker stations is an important factor when the LNG price volatility is considered. Overall, our results suggest that although LNG-fueled shipping is a promising option in the long term, the optimal industry policy on fuel use is dependent on multiple factors including the fuel price, types of subsidy, and emissions targets.