Trying to fix carbon emissions is way more expensive when you’re dealing with thousands of small businesses instead of a few big ones.
March 20, 2026
Original Paper
Heterogeneous Shipping Companies’ Responses under Emissions Trading Schemes: An Equilibrium Analysis
SSRN · 6439648
The Takeaway
Smaller shipping companies are less efficient at slowing down their vessels to save fuel, forcing them to buy more carbon permits to stay in business. This higher demand from small firms drive up the market price of carbon for every other company, meaning industry fragmentation inadvertently makes decarbonization more expensive.
From the abstract
Emissions Trading Schemes (ETS) are pivotal for decarbonizing the shipping industry. Thisstudy develops an equilibrium framework to characterize the strategic responses of heterogeneous shipping companies to an ETS, jointly incorporating ship speed and green investment decisions with the price of carbon emission allowances (CEAs) determined endogenously through market clearing. We establish the existence and uniqueness of equilibrium under mild conditions. Theoretical analysis reveals that large