Lab Seminar: Will Troske

This week, ARE PhD candidate Will Troske presented his ongoing work on the behavioral response of commercial shipping firms to sulfur emissions regulations. 

In 2012, the US and Canada implemented a technological regulation, called the ECA (emission control area), in their exclusive economic zone to reduce emissions from ocean-going ships. The ECA required ships to use low-sulfur fuel, increasing a ship’s main operating cost. The EPA estimated that the operational cost of ships would increase by $18 for a twenty-foot-equivalent container. Operation costs, however, are not the only costs of regulation. In international trade, fuel and capital are substitutes, and an increase in fuel prices leads to demand for larger (more fuel-efficient) ships. In this paper, Will uses data from 2006 to 2016 on commercial container ships’ calls to US ports, from the Army Corps of Engineers, to construct a panel at the port-quarter level that tracks ship size and port exposure to the ECA for all US ports. Port exposure measures the average time a ship operates in ECA-regulated waters before reaching said port. Will uses variation in port exposure to estimate the relative change in ship size for more exposed US ports after the ECA. He finds the ECA led to about 3% larger ships for ports further along container routes. This is driven by larger ships shifting to serve the more exposed US ports. These findings show that fuel regulations favor larger ships, with implications for container movement along trade routes and investments for port expansions.