Bridging the Energy Efficiency Gap in Shipping: The case of Principal-Agent Problems in operational emission reduction measures

Recent literature identifies several measures and practices that have a great potential to reduce ship air emissions. Interestingly enough, some of them have negative abatement costs, i.e. the use of such measures would lead to reductions in Greenhouse Gas (GHG) emissions and entail economic benefits leading to a win-win scenario. However, most of these measures are not adopted. Indeed, there is a vast amount of literature that tries to explain why companies fail to invest in energy efficiency even though it is, or is perceived to be, profitable - a “phenomenon” that is also commonly referred to as the “energy efficiency gap”. In the shipping industry, most works have identified the socalled Principal Agent problem, or split incentives barrier as a fundamental one. The paper identifies the cases where this kind of problem may occur. Finally, the paper presents barriers and ways to overcome them (such as the “Virtual Arrival” Incentive) in the case of operational measures that are mainly related to slow steaming.