Empirical Analysis of Charterers’ Willingness to Pay for Energy Efficiency : A Study on Time Charter Contract Rates in the Dry Bulk Market and GHG Ratings by RightShip
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- Master Thesis 
This thesis investigates whether charterers value energy efficiency in the dry bulk time charter (TC) market using greenhouse gas (GHG) emissions ratings from RightShip and TC fixtures from Western Bulk and Clarksons Shipping Intelligence Network (SIN). An energy efficiency premium in the TC market would incentivize shipowners to invest in energy efficiency technology as they would recoup some or all their investment, strengthening the investment case. Energy efficiency technology on ships allows less fuel consumption for the same speed, effectively reducing harmful emissions (IMO, 2023). Therefore, an increased adaptation of such technology would help the shipping industry to contribute to the worldwide effort to lower carbon emissions. Applying different multiple linear regression models to the size segments Handysize, Panamax, Capesize, and Supramax, we find no statistically significant energy efficiency premium for any segments. This implies that charterers are unwilling to pay for energy efficiency in the TC market. A TC contract facilitates dynamics that can create principal-agent problems between the shipowner and the charterer. We identify the presence of split incentives and information asymmetry between the contract parties, which can ultimately lead to market failure resulting in a lack of energy efficiency investments by shipowners. It is necessary that the International Maritime Organization (IMO) and the European Union (EU) implement policies that help unite the incentives of the shipowner (principal) and charterer (agent) and equalize the information asymmetries between the two to correct for inefficient market outcomes. Therefore, the EU Monitoring, Reporting, and Verification (MRV) and the IMO 2023 regulations can make a difference. On the other hand, we find a discount for vessels with below average energy efficiency performance in the Handysize and Supramax segments, showing that a relative lack of energy efficiency technology is penalized. This could incentivize shipowners to invest in energy efficiency as they would otherwise have to accept a discount, lowering their revenue potential. However, no publicly available cut-offs on energy efficiency performance by charterers exist, and there is a low adaptation rate of energy efficiency technology in the shipping industry. Our data sample has weaknesses in terms of size and biased sampling, making the discount representative of one charterer, Western Bulk, rather than the whole market.