Study on impacts of GHG Fund for shipping emission reduction on China´s iron ore import cost

GHG Fund is one of the suggested market-based measures for emission reduction from the international shipping. Analysis showed that application of the Fund may cause the bunker fuel cost increased directly and the capital and operation cost increased indirectly in the shipping industry. Furthermore, a causality model about the bunker fuel price and the cargo freight as well as a model about the bunker fuel price and the cargo cost have been developed by EVIEWS software. Empirical analysis showed that, at 95% confidence interval, during 2002q1-2010q4 period, if the fuel price change of 1%, China´s imported iron ore freight will change by 1.28% and imported iron ore cost will be a 0.35% change. In conclusion, the application of GHG Fund will have a slightly negative impact on the import cost of iron ore in China. This methodology can be used to evaluate the impacts of the other imported cargoes in China so that a thorough picture could be obtained.