Currents of change: Social-environmental valuation of electric ships for sustainable passenger transport

Abstract

Air and maritime transport services enable mobility and economic and social development, but they have significant environmental impacts. To reduce carbon emissions, there is a growing trend towards adopting electric ships for short-distance passenger transport. Nonetheless, there is a lack of appropriate valuation frameworks. This paper proposes a framework specifically tailored for evaluating investments in electric ships, considering the economic, environmental, and social impacts. A real options approach balancing users' utility is used, with demand following a stochastic process and unexpected jumps. Using the Azores as an empirical case study, the results revealed that investing 25 million euros in electric ships yields a significantly positive impact on social welfare (1906 million euros). For long-distance travel, maritime transport's impact on social welfare is diminished, making it less suitable. Embracing electric ships can unlock new possibilities for enhancing social welfare and sustainability. The contribution of this paper lies in its unique approach, as very few frameworks enable the comprehensive social-environmental valuation of green investments.