Keywords

1 Introduction

1.1 Global Crops Supply and Shipping Vulnerability

Climate change has already impacted food security through increased temperatures, changes in precipitation patterns, and increased frequency of extreme meteorological events, such as intense storms and droughts, resulting in massive losses in agriculture (Intergovernmental Panel on Climate Change 2019). When climate change was examined in isolation from other factors affecting crop yields in recent decades, it was observed that climate change had harmed crop yields and deepened income disparity in many low-latitude developing countries. In contrast, it had a positive impact on crop yields in high-latitude countries. These features have contributed to the global food supply chain (Table 9.1), accounting for a significant 38% of commodity demand in 2019.

Table 9.1 Ranking of wheat’s trade by volume of 2021
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Regarding the global food supply through sea transportation, cereals are one of the most produced crops globally. They are one of the most complex and dangerous crops to transport. Compared to iron ore and coal, grain is an agricultural commodity that is highly dependent on commodity tonnage in the charter market (Australian Competition and Consumer Commission 2021). This is because its trade is seasonal, and its volumes and routes are irregular, making it challenging to optimize transportation (Hellenic Shipping News 2021). To transport wheat safely, specific temperature, humidity, moisture, and ventilation conditions are required. There is no lower limit to the temperature, but the preferred transport temperature is approximately 20 °C. This is because mold growth is highest in the range of 20–30 °C, and above 25 °C, metabolic processes become more active, CO2 production increases, and wheat self-heats with a relative humidity of 80% (Ocean Route 2020).

According to International Maritime Organization (IMO), the share of shipping emissions in global anthropogenic emissions has increased from 2.76% in 2012 to 2.89% in 2018, while NOx and SOx account for 15% and 13% total emissions, respectively (International Maritime Organization 2020). For these reasons, it is crucial to reduce shipping losses to ensure a resilient global food supply chain by minimizing the losses caused by cargo and ship sweats during long-distance voyages (Fig. 9.1).

Fig. 9.1
Two diagrams illustrate the movement of sweat in cargo and ship. 1. warm moist air admitted on a cargo seat of the cold charge in warm water. 2. In warm cargo, the ship sweats out in cold air inside the cold water.

Source Illustrated by authors

Cargo’s and ship’s sweat.

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1.2 Cooling System and Greenhouse Gas (GHG) Emission of Sea Transportation

Cargo sweat is a common problem that occurs when warm, moist air comes into contact with the surface of cold cargo, often resulting from loading bulk cargo in a cold environment and transporting it to a warmer one. The resulting condensation can cause the cargo to deteriorate, affecting its quality and value. The proper operation of the cooling and ventilation system is crucial for preserving the quality of the cargo on board a ship. According to regulations, the cooling and ventilation system must remain operational until the cargo is unloaded, even while the ship is waiting at the berth. To avoid claims related to damaged cargo, accurate records of the ventilation system's use must be maintained, including the periods when ventilation is active and when it is not available or appropriate. The purpose of the cooling and ventilation system is to reduce moisture levels in the cargo hold by replacing humid air with drier air. This helps prevent the formation of cargo and ship sweats, which can damage cargo by as much as 15-20% (DNV 2021). Therefore, proper operation and maintenance of the cooling and ventilation system are essential for mitigating cargo sweat and preserving the quality of the cargo during transport. Accurate record-keeping is also critical for ensuring that the system is operated correctly and that any issues can be identified and resolved promptly to prevent cargo damage and claims.

As of 2017, more than 85% of cargo ships and 64% of cargo tonnage were powered by internal combustion engines, and the cost of energy was between 20 and 60% of the operating cost (Saidyleigh et al. 2019). To promote eco-friendly shipping while achieving the goal of reducing greenhouse gas GHG emissions, the shipbuilding industry has been developing electronic systems by improving more efficient propulsion and power supply systems with hybrid energy inputs sourced from renewable energy, such as solar photovoltaic applications (Danfoss 2016; Visa et al. 2016; Mircea 2021). While still in the experimental stage, a hybrid-powered vessel has been developed with the potential for solar energy efficiency to reduce fuel consumption cost by 28% and CO2 emissions reduction of 77% (Lan et al. 2015). Based on the International Energy Agency (IEA)’s projection, the cost of electricity from PV may decrease from 25% in 2020 to 65% by 2050 (International Energy Agency 2014).

Utilizing more renewable energy with electronic equipment for transportation could also increase overall welfare in Japan (Huang and Kim 2022). Long-distance voyages between large temperature disparities are unavoidable in global food supply chains. There is a need to use more fuel for ventilation and cooling systems, but bulk carriers give less priority owing to the fuel cost performance in terms of commodity value (Thakur and Hurburgh 2022; Theotokatos et al. 2017). Nevertheless, under looming severe climate change threats urgent and innovative measures to improve grain shipping quality are needed to help eliminate food insecurity while reducing GHG emissions.

To capture the investment effect on the implementation of cooling system improvement into sea transportation sector and its impact on global trades and CO2 emission, this study aims to apply the electricity-specified model developed by the Global Trade Analysis Project (GTAP-E-Power) by the Purdue University (Peters 2016a) to examine the implementation of an eco-friendly, more efficient electronic system with ventilation and cooling systems on bulk carriers for agricultural product shipping. The simulation results are expected to provide key economic indicators from insights into sectoral output, changes in the global supply chain, GHG emissions, and welfare analysis.

2 Methodology and Scenarios

2.1 Classification of Sector and Region

The GTAP database is commonly used for international trade and tariff analysis (Hertal 1997). It has many extensive databases, such as GTAP-E, which contains GHG emission data, and GTAP-Power, which specifies power generation, including the renewable energies of hydro, solar, and wind power. To merge the power generation and GHG emission features, we followed Peters (2016a, b) to construct a GTAP-E-Power model to capture the impact of electronic equipment investment on the sea transportation sector. The study categorized eight major sectors—agriculture, energy, power generation, energy-intensive sectors, other industries, electronics, sea transportation, and services—from 76 sectors in the GTAP database version 10. We analyzed ten regions, including Japan, East Asia, ASEAN, South Asia, the rest of Asia, Australia and New Zealand, the US, Mexico and Canada, the rest of America, Europe, and the rest of the world, from 140 regions.

2.2 Scenario of Technology Change

To create a scenario of technology change, we calibrated the parameters from the SciREX Policy Intelligence Assistance System (SPIAS-e), which serves as a comprehensive platform, based on a computable general equilibrium model based on Japan’s input–output table of 1995–2011 with the economic development projection of 2011–2050 and distinguishes tangible and intangible capital stock into 93 sectors (Kuroda et al. 2018).

Using the price index of tangible capital stock (PSK) of the base run, in which public research and development (R&D) investment is constant as of 2005, we created a scenario of technology change (Fig. 9.2), where a higher index implies a higher cost in specific sectors. The SPIAS-e is also based on Japan’s demographic changes due to aging and shrinking population. The rising price index of capital services indicates that the service sector’s costs are rising; in contrast, the declining price index of the energy sector, power generation, energy-intensive sectors including transportation equipment, and heavy industry indicates that the sector’s technology has changed allowing it to operate with less capital input.

Fig. 9.2
A line graph represents the price index of capital service where the plotted lines exhibit a downward trend except for services and other industries with an upward trend. Beside is a table with 2 columns and 8 rows, and the headers are sector and 2020 to 2025.

Price index of service goods. Source SPIAS-e (Kuroda et al. 2018)

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The projection of SPIAS-e has indicators from 2011 to 2050 (Huang and Kuroda 2021). After aggregating the 93 categories into eight major sectors (the energy source and power generation are still distinguished as independent sectors), we standardized the index based on 2014, which is consistent with the GTAP database base year. For policy simulation, we calibrated the price index for 2020–2025 as our simulation period (Table 9.2). Although GTAP-E-Power is a static model, the parameters enabled us to proceed with the investment as a policy intervention with the technology change assumption (Huang et al. 2021).

Table 9.2 Policy shocks of cooling system implementation
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2.3 Scenario of Cooling System Implementation

To create the scenario for impact assessment of a cooling system implementation in the sea transportation sector, we use of a capital-use subsidy in the electronic, solar power, and sea transportation sectors, coupled with an efficiency improvement in intermediate inputs. To incentivize the industry and strengthen the synergy of the sectors, the assumed subsidy and efficiency improvement rates were set at 20%, based on the above literature for simplicity to specify the impact assessment of the stimulus renovation project.

To provide regions for policy shocks, we focus on Japan, Australia, and New Zealand based on their complementary connections in the electronics, sea transportation, and agriculture sectors. Australia's crop exports have experienced significant issues related to cargo and ship sweating, which can damage the quality of exports, while Japan has expertise in electronic systems and shipbuilding capacities for global logistics. By focusing on these complementary connections, the study aimed to determine the potential impact of policy shocks on these sectors and their interactions. Table 9.2 presents the policy shocks.

3 Simulation Results

The implementation of better fuel and cooling systems in the shipping industry has been hindered by the unpredictability of costs, profit, and GHG emission reduction. To address this issue, this study employs the GTAP-E-Power model to assess the potential consequences on output, the impact on the global supply chain, and the effect of GHG emission reduction. The objective of the study is to provide stakeholders with a comprehensive view of technological improvement and its spillover effect on eco-friendly shipping in the agricultural sector, which can help them manage their resources better and enhance household welfare. The quantified results of this study will also have ramifications for trading partners and relationships in the agriculture, sea transportation, and electronics sectors.

3.1 Sectoral Output Change

To understand the impact of the technology change and implementation in the cooling system in maritime transportation, we demonstrated the sectoral output change after policy shocks in Japan, Australia, and New Zealand in Fig. 9.3.

Fig. 9.3
Two bar graphs represent values versus sectoral output. The highest for Japan is from coal at around 4.0 percent, while for Australia and New Zealand is from electronics.

Output changes of Japan, Australia, and New Zealand

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Simulation results show that higher output in energy-intensive sectors, such as coal, oil, gas, and petroleum, leads to higher productivity, but given Japan's relatively small output in these sectors, changes are negligible. Moreover, Japan's electronics and sea transport sectors grew by 3.3% and 1.6%, respectively, with the policy shocks, indicating their competitiveness in these sectors. Additionally, agriculture grew by 0.9%, supported by technological improvements and better shipping logistics. However, investment in electronics for sea transportation caused a slight decrease in the agriculture sector in Australia and New Zealand, indicating that less production could now satisfy global demand. Similarly, energy-intensive sectors and electronics showed a decrease of 0.25-0.6%, indicating that Australia and New Zealand are focusing on their core industries, while service sector show slight growth. These results have implications for policymakers and stakeholders in various sectors, especially in terms of resource management and boosting household welfare.

3.2 Change of Global Supply Chain

The findings of our study suggest that Japan has undergone a transition in the global supply chain as evidenced by the changes in import destinations (Fig. 9.4), our analysis reveals that this transition has been driven by Japan's significant reduction in imports from other regions due to increased productivity resulting from technological improvements. Additionally, our study highlights that Japan's investments in electronics, solar power, and cooling systems have had spill-over effects on other regions, further contributing to changes in the global supply chain with a greater degree of trade interdependence among regions, with potential implications for global trade patterns and economic growth. We thus highlights the importance of considering the broader impacts of technological and investment decisions on trade interdependence and global supply chains.

Fig. 9.4
Six bar graphs of agriculture, energy-intensive sectors, electronics, other industries, sea transportation, and petroleum. All graphs exhibit Japan reducing imports from other regions.

Change of import by trading region (%)

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3.2.1 Agriculture

The agriculture sector has experienced significant impacts by the policy shocks. The findings reveal that Japan could become more self-sufficient in agricultural products as productivity rises, leading to lower imports from all regions, and vice versa. However, it is interesting to note that regions such as the rest of Asia, the rest of the world, South Asia, USMCA, and Europe slightly increased their imports from Australia and New Zealand by 0.05–0.15%. This implies that the implementation of electronics and cooling systems resulted in a more effective improvement in the agriculture export-oriented region. Such changes in the agricultural sector can have significant implications for regional trade and welfare. The results of this study can help policymakers and stakeholders better understand the spillover effects of technological improvements on the agricultural sector, enabling them to manage their resources more efficiently and sustainably.

3.2.2 Energy-Intensive Sectors

In terms of the energy-intensive sectors, higher productivity in Japan has led to a boost in competitiveness in sectors such as chemical and metal production. Japan decreased its imports from all regions by 1%, while there was a slight increase in imports of Japanese products from rest of Asia, South Asia, rest of world, USMCA, and Europe by 0.09-0.17%. This suggests that the policy shock had a positive impact on the energy-intensive sectors in Japan, which in turn has contributed to increased demand for Japanese products in various regions. The increase in imports from Japan by these regions can be attributed to the improvement in productivity in the energy-intensive sectors, as well as the policies implemented to promote competitiveness.

3.2.3 Electronics

The electronics sector in Japan has experienced an increase in demand for its products due to technological advancement and investment. This resulted in a rise of 1-1.5% in demand for Japanese electronics products in most countries. As a consequence of its self-sufficiency policy, Japan reduced imports from other regions. However, interestingly, imports from East Asia, ASEAN, Australia, and New Zealand increased by 0.5-0.8%. This has resulted in a spillover effect on Japan's electronics sector, which can further consolidate the integration of regional electronic production networks.

3.2.4 Other Industries

For other industries, such as food, manufacturing, and transportation equipment, simulation results indicate that Japan's imports to most regions were robust, showing an increase of 1.3-1.7%. This growth can be attributed to the country's high productivity and competitiveness, which has led to the production of high-quality goods. However, the spillover effect to other Asian regions was not as significant as that of the electronics sector. On the other hand, Australia and New Zealand witnessed higher growth in exports compared to other regions. This trend can be attributed to the increase in demand for their products, which are likely to be complementary to Japan's production.

3.2.5 Sea Transportation

The implementation of a capital-use subsidy on sea transportation has had a positive impact on the imports from Japan, Australia, and New Zealand, as they increased by 0.16–0.3% to all other regions. This suggests that more efficient sea transportation is preferable for the industry. The increase in imports from these countries to other regions could be attributed to the lowered transportation costs due to the subsidy, making it more cost-effective to import goods from these regions. This increased efficiency in sea transportation could also have positive spillover effects on other sectors that rely on international trade, such as manufacturing and agriculture, by reducing costs and increasing competitiveness.

3.2.6 Petroleum

Because of improved energy efficiency, there has been a decrease in the import of petroleum products to Japan by 0.6-1.06%, and to Australia and New Zealand by 0.3-0.5%. This decrease can be attributed to Japan's increased efforts to transition to renewable energy sources, which have resulted in a reduction in the demand for petroleum products. The positive impact on GHG emissions is significant, as this transition to renewable energy has contributed to lower emissions.

3.3 GDP Change and Welfare Analysis

We presented GDP and welfare changes to interpret the total impact of policy shocks. Welfare is demonstrated in the form of equivalent variation, which indicates the utility difference of the region under the price change after the policy shocks (Fig. 9.5).

Fig. 9.5
Two bar graphs represent the G D P change in percent and equivalent variations in million U S dollars versus countries. The highest for G D P change is from Australia and New Zealand, while Japan has the highest equivalent variations.

Change on GDP and welfare

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Based on the technology change scenario, the capital-use subsidy in electronics, solar power, and sea transportation of higher efficiency implementation has stimulated Japan’s sectoral output, which contributed to a growth of 0.09% in Japan’s GDP. On the other hand, Australia and New Zealand, as Japan’s counterparts with the same level of investment in the three target sectors of sea transportation, interestingly, grew faster than Japan, implying that investment’s spillover effect has boosted Australia and New Zealand’s competitiveness in sectors such as agriculture and other industries.

Moreover, the study found that the capital-use subsidies significantly led to the welfare improvement in Japan by USD 4,219 million. The implementation of more efficient systems of electronics and renewable energy in the sea transportation sector could substantially improve the quality of life for people, providing them with higher purchasing power and satisfaction. Additionally, as collaborative partners, Australia and New Zealand partially enjoyed co-benefits, as they saw a slight improvement in welfare of USD 417 million, while all other regions experienced a decline. Although the impact on welfare was relatively small compared to GDP growth, the results suggest that capital-use subsidies could lead to substantial improvements in the welfare of countries, as well as promoting growth and competitiveness in target sectors.

3.4 Reduction of Greenhouse Gas

The technological improvement has led to increased productivity and efficiency in sea transportation-related sectors in Japan has contributed to reduce 8.4 million tons of GHG emissions under the policy intervention, which is equivalent to 0.9% of the total emission of Japan's sea transportation sector. This indicates that capital-use subsidies and policy interventions can play a crucial role in promoting sustainable practices and reducing GHG emissions in the sea transportation sector. Furthermore, the study also found that East Asia had a reduction of more than 3.0 million tons of GHG emissions, suggesting that the impact of such policy interventions can extend beyond national boundaries, potentially contributing to regional and global efforts to combat climate change (Fig. 9.6). For Australia and New Zealand, the effect was not significant, which may be partially due to the lower share of sea transportation by the two countries.

Fig. 9.6
An inverted bar graph represents the reduction of greenhouse gas emissions in a million tons in different countries. The highest value is from Japan at around negative 8.5.

Reduction of greenhouse gas emission (mil. ton)

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4 Discussion and Concluding Remarks

4.1 Discussion and Policy Implications

The study employs the SPIAS-e indicators to generate a technology improvement scenario for Japan, specifically focusing on the impact of R&D. The simulation results could offer policymakers and stakeholders with a quantified reference of the combined effect of industrial competitiveness between countries, highlighting the importance of data acquisition infrastructure for evidence-based policy-making. Additionally, the capital-use subsidy on sectors such as electronics, solar power, and sea transportation, has demonstrated significant policy shocks, directly affecting the visualization of sectoral output, GDP, and welfare analysis.

The simulation results also address the implication on the economic partnership agreements between Australia, New Zealand, and Japan have not only focused on investment and technology transfer but also on strengthening collaboration towards more sustainable and environmentally-friendly practices, particularly in the area of shipping. The global shipping industry has been identified as a significant contributor to greenhouse gas emissions and climate change. Eco-friendly shipping practices such as the use of low-carbon fuels, energy-efficient design, and improved logistics can reduce the sector's carbon footprint and contribute to global efforts towards achieving net-zero emissions.

More importantly, the impact assessment is expected to incentivize collaboration towards a net-zero carbon society for the study’s focus on agricultural trade is particularly relevant to the global food supply chain, which is a crucial aspect of sustainable development. Ensuring the resilience of the global food supply chain is essential to achieving a sustainable future, particularly in light of the challenges posed by climate change, increasing demand for food, and the need for more efficient and environmentally-friendly production practices.

Thus, the scenarios and policy consequences of the study can be applicable to other regions that are involved in the global food supply chain, emphasizing the importance of collaboration towards achieving sustainable and eco-friendly practices in the industry.

4.2 Future Prospective

The study presented comprehensive simulation results, utilizing calibrated scenarios from the GTAP database v10 and SPIAS-e to model the impact of technology change on greenhouse gas (GHG) emissions. However, to provide a more comprehensive analysis, technology parameters from other regions are required. The development of a consistent technology parameter benchmark is crucial to address the gap in technological change and ensure accurate and reliable analysis. The implications of the benchmark would enable policymakers and researchers to better understand the role of technology in achieving a net-zero carbon society.

Moreover, to effectively invest in strategic sectors, GHG emission reduction data must be considered. Developing a carbon credit mechanism would be an essential step towards creating a roadmap to achieve a net-zero carbon society. Additionally, connecting the effect of GHG reduction with welfare can serve as an indicator for a net-zero society. This approach would enable policymakers to evaluate the economic, environmental, and social implications of investments in strategic sectors and prioritize areas that have the potential to achieve the greatest benefits for society as a whole.