Marine Policy xxx (xxxx) xxx Please cite this article as: George Kokosalakis, Marine Policy, https://doi.org/10.1016/j.marpol.2020.104278 0308-597X/© 2020 Elsevier Ltd. All rights reserved. Full length article Environmental regulation on the energy-intensive container ship sector: A restraint or opportunity? George Kokosalakis a , Anna Merika a, * , Xakousti-Afroditi Merika b a School of Business and Economics, The American College of Greece, Greece b School of Management, University of Bath, United Kingdom ABSTRACT This paper investigates how the containership sector has responded to the IMO environmental regulation. In doing so, it identifes the determinants of the IMO regulation compliance and derives a strong positive bidirectional relationship between the probability of compliance and lower fuel consumption in the container segment of the shipping sector. Using data for a population of over fve hundred S&P of container ships registered in Clarkson’s database over the period 2016–2019, this paper then employs cross-sectional analysis and General Method of Moments (GMM) estimation to derive the impact on the probability of compliance of fuel consumption, vessel size, type of fuel price differential, price of ships, vessels’ age and country specifcs. The fndings are consistent with specifc characteristics of the containers sector, such as high-energy intensity and a rather competitive market structure. Furthermore, they indicate that a restructuring is under way, towards a more environment friendly and fuel effcient sector. Finally, the buyers’ and shipbuilding countries nationality, are found to be important factors in explaining the probability of compliance and preference for energy-effcient vessels. 1. Introduction Over 90% of global trade is transported across the world’s oceans by seagoing vessels. However, due to their use of fossil fuels for operating their engines, ships directly contribute to climate change through car- bon dioxide emissions, UNCTAD [1], emissions of global warming substances, including nitric oxide (NO) and nitrogen dioxide (NO 2 ), which contribute to photochemical smog and acid rain, Donev et al. [2], and also highly toxic chemicals, as sulphur oxides, ICS [3]. Containerships, constitute a major part of the maritime industry, contributing to more than 17% of total maritime trade, UNCTAD [1]. They are designed to operate on higher speed levels compared to other vessels (dry-bulk and tankers) and this enables them to execute a larger number of agreements, on time. As a result, they consume more energy which in turn leads to higher emissions. This paper sets out to investigate and reveal the response of the container sector to the International Maritime Organization’s (IMO) environmental regulations. IMO policy directives have induced energy- effcient vessels but also the gradual transformation of the current feet towards environment ‘friendly’ vessels. The present study is the frst attempt to assess the container sector’s response to the imminent implementation of IMO regulation. Regulations introduced, by the IMO, address environmental inter- action with the shipping sector on four interrelated levels, IMO [4,5]. First, IMO regulations capture gas emissions from ships which contribute substantially to the “greenhouse effect”. It is reported that sea vessels are responsible for about 3% of carbon dioxide emissions on a global level, a signifcant contribution towards exacerbating the accu- mulated effect on climate change, Reynolds [6]. Given an average annual 5% growth in the size of the industry over the last thirty years, the current global three per cent contribution rate is expected to rise if action is not taken to regulate greenhouse gas emissions from ships, UNCTAD [1]. The IMO in its meeting, IMO [7], reached an agreement to limit further GHG emissions from ships and completed a revised IMO strategy. This decision aims to reduce CO 2 emissions coming from global shipping by a minimum of 40% by 2030 and target a reduction of 70% by 2050 compared with 2008 levels, [8–10]. In the context of the IMO initial strategy, existing but also new vessels had to develop and report technical as well as operational energy fuel-effcient indicators, intro- duced and defned by IMO, like the Annual Effciency Ratio (AER) and Energy Effciency per Service Hour (EESH), Individual Ship Performance Indicator (ISPI), Fuel Oil Reduction Strategy (FORS), and others, IMO [11,12]. Second, the IMO regulates on reducing sulphur oxide emissions: Sulphur oxides, in particular, are causes of acid rain, which affects aquatic life as some species are not able to adapt to more acidic eco- systems. Our ecosystem though is interconnected and whatever affects some species initially aquatic species, is transmitted through the food * Corresponding author. E-mail addresses: gkokosalakis@acg.edu (G. Kokosalakis), merikas@acg.edu (A. Merika), Xmerika21@gmail.com (X.-A. Merika). Contents lists available at ScienceDirect Marine Policy journal homepage: http://www.elsevier.com/locate/marpol https://doi.org/10.1016/j.marpol.2020.104278 Received 26 May 2020; Received in revised form 17 October 2020; Accepted 20 October 2020