Eco-vessel time-charter and price premia: moderating role of decarbonization policy

Using monthly panel data on crude and product tankers from 2018 to 2025, we examine how the eco-vessel time-charter rate premium (ETCP) relates to the eco-vessel price premium (EPP) and how this relationship changes under decarbonization policy. Higher ETCP is associated with lower EPP, indicating that short-term freight market advantages do not translate mechanically into higher asset values. When decarbonization regulations, such as the IMO 2020 sulfur cap, are in force, they reduce the negative effect of ETCP on EPP by partially aligning the incentives of owners and charterers. Tightening environmental regulation increases eco-vessel values without a commensurate improvement in earnings, shifting valuation risk and financial burdens onto shipowners.