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Unintended consequences of environmental regulation of maritime shipping: Carbon leakage to air shipping

Author

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  • Lugovskyy, Volodymyr
  • Skiba, Alexandre
  • Terner, David

Abstract

We assess the expected impact of the upcoming International Maritime Organization’s CO2 emissions cap on global maritime shipping. Using detailed data on U.S. imports—covering vessels, routes, emissions, and trade—we estimate a model that allows for substitution between maritime, air, and land transport. Our findings show that the cap will drive a shift to more carbon-intensive air and land transport, leading to an overall increase in transportation-related CO2 emissions in both the short- and long-run. Additionally, it will cause significant welfare losses. Our findings support a case for more efficient alternative policy options.

Suggested Citation

  • Lugovskyy, Volodymyr & Skiba, Alexandre & Terner, David, 2025. "Unintended consequences of environmental regulation of maritime shipping: Carbon leakage to air shipping," Journal of International Economics, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:inecon:v:155:y:2025:i:c:s0022199625000376
    DOI: 10.1016/j.jinteco.2025.104081
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