Shipping, carbon pricing, and inflation pass-through: The Silent Absorber hypothesis

This study explores whether the recent introduction of CO2 emission pricing in maritime transport has affected freight rates and inflation in the euro area. Focusing on the regulatory shift implemented in 2023, we examine whether the additional costs for shipowners have been passed on to shippers and consumers. Using a Bayesian Vector Autoregression (BVAR) model, we analyze the dynamic interactions between CO2 allowance prices, freight rates, oil prices, inflation, and macro-financial variables from January 2023 to August 2024. The BVAR framework, suitable for small-sample analysis, allows us to trace impulse responses and uncover potential pass-through effects. Our findings challenge the common assumption that environmental taxation leads to inflationary pressures. Specifically, we find no significant increase in freight rates or inflation following a rise in CO2 prices. Instead, the data indicate a slight drop in oil prices and a modest gain in shipowners’ revenues, suggesting that much of the regulatory cost has been absorbed within the sector. This implies that the short-term (1–2 years) inflationary impact of maritime decarbonization was limited. As the first empirical analysis of its kind using real-time data and a macro-shipping lens, this study provides timely insights for policymakers assessing the economic neutrality of green regulation in maritime transport.