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Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route

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  • Eddy Bekkers
  • Joseph F. Francois
  • Hugo Rojas†Romagosa

Abstract

One consequence of melting Arctic ice caps is the commercial viability of the Northern Sea Route, connecting East Asia with Europe. This represents a sizeable reduction in shipping distances and average transportation days compared to the conventional Southern Sea Route. We examine the economic impact of opening this route in a multi†sector Eaton–Kortum model with intermediate linkages. We find remarkable shifts in trade flows between Asia and Europe, diversion of trade within Europe, heavy shipping traffic in the Arctic and a substantial drop in Suez traffic. Projected shifts in trade also imply substantial pressure on an already threatened Arctic ecosystem.

Suggested Citation

  • Eddy Bekkers & Joseph F. Francois & Hugo Rojas†Romagosa, 2018. "Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route," Economic Journal, Royal Economic Society, vol. 128(610), pages 1095-1127, May.
  • Handle: RePEc:wly:econjl:v:128:y:2018:i:610:p:1095-1127
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    File URL: https://doi.org/10.1111/ecoj.12460
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    1. repec:gam:jsusta:v:10:y:2018:i:4:p:921-:d:137522 is not listed on IDEAS
    2. Francois, Joseph, 2015. "Special Tax Treatment as Trade Policy: A Database on Export Processing and Special Economic Zones," Papers 872, World Trade Institute.
    3. Eddy Bekkers & Hugo Rojas-Romagosa, 2018. "Non-tariff Measure Estimations in Different Impact Assessments," RSCAS Working Papers 2018/40, European University Institute.
    4. repec:pal:marecl:v:20:y:2018:i:3:d:10.1057_s41278-016-0049-1 is not listed on IDEAS
    5. repec:spr:climat:v:143:y:2017:i:1:d:10.1007_s10584-017-1980-6 is not listed on IDEAS
    6. Rob Dellink & Hyunjeong Hwang & Elisa Lanzi & Jean Chateau, 2017. "International trade consequences of climate change," OECD Trade and Environment Working Papers 2017/1, OECD Publishing.
    7. Bekkers, Eddy, 2019. "The welfare effects of trade policy experiments in quantitative trade models: The role of solution methods and baseline calibration," WTO Staff Working Papers ERSD-2019-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    8. Bekkers, Eddy & Teh, Robert, 2019. "Potential economic effects of a global trade conflict: Projecting the medium-run effects with the WTO global trade model," WTO Staff Working Papers ERSD-2019-04, World Trade Organization (WTO), Economic Research and Statistics Division.

    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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